Separating the “Business Entity” from the “Business Owner”

DBA stands for “Doing Business As.”  A DBA is crucially used for banking purposes. Operating under a business name without setting up a DBA will make it impossible to issue and receive checks under the business name.  For one thing, a business owner cannot use his personal account and issue checks or receive checks under his business name.  The second issue with this is that a business owner will be unable to open an account under his business name without first having a DBA.  Business owners should plan ahead for these banking issues by getting their DBA filed prior to trying to set-up bank accounts.

In this way, the business owner is still connected to his business in that he may still receive checks under the name of his business but he will still be able to keep the two accounts separate, separating himself from the business entity.

The most common use of a DBA is probably by those who are sole proprietors.  These are individual business owners who run their business themselves and have just hung out their shingle.  Since most people in these circumstances use a business name other than their own name, it would be necessary to get a DBA.  For example, if Mario wanted to open his own doughnut shop called “The Perfect Doughnut,” he would need to get a DBA that asserted it was Mario doing business as “The Perfect Doughnut.”  This would allow Mario to receive checks made out to the “The Perfect Doughnut” and also sign checks under that name.

DBAs can also be useful to corporations, LLCs, and other business entities because it can permit them to do business under other names without having to form new organizations.  In this way more formalized business entities that are seeking to branch out into other businesses or industries can do so without forming new corporations or LLCs.  This can save money (in the form of filing fees) and time (in the form of filing documents and maintaining the business entity throughout the year).  For example, let’s say Mario decided to form Mario’s Tasty Treats, LLC and started a doughnut shop. Now he wants to start a sandwich shop too.  Instead of starting a separate company for the sandwich shop, he can just file a DBA for Mario’s Tasty Treats, LLC doing business as “The Perfect Sandwich.”

Forming a business entity such as a corporation or LLC, along with a DBA provides excellent benefits for a business owner.  It allows an owner to have liability protection for their personal assets, arrange taxation of their business in a way that is most beneficial for them, and still permits them to use various names for their business endeavors.