At least once a week, a business owner who has been operating under a DBA (aka fictitious name or “Doing business as”) comes to us because someone told them they should set up an LLC for their business. They are skeptical of forming an LLC and inevitably ask, “If it’s just me in my business, is a LLC better than a DBA?”
In case you aren’t familiar, a DBA is a name that a business markets to the public that is different than the legal name of the business. For example, a sole proprietor named Joe Smith may advertise his donut shop as Joe’s Donuts. In this case, Joe’s Donuts would be his DBA. Or in another example, Joe Smith may create an LLC named Joe Smith, LLC which owns the DBA Joe’s Donuts.
So, is a single-member LLC better than a DBA? The answer is yes. Although using a DBA is generally a better idea than simply marketing your name as a sole proprietor, a DBA provides no personal liability protection. So, if you have a DBA and your business is sued, your personal assets are just as exposed to potentially being taken as they would be if you did not have a DBA.
This is not the case with an LLC. Even if you are operating a business as the only member, a single-member LLC grants you the liability protection that a DBA cannot offer. In addition, the LLC structure makes it easier to open a business account which helps you organize business expenses from personal expenses. The filing fees for an LLC are more expensive than a DBA, but the benefits are worth the costs. DBAs do have value though. DBAs are usually most effectively used when they are owned by an LLC as in our Joe Smith example above. When structured correctly, the LLC/DBA combination can provide a lot of benefit and value to your business.
If you want to find out how a business attorney can help you structure your business to protect your personal assets, give us a call! We would love for you take advantage of our free consultation! Click here to schedule a free telephonic consultation.