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Legal Steps Every Business Owner Should Take

Lesson 7 of 13

Defining DBAs

 

Legal Steps Every Business Owner Should Take

Lesson 7 of 13

Defining DBAs

 

Lesson Info

Defining DBAs

All right. Let's talk be about DBA's because they drive me nuts. All right, this is what an LLC is. We've already established your Limited Liability Company. Now, what is a Doing Business As, a DBA? Well, we've already established that your LLC is registered with your state. It is a totally separate legal entity from you or your partner's as a business. It has a separate employee identification number that is not your social security number. So, you can go to the IRS website and get an employee identification number, sometimes called the EIN, or a tax ID letter, and this is basically a new social security number for your business. So, your LLC has that new EIN. You have separate bank accounts when it comes to your LLC. You can have even a separate credit rating when it comes to your LLC, and then finally, we've already talked about the legal and financial liability that is totally separate and distinct from you personally. Now, when we look at a DBA, this is where a lot of people get i...

nto trouble, because they think that they've formed an LLC, when in reality, they formed what's called a Doing Business As license or certification with their county or their state. So, the DBA is the registration certificate that you get with your state, or with your local municipality, city, county, and all that it serves is to show where or who is behind any kind of business that has been registered with them. So, what that means is that even though you have registered technically with some authority, some licensing authority, they have recorded, who is behind the DBA? That's all that's happened. There is legally nothing that has actually occurred. There is no new entity that's formed. You are still a sole proprietorship. You are still absorbing the risks financially and legally that you would otherwise have if you had not formed that LLC. So, a DBA is really kind of a deceptive little thing that's happening. The only place that I really see them being useful is if you do have an LLC, and you are operating under a different name. So, for example, I have Christina Scalera LLC. But when you go to thecontractshop.com which is my business, you see The Contract Shop logo in the front of it. So, for example, that would be a great instance where a DBA is something that is a helpful tool to see who is behind The Contract Shop. They can see that it's my LLC. Let's compare the three of these things, because we've gone over them in different parts, and I wanna just put them all together so that you can compare and contrast them while they're right next to each other. So, as you can see, the sole proprietorship, which is SP right here, that is the cheapest thing to form. There is no cost. It is by default the entity that you are classified as, and remember, if you do have more than one person in your business, and you have not formed an LLC, you are a partnership, not a sole proprietorship. The DBA is the next step, and that does have some kind of cost, typically. And that cost is going to be to offset any kind of administrative costs at the municipality or state level, and it's typically a very, very low cost. And then, compare that with the LLC. It's typically very inexpensive to register your LLC and to pay any kind of annual renewal fee as compared to facing any litigation or financial risk later on. So, as you can see, the personal financial risk, the risk that you have of getting your car or your house, or any kind of lien taken against your personal property is quite high if there is any kind of legal incident or financial incident against you as a sole proprietorship, or even as a person or a partnership that has stated that you are doing business as something. With the LLC, that is significantly reduced because it is the LLC, that new business entity, that is absorbing all of that risk for you. If you have any kind of personal liability, as you can see, it's the same situation as the financial risk. And then, if you are applying for any kind of credit or loans, if it's a sole proprietorship, or even a DBA, you are still personally on the hook. They're looking at your credit, whereas, with an LLC, you can have the potential that they are looking at your Dun & Bradstreet number, which Dominique, again, is going to be talking a lot about. And then, finally, with your tax liability, you don't have any other option if you are a sole proprietorship or a DBA. You are filing taxes under yourself, and that's it. You are personally paying taxes. With the LLC, you have the option to file either as a sole proprietorship, as yourself, or as an s-corporation, which could potentially, again, reduce your tax burden in those certain scenarios we covered earlier.

Class Description


The content and opinions expressed in this course are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem

Brought to you in partnership with

Navigating the legal waters when it comes to your business can feel overwhelming. Attorney Christina Scalera breaks down all the information that you need to know, empowering you to run your business with confidence. This class will teach you:

  • The differences between an LLC, a sole proprietorship and an S corp -- and which one is right for you

  • How to protect your business with legally sound contracts and where to find them

  • What to do when faced with a dispute

By the end of this class, you’ll be able to start the process of setting up your business structure, follow legal best practices and understand the resources available to you.

Ready to protect your business with top-notch legal contracts? Click here to start your free 7-day HoneyBook trial.

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Reviews

user-c49d1c
 

Every minute of this is filled with such valuable info! She covers every legal topic you could possibly need to know about as a creative small business owner and clarifies lots of confusing topics. I feel super confident about my small business ownership after watching this. Thank you Christina!

user 139935643048782
 

I loved this course! Covered so many topics I've been wondering about in an easy and understandable way!! Brilliant! Thank you!

KimberlyAnnMurphy
 

Amazing! This stuff can be so hard to try and wrap your brain around but this is simple, easy to follow advice.