As financial advisors, we often encounter queries from business owners about DBA designations and their interaction with Limited Liability Companies (LLCs).
DBA stands for ‘Doing Business As’ and is also known as a fictitious business name or trade name, which allows businesses to operate under a different name from their legal one.
For small business owners, understanding the intersection of DBAs and LLCs is crucial, especially when running multiple businesses or considering the formation of more than one LLC.
In this article, we aim to address how many DBAs can be attached to a single LLC, delve into the process of DBA registration, and explore whether having separate legal entities is necessary for separate businesses. Let’s delve in!
- An LLC can have unlimited DBA names, each registered separately for diverse business activities.
- Registering a DBA involves selecting a unique name, completing necessary forms, and possibly publishing a notice.
- While multiple DBAs offer business expansion, brand protection, and privacy, they require additional administrative duties.
What Is the Maximum Number of DBAs for LLCs?
There is no legally defined limit to how many DBA names an LLC can have. However, each DBA must be registered separately with the appropriate governmental bodies, typically at the county or state level, depending on the jurisdiction’s requirements.
Multi-member LLC with one DBA
In practice, an LLC can operate under its registered name and also under a different name through a DBA. This strategy can be beneficial for LLC owners looking to add new business operations without the necessity of forming a new LLC.
Multi-member LLC with multiple DBAs
Similarly, a multi-member LLC can have multiple DBA application filings. For each separate business structure or product line, you can register a different DBA.
This enables the LLC to conduct diverse business activities under the same LLC structure but with different trade names.
This practice works well if you have a holding company with multiple locations or divisions.
Single Member LLC with One or Multiple DBAs
A single-member LLC is no different in terms of how many DBAs it can have. However, within a sole proprietorship, you do need to keep accurate records that separate the different DBAs and their respective revenues.
How to Register a DBA for an LLC
To register a DBA or fictitious name for a legal entity, start by ensuring the desired business name complies with local and state rules.
Then complete and submit the required forms to the appropriate state agency, often the Secretary of State’s office. The process typically involves a small fee.
Registering a DBA for a Single-Member LLC
The DBA registration process for a single-member limited liability company primarily involves a few essential steps. However, our expert analysis indicates that the process can differ across states due to variations in state laws and several local counties’ specific requirements.
- Identifying a Unique Fictitious Name: The first step involves choosing a distinct trade name that isn’t already in use by another business entity in your state. Some states provide an online fictitious name search tool to help you make sure you don’t use the same DBA as another company.
- Filing the DBA Application: After choosing a DBA name, the LLC owner must file the DBA application either online or by visiting the local county’s state authority office. Some states require an ID number for registration and charge a small fee to file legal documents.
- Publishing a Notice: In some states, new DBA businesses are required to publish a notice in a local newspaper, informing the public of the new DBA name that is associated with their legal LLC name.
Registering Multiple DBAs for a Multi-Member LLC
For multi-member LLCs desiring to operate under multiple DBA names, the steps to register DBAs can be more complex.
However, from our in-depth research, you can handle DBA registration for each business line or division by following similar steps as registering a single DBA.
- Choosing DBA Names: Each fictitious name should be unique and distinguishable to avoid confusion with other LLCs or business entities. The LLC members should conduct a thorough DBA name search for each business name.
- Filing the Applications: Separate LLC DBA applications must be filed for each trade name, often involving paying multiple small fees. This process is repeated as many times as the number of DBAs you wish to register.
- Maintaining Separate Bank Accounts: To ease bookkeeping services and tax returns, it’s recommended to maintain a distinct business bank account for each DBA.
However, our team of experts has determined that the challenges of maintaining more than one DBA include potential confusion in bookkeeping and additional legal or tax advice needed to ensure compliance with the laws of the local government.
Also, according to the Pennsylvania Department of State, registering multiple DBAs does not create separate LLCs; the liability protection does not extend beyond the primary LLC. Therefore, it is prudent to seek professional advice from a law firm or tax consultant before proceeding.
Benefits of Having Multiple DBAs
Having multiple DBAs can offer several advantages to an LLC. Here are a few that highlight their potential:
- Business Expansion: Multiple DBAs allow an LLC to diversify and expand into different business areas under separate names, all while maintaining the parent LLC structure. For example, a parent company specializing in tech can operate a software development division, a hardware retail subdivision, and a digital advertising agency, all as separate DBAs under the same LLC.
- Brand Protection: With each DBA, the LLC can protect a different brand name. This prevents others from using a similar name, ensuring that your company’s reputation is not diluted by other businesses.
- Increased Business Privacy: A properly registered DBA can help provide privacy to the business owner. By using a DBA, the public dealings of the company can be conducted under the company name rather than the owner’s name, providing a level of anonymity.
When It Makes Sense to Register Multiple DBAs?
Registering multiple fictitious business names makes sense for an LLC when the business is looking to branch out into new sectors or markets, but the owners do not want to form multiple LLCs.
It’s an ideal strategy for those who aim to diversify their business offerings and create more business lines, and as we have seen, there’s no limit on how many DBA names your own LLC can have.
However, this decision should be made considering factors like the nature of the business, market conditions, and the company’s future expansion plans.
It involves additional administrative duties and costs. Therefore, it is advisable to consult with a business advisor or attorney before proceeding.