The Blog

October 19, 2021

Deciding Whether an LLC or DBA is Right for Your Business

The Contract Shop LLC VS DBA Woman In Blue Stripe Shirt With Glasses

Look at you, trying to figure out the next way to legitimize your business. We are here for it!

If you want to take those next steps to make your biz legit, but you’re a little overwhelmed or unsure what to do, we totally understand. It can be really scary trying to figure out what the right move is, especially when it comes to business entities and legal names and all that jazz.

Asking yourself whether registering a DBA or going full official to an LLC is the right choice for you? You’ve come to the right place. We’re gonna break it down for you, right here, right now.

What is a DBA?

DBA, or “doing business as,” is the assumed name of your business —not its legal name or yours. A DBA may be different from your legal name or the name you registered for your business.

For example, if your name is Jane Smith and you’re a photographer, your DBA might be “Photography by Jane.” Or, your business may be registered as “Jane Smith Photography” but your DBA may be “Captured Moments by Jane Smith.” See what we mean?

Benefits of a DBA

Deciding whether or not to register your business as a DBA depends on personal preference and if where you live requires you to be registered in order to run your business. But, if you want to run your business as anything other than your legal name, you’ll want to file a DBA. 

Registering also makes banking much easier, as it allows you to open a different bank account under the DBA. This helps keep your personal and business finances separate, which is important in case of any type of lawsuit. You also look pretty legit having a separate account for your business. 

What is an LLC?

An LLC, or a limited liability company, offers more legal protection than a DBA. They typically are a middle ground between a sole proprietorship and a corporation. Regulations regarding LLCs will vary state by state, so you’ll want to figure out what your state requires.

How do you know if you need an LLC for your biz? There’s no one-size-fits-all answer, and it’ll depend on your personal preferences. However, if you...

  • are making more than $40,000 in revenue
  • are selling a product
  • want to separate your account for liability purposes

...then those are great reasons to consider forming an LLC.

Benefits of forming an LLC

The main reason to form an LLC is to protect yourself in case you’re sued. It’s also a great way to legitimize your business and build trust and credibility with your customers. 

An LLC not only protects you in case of a lawsuit, but it can protect your work, too! If you’re a web designer, for example, an LLC can help protect your site from copyright infringement. It can also save your buns if a client does anything shady.

The differences between a DBA and LLC

A DBA is a registered name of a company, whereas an LLC is a business entity. A DBA is not a type of business structure, while an LLC is. An LLC offers actual liability protection, whereas a DBA is just a name. Think of a DBA as an alias to help you differentiate the two! 

This is where it can get kinda confusing: Some LLCs can function as DBAs. Think of franchises. If someone owns a local McDonald’s franchise, they can register their LLC as “XYZ Franchising” but their DBA would be McDonald’s. 

Remember, since a DBA is not a separate legal entity, you wouldn’t have to file separate taxes. With an LLC, you can choose the way it will be taxed, so that comes with some tax benefits. Tax benefits are great and all, but an LLC requires you to submit annual reports and fees. Make sure you’re looking at the whole picture before making a decision between a DBA and an LLC

Choosing between a DBA and an LLC

At the end of the day, deciding to go the DBA or LLC route is a personal choice. But you’ll want to consider whether you are just starting a business and aren’t sure if it will take off, or if you’re starting to sell things and become a bit more legitimate. If it’s the former, you’ll want to stick with a DBA for now. If it’s the latter, an LLC might be the right choice for you. 

Decided on an LLC? You go, boo boo. You'll want to have an LLC operating agreement to get started. Once you have that in hand, go on out there and legitimize your business! 

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