What Is a Trade Name?
When legally forming your business with the state, you’ll choose and register a name for your business. This is considered your legal business name. However, you also have the option of operating your business under a trade name or a DBA (Doing Business As).
Utilizing a trade name or DBA is a simple way to legally conduct business under a given name without the need to form a new business entity. Note that your chosen trade name or DBA name must be registered with the state or local municipality in which you’re conducting business.
Trade names and DBAs have wide application for businesses. If your business is a sole-proprietorship or general partnership, you likely registered the business under your personal name. Instead of conducting business under your own name, you may opt instead to use a DBA that has a broader and more credible appeal.
For example, say that business owner John Carpenter has a sole proprietorship. He might choose to register the DBA name “Carpenter’s Construction” for his business. This offers him more personal privacy while also communicating a clear message about his business.
Advantages of a DBA
Choosing to register a DBA name can offer your business a number of advantages. Consider the following DBA opportunities for your business:
Cost-Effective Option: No matter the size of your business, registering a DBA name is a simple way to begin conducting business and a cost-friendly alternative to forming an LLC or corporation. Later on, once your business is ready, the process of converting to either an LLC or corporation is a simple one.
Provides Credibility: Utilizing a DBA name can offer your business more credibility when it comes to winning over customers or working with suppliers. For example, if you’re a sole-proprietor, choosing a more appropriate business name rather than your personal name will offer professionalism and better marketing opportunity.
Organize Business Entities: If you’re in a situation where you operate more than one business under a single entity, such as an LLC or corporation, registering a DBA will allow you to forego creating separate legal entities for each of your businesses.
Disadvantages of a DBA
As you consider registering a DBA for your business, keep in mind that there are a few potential disadvantages to a DBA, as well.
No Asset Protection: Remember that a DBA serves only as a legal certification for conducting business under a given name. It does not provide real asset protection in the way that an LLC or corporation does. For example, if you have a sole-proprietorship, registering for a DBA does not offer any kind of protection for your personal assets.
Location Sensitive: Note that a DBA has jurisdiction limitations, meaning that you can only conduct business using that name in the location(s) where you’ve registered it. So, your DBA is bound to the local or state level at which it is filed.
Different Ways to Register Your Business Name
When you’ve found the right name for your business, you’ll want to take the necessary steps to protect it by registering with the appropriate agencies. Any entity type can register a trade name for their business (sole-proprietorship, partnership, LLC, corporation, etc.).
Here are four methods for registering your business name and the corresponding level of protection they offer your business:
- Entity Name: Offers business name protection at the state level.
- Trademark: Offers business name protection at the federal level.
- DBA: Does not offer any legal protection, though may be a legal requirement.
- Domain Name: Offers business name protection for your website.
The entity name of your business is the name you register with the state during its legal formation. The name must be unique from all other current businesses in the state, so that the state can effectively identify your business.
Registering your entity name can differ slightly from state to state. Typically, this process is handled by the secretary of state’s office. Once completed, the entity name registration will protect your business name at the state level by allowing only your business to operate under that name in the state.
Registering a trademark is another way to protect your business name, as well as other goods and services offered by your business. By registering a trademark, you can protect the name of your business at a national level by preventing others in your industry from using it.
Trademarks are registered with the U.S. Patent and Trademark Office and can be completed online at their website. Additionally, you can check for availability on the site using the trademark database to ensure your prospective name is not already in use.
DBA (Doing Business As)
While registering a DBA name for your business does not alone provide any level of legal protection, it may be a necessary step required by your state. Beyond state requirements, you may find that a DBA is beneficial to your business in a number of ways, such as the ability to open a business bank account.
The filing requirements for DBAs will vary by location, whether filed at a local, county, or state level. Also, keep in mind that registering a DBA name does not prevent others from going by the same name.
Once you’ve settled on a name for your business, you’ll likely want to register the domain name for your business, as well. By registering a domain name, you can prevent all others from using the web address for the duration of your ownership. To maintain ownership of your domain name, you’ll be required to renew your registration on an annual basis.
Keep in mind that domain names do not need to perfectly match your business name, DBA name, or trademark name. So, don’t worry if the matching domain name is currently taken. To register a domain name, use an accredited internet domain registrar.