What's The Difference Between A DBA & an LLC?

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Choosing the type of business entity to form is one of the first things new prospective business owners must do. There are several types of business structures to choose from, and we've covered them a few times in this blog, but two of the most common ones are a DBA and an LLC. But what are the differences between them? Each structure has its pros and cons, and if you need help choosing which type of business entity to form, doing the research to make sure your business name isn't already taken, and filling out the appropriate paperwork, we have a New Business Filing Package that may be right for you.

What are LLCs and DBAs?

LLC stands for Limited Liability Company, and this type of business structure protects your personal assets and has some tax benefits. DBA stands for Doing Business As, and it is used if you are choosing to do business under a name that is not your - or your business' - legal name. For example, if your legal business name was Dave Jones Enterprises but you want to do business under the name Davey Jones' Locker, you would need a DBA.

The Pros of Setting Up an LLC

The biggest benefit of setting up an LLC is the personal liability protection, protecting your personal assets if your business is sued. LLCs are taxed as pass-through entities, which means that the profits and losses of the business are "passed through" to the owner's personal tax returns. LLCs also allow owners to run their businesses however you want, due to their flexible management structure, so your business can be centralized or decentralized depending on your needs. LLCs are also easy to set up and maintain.

The Pros of Setting Up A DBA

DBAs are even easier (and cheaper) to set up than asn LLC. DBAs can be appealing if you do business in multiple states as you don't need to fill out additional paperwork or pay extra fees.

The Cons of an LLC

Doing business in multiple states as an LLC means more paperwork and additional fees. Some states also require LLCs to have an Operating Agreement outlining ownership and the business' operating procedures. LLCs can also take longer to set up: you'll need to research your proposed business name through state databases to make sure that it is available.

The Cons of a DBA

The biggest drawback to a DBA is the lack of personal liability protection, so if your business is sued, you could be risking your personal assets. Not setting up your DBA properly can also mean that you are taxed as a sole proprietor, which means that you have pay self-employment taxes on your business earnings, paying both the typical employee share and the employer's share of taxes.

Which Is Best?

There is no clear verdict: it depends on what type of business you want to start and run. Each structure has its strengths and weaknesses and your personal and business situation will dictate which will work best for you.

If you are struggling to decide what kind of business entity to choose, we can help! With our New Business Filing Package, we'll walk you through each structure based on your specific situation and help you choose the right one for you and your new business. We'll do the legwork and research to make sure that your business name is available, fill out the paperwork you'll need to file with the Secretary of State, and help you get your federal and State Tax ID numbers, all for just $199! Learn more about our New Business Filing Package service, or sign up for our Small Business Legal Protection Plan today!