Reader Mail: What are the advantages of a DBA?

Wednesday January 14, 2009

I received this from a reader this morning:

What are the advantages of a "dba"?
We currently operate in NY, are registered in Delaware and now want to open a small branch office in Chicago.
We want to keep the Chicago operations under the NY office name, but with segregation as far as work is concerned and a slightly different identity.
If you can please advise on the same.
TK

"DBA" stands for "Doing Business As". It's also sometimes referred to as a "fictitious business name" or "assumed name" in the U.S. or "trading as" in the U.K. It exists almost entirely for branding purposes, i.e., how you present yourself to the public. It does not create a new legal entity. DBAs are commonly used by sole proprietors to create a business identity without the expense of incorporating.

For an incorporated business, though, there are two main advantages to having an assumed name:

You can accept payment, i.e., credit cards and checks, using the assumed name. Of course, you have to have the name added to your bank account, and having the DBA allows you to do so.
It also allows you to advertise your business using the assumed name. We can't very well have companies just making up business names and then shutting them down with no legal record!

In some states, the DBA is a state-level filing, while in others it's a county filing. llinois requires that the assumed name be filed with the County Clerk of the county in which you will be doing business. They also require that a newspaper announcement be published once a week for 3 consecutive weeks, so be prepared for that expense as well. For more details on Illinois requirements, see Illinois Assumed Business Name Act (other readers, check with your state's Secretary of State).

Now while the DBA may prevent you from having to create a new corporate entity for an office in another state, states generally do require some kind of registration as a "foreign corporation" in order to conduct business in the state. For more information, see Illinois Guide for Qualifying Foreign Corporations (other states should have a similar publication available on their Secretary of State web site).

I hope you find this overview helpful, but as you can see, the process of opening a new location in another state is non-trivial. As the laws vary significantly from state to state, I highly recommend you find a qualified attorney in the new location's state, or be certain that your current attorney has experience with this specific issue at a national level.

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