There are many different types of business entities in Texas, each with their own advantages and disadvantages. Two of the most popular types are the DBA and LLC. So, what’s the difference between them? Let’s take a closer look.
DBA vs LLC – what’s the difference
Operating a business can be a complex endeavor, and understanding the differences between different types of businesses can make a big difference in your success. DBA, or Doing Business As, is an affidavit filed with the county clerk that provides another name to operate under while still operating as an individual.
In contrast, an LLC, or Limited Liability Company, allows multiple owners to own and run a single business. Unlike DBAs, LLCs are considered separate legal entities from their owners, providing personal asset protection for members if the LLC is sued or goes into debt.
Is a DBA the Same as an LLC
So one of the major differences between an LLC and a DBA is that an LLC is actually considered a business entity offering liability protections, whereas, a DBA is simply a certificate stating that your business is also doing business under some other assumed name, and a DBA offers no liability protections. A DBA simply tells the world what business name(s) you are operating under.
Fictitious Name vs LLC
Therefore a DBA is not the same as an LLC. If all you have is a DBA, then a plaintiff does not even have to pierce the corporate veil to get to your personal assets. You have to note that a DBA provides NO liability protections. Not to be confused with a shell corporation, which at lest provides liability protections.
Doing Business As LLC
However, when an LLC is also doing business under some other assumed name, then an LLC can have a DBA, which would identify whatever other name the LLC is doing business as.
If you’ve ever wondered how two seemingly similar sounding entities could be completely different make-ups and entity arrangements, then Wonder No More: we’ve got your answers here!
Pros and Cons of DBA vs LLC
Understanding the legal structures available for businesses and their associated pros and cons is vitally important when deciding on what kind of entity to form. As a Texas lawyer, I believe it is important to be aware of the different types of business entities that are available, such as Sole Proprietorship, General Partnership, Limited Partnership, Corporation (C-Corp & S-Corp), Limited Liability Company (LLC) and Non-Profit Organization.
It is essential to compare each of these options carefully in order to make an educated decision. Factors such as taxation rules, liability protections and registration requirements should all be taken into consideration when selecting the best type of business structure for any particular venture.
Does the LLC Have a DBA
Should I Use An LLC or DBA for my Business?
Choosing the right business entity for your needs can help ensure that your business is properly structured from the start and, if necessary, sustainable for years to come. There is a variety of business entities to choose from, each with their own unique advantages and disadvantages.
It’s important to take into consideration factors such as tax obligations, asset protection and legal requirements when making this important decision. As a Texas lawyer I am pleased to advise anyone building a business that it is wise to research the different types of entities available in order to choose one that most closely meets their needs – now and in the future.
7 Reasons to Use an LLC instead of a DBA or Corporation
For certain businesses and LLC is typically thought of as the best business entity structure. And LLC has advantages over a sole proprietorship (most DBAs are just sole proprietorships), and an LLC also has certain advantages over a corporation.
1. Limited liability: One of the primary advantages of an LLC is that it provides its owners with limited liability protection. This means that the owners of an LLC are not personally liable for the debts and liabilities of the LLC.
2. Pass-through taxation: Another advantage of an LLC is that it is taxed as a pass-through entity. This means that the LLC itself is not taxed on its income. Instead, the income of the LLC is “passed through” to the individual owners and taxed at their personal income tax rates.
3. Flexible management structure: An LLC also has a flexible management structure. Unlike a corporation, an LLC does not have to have a board of directors or officers. The owners of an LLC can choose to manage the business themselves or hire managers to do so.
4. Fewer formalities: An LLC also has fewer formalities than a corporation. For example, an LLC is not required to hold annual meetings or keep minutes of meetings.
5. No double taxation: Another advantage of an LLC is that it avoids double taxation. Double taxation occurs when a corporation is taxed on its income and then its shareholders are also taxed on their dividends from the corporation. Since an LLC is not taxed as a separate entity, there is no double taxation.
6. Increased credibility: Having an LLC can also help to increase the credibility of your business. Customers and suppliers may perceive your business as being more professional and established if it is organized as an LLC rather than a sole proprietorship or partnership.
7. Asset protection: An LLC can also provide asset protection for its owners. This means that the assets of the owners are protected from creditors in the event that the LLC is sued or incurs debts
The process of setting up a DBA or LLC
If you’re going to setup an LLC, then you might start by checking name availability. Starting a DBA or LLC here in Texas can be a confusing process, and that’s why it’s important to contact an experienced legal team. It takes time, legal forms, fees, and other documents to make sure you’re setting everything up properly.
Without the proper guidance, you could be subject to various fines as well as other risks associated with not having the right infrastructure setup. The complexity of this process is why anyone trying to set up a DBA or LLC should consult with an experienced lawyer – they can help guide you through the legal maze and help ensure all the appropriate steps are taken so your business gets off on the right foot!
The benefits of having a DBA or LLC
Having a DBA or LLC is a smart choice for business owners in Texas. Establishing either one gives you the right to use that name, increases the credibility of your business, and provides essential liability protection. It also helps provide clarity when it comes to financial matters such as taxes as funds are drawn from a separate account.
These benefits create an atmosphere of professionalism and make it easy to keep track of income and expenses, meaning you’ll always know exactly how your business is doing. Don’t wait – set up your DBA or LLC today and enjoy peace of mind when it comes to protecting your business!
The drawbacks of not having a DBA or LLC
Starting a business without an LLC or DBA can be risky. Without business entity protection, you may be running the risk of being held liable for any legal issues that could arise from your venture. Without a professional legal representative to ensure you are compliant with state and federal legislation, it is likely your business will fall behind on paperwork such as taxes, operating agreements and other requirements particularly if you are hiring additional employees.
This can have significant financial ramifications when the IRS does eventually audit your company or decides to impose hefty penalty fees for failure to file on time. Failing to set up a DBA or an LLC means sacrificing a crucial layer of protection between you and your business as well as leaving yourself wide open to potential legal troubles. Make sure you get sound professional advice so that you know all of your options before committing to starting a business without forming one of these valuable entities.
As you can see, there are many important considerations to take into account when choosing the right business entity for your company. It is essential that you do your research and consult with an experienced business attorney to ensure that you are making the best decision for your particular business. If you have any further questions about DBAs or LLCs, please don’t hesitate to contact our office. We would be happy to assist you in forming the best business entity for your needs.
LLC vs DBA FAQ
How many DBAs can an llc have in Texas?
An LLC can have multiple DBAs. Generally speaking, Texas has no limit on the amount of DBAs an LLC can file.
What is a DBA in Texas?
In Texas, a DBA is not a business entity. A DBA lets businesses operating under an alternate name for certain business purposes. A DBA provides no liability protection or business structure. You can file a DBA with the Secretary of State.
Should I use an LLC or DBA?
An LLC should be used for liability protection. When you need liability protection, then you should consider an LLC or some other business entity. A DBA is only used to tell people what other names you may be operating under. If you need to operate under multiple names, then you should consider getting a DBA for your business entity.
Business Entity Legal References and Sources
- File your DBA with the Texas Secretary of State Name Filings Division https://www.sos.state.tx.us/corp/namefilingsfaqs.shtml
- See also…Section 5.503 of the Business Organizations Code
Sec. 5.053. DISTINGUISHABLE NAMES REQUIRED. (a) The name of a filing entity or registered series of a domestic limited liability company or the name under which a foreign filing entity registers to transact business in this state must be distinguishable in the records of the secretary of state from:
(1) the name of another existing filing entity;
(2) the name of a foreign filing entity that is registered under Chapter 9;
(3) the fictitious name under which a foreign filing entity is registered to transact business in this state;
(4) a name that is reserved under Subchapter C;
(5) a name that is registered under Subchapter D; or
(6) the name of another existing registered series of a domestic limited liability company.
- Selecting a Business Structure in Texas https://www.sos.state.tx.us/corp/businessstructure.shtml
- Types of Corporate Reorganization.
