A DBA is a registered business name, while an LLC is a legal business entity. Both let you operate under a chosen name, but only an LLC separates your personal assets from the business and gives you tax options. Many owners use both: an LLC for protection and a DBA for a brand name.
From taxes to liability, there are a lot of considerations that go into deciding which business structure is right for you. There’s also a lot of confusion about the differences between a DBA and an LLC. This guide covers taxation, liability, cost and control.
DBA vs. LLC at a glance
| Item | DBA | LLC |
|---|---|---|
| What it is | A registered business name | A legal business entity |
| Liability protection | None | Separates personal assets from business debts |
| Taxes | No change to how you’re taxed | Pass-through by default; can elect S corp or C corp taxation |
| State filing fee | About $5 to $150 | About $35 to $500 |
| Ongoing requirements | Renewal in many states | Annual report or fee in most states, plus a registered agent |
| Name protection | No exclusive rights | No other registered entity in the state can use the same name |
| Who can use it | Sole proprietors, partnerships, LLCs and corporations | Anyone forming a new business |
What is a DBA?
DBA is an acronym for “doing business as.” It’s also called a fictitious business name, assumed business name or trade name.
A DBA isn’t a legal business structure. It allows a business to operate under a name that’s different from its legal name. Read the full guide to what a DBA is for state rules and filing steps.
It has many uses for different business structures, including partnerships, corporations, and single-member or multi-member LLCs. Sole proprietors, who otherwise operate under their own name, can use a DBA to trade under a more professional business name.
While you can have a DBA for your LLC, this guide mainly focuses on the differences between a DBA on its own and an LLC.
What are the benefits of a DBA?
A sole proprietor can file a DBA and use a professional-looking business name without creating a formal legal entity, like an LLC or corporation. Informal business structures like partnerships and sole proprietorships can also use a DBA for banking, privacy, and branding.
Filing a DBA is also common among franchise owners. For example, a franchisee could register their company as “Jill’s Fine Food LLC” but trade under the franchise brand as a DBA, with the franchisor’s permission.
A DBA offers 4 main benefits.
- No change to your taxes: your tax and filing requirements stay the same when you file a DBA. A sole proprietorship or LLC keeps reporting income the same way it did before.
- Multiple names: a business with several product lines can use a different DBA for each one. For instance, an online seller with products in 10 categories could register a separate DBA for each category.
- Several brands under one roof: a business can build different brands for different target markets using several DBAs.
- More privacy: a DBA lets you open a business bank account and take payments under a business name, which helps a sole proprietor keep personal and business banking separate.
What are the disadvantages of a DBA?
There are 3 main downsides to a DBA.
- No asset protection: a DBA provides no liability protection. As a sole proprietor or partner, you’re personally liable for the business’s debts and lawsuits.
- No tax options: filing a DBA has no effect on your business’s tax benefits or requirements, unlike an LLC that can choose to be taxed as a corporation.
- No naming rights: registering a DBA doesn’t give you trademark protection, so someone else can use a similar business name.
To stop others from using your business name for similar goods or services, you need a trademark, which you register with the United States Patent and Trademark Office. The guide to DBA vs. trademark explains the difference.
What is an LLC?
A limited liability company (LLC) is a business structure that combines the liability protection of a corporation with the simple taxation of a sole proprietorship or partnership.
An LLC is a separate entity from its owners, who create it by filing articles of organization with their state.
Once approved, an LLC helps protect its owners from personal responsibility for the business’s debts and lawsuits.
The LLC structure is flexible, so businesses of all sizes can form an LLC, from single-owner operations to multi-member companies, including tradespeople, property owners, and ecommerce sellers.
What are the benefits of an LLC?
When you compare a DBA with an LLC, the benefits of an LLC become clear.
- An LLC helps limit the liability of its members and managers.
- It’s an affordable business entity to create and manage.
- Flexible management and ownership give you options as you grow.
- Pass-through taxation avoids double taxation by default.
- Your business gains credibility.
Liability protection
An LLC gives owners limited liability that, if maintained properly, helps protect their personal assets if someone sues the business. It can also protect members from liability caused by other owners or employees.
Low cost
The cost to form an LLC is one of the reasons many small business owners choose it as their business structure.
State filing fees for articles of organization range from about $35 to $500, depending on your state.
You’ll also need a registered agent to receive official mail. You can act as your own agent if you have a street address in the state, or hire a service. Registered agent services typically cost $50–$300 a year, and Tailor Brands’ registered agent service is $199 a year.
Flexible management and ownership
An LLC’s flexible structure lets you start a business alone or with other members.
An operating agreement replaces your state’s default rules and lets owners decide how they’ll run their business. You can amend it as the business grows.
Flexible profit sharing
LLC members can agree in the operating agreement to share profits and losses in ways that don’t match their ownership percentages, within IRS rules.
Pass-through taxation
By default, the IRS treats an LLC as a pass-through entity. The LLC doesn’t pay federal income tax itself; profits pass through to the members, who report them on their own tax returns. An LLC can also choose to be taxed as an S corporation or C corporation. See how LLC taxes work.
Ease of registration
Most states let you file your articles of organization online through the Secretary of State’s website. Once the LLC is approved, you can get an EIN from the IRS for free.
Improved credibility
Your LLC’s legal name has to include “LLC” or similar words. Seeing LLC after a business name tells customers the owner formed a legal business entity, which can build trust.
What are the disadvantages of an LLC?
An LLC has higher set-up and ongoing costs than a sole proprietorship using a DBA. Ownership changes take more paperwork, and venture capital investors usually prefer corporations.
Higher costs in some states
LLC costs vary by state. These are the main ones to budget for.
- State filing fee
- Registered agent fee (if you don’t act as your own agent)
- Operating agreement (you can write one yourself)
- Other state-specific requirements, such as publication in New York
- Annual report fees or franchise tax in some states
Transfer challenges
Transferring ownership of an LLC is often more complex than selling shares in a corporation.
In many states, the default rules require all members to agree before a new member joins or ownership percentages change, unless the operating agreement says otherwise. A multi-member LLC can avoid disputes by setting out how transfers work in its operating agreement.
You can transfer ownership in 2 ways.
- Partial transfer: you sell a percentage of your interest while keeping the rest
- Complete transfer: you sell your entire interest to another person or company
Less attractive to venture capitalists
Many venture capital funds avoid investing in LLCs, partly because the LLC’s income passes through to the fund and can create tax problems for the fund’s tax-exempt and foreign investors. Most venture-backed startups form as C corporations instead.
An LLC can still raise money through business loans or by bringing in new members.
DBA vs. LLC: how do they compare?
An LLC and a DBA both let you run your business under a chosen name, but the similarities end there. Here’s where they differ.
Setup
A DBA is easier and less expensive to set up than an LLC. You file one form, and there’s no annual report. Many states do require a renewal every few years.
Cost to file
A DBA is cheaper to set up. State fees range from about $5 to $150, while forming an LLC costs about $35 to $500 in state fees, depending on the state.
Asset protection
The biggest difference between a DBA and an LLC is liability protection.
A DBA makes no distinction between the business and its owner, who is liable for all of the business’s debts.
An LLC, on the other hand, helps keep its members’ personal assets safe if the business goes into debt or is sued (see LLC asset protection).
Name protection and branding
Any business structure can use a DBA for branding. An LLC’s legal name is also protected in its home state, because the state won’t register another entity with the same name.
To protect a brand name nationally, whether it’s a DBA or an LLC name, you need a federal trademark registration.
State filing differences
Depending on the state, you file a DBA with the Secretary of State or with a county or town clerk, and LLCs and sole proprietors sometimes file in different places. You form an LLC with the Secretary of State.
An LLC that does business in another state usually has to register there as a foreign LLC. If it wants to use a different name in that state, it can register a DBA there too.
Bank accounts
A DBA lets a sole proprietorship or partnership open a bank account and deposit checks under its business name.
An LLC can open an account under its registered legal name, so it only needs a DBA if it wants to take payments under a different name.
Which is right for your business?
A DBA works for sole proprietors or partnerships who want a business name without forming an LLC. But a DBA isn’t a business structure, and it doesn’t provide limited liability protection.
An LLC provides credibility, tax options and asset protection. In many cases, an LLC is worth the extra fees, and you can still add a DBA later if you want to trade under another name.
Choosing between them comes down to your business’s risks and your plans for growth.
FAQ
No. A DBA is a registered business name with no legal protection. An LLC is a legal business entity that separates your personal assets from the business’s debts and lawsuits.
Yes. An LLC can register one or more DBAs to operate under names that are different from its legal name. The DBA uses the LLC’s EIN and keeps the LLC’s liability protection.
No. A DBA doesn’t create a separate entity, so a sole proprietor or partner stays personally liable for business debts. You need an LLC or corporation for liability protection.
It depends on your risk. A DBA is cheaper if you just need a business name, but if your work carries any liability risk, an LLC is usually the better starting point.