There’s a lot to think about as you’re starting a business in Maryland. You could be well on your way to securing valuable liability protection (and peace of mind), but you’ll need to complete a lot of paperwork that reflects how your business operates.
As you proceed, remember: The name of your business underscores everything you do, so it’s important to choose carefully. If you’re not 100 percent happy with your legal business name, it’s time to take action.
Depending on how you want to run your business, you may benefit most from using an assumed name. Also known as a trade name or DBA, this is an important step in operating sole proprietorships, general partnerships, and even LLCs. The better you understand how DBA works and when it’s advisable, the more likely you are to select a naming strategy that benefits your business.
Are you confused about the concept of DBAs as they pertain to running an LLC or other type of business in Maryland? We’ve outlined all of the essential details on Maryland DBAs below, so keep reading to learn more:
What is a DBA in Maryland?
Before we define the acronym DBA, it helps to know what it is not: a legal business structure. Rather, DBA is used by a variety of entities, including:
- Sole proprietorships
- Single-member LLCs
- Multi-member LLCs
- Corporations
Simply put, DBA is an acronym for “doing business as.” This phrase accurately describes the purpose of the DBA: to help entities do business under assumed names. In other words, a business with a DBA will be known to the public by another title rather than its legal name.
While some states outright reference this concept as DBA or a fictitious name, Maryland uses the phrase “trade name” to describe any business title that is not an entity’s legal name.
Benefits of Filing a DBA
If you’ve already gone through the trouble of designating a legal business name, you might wonder: Why deal with the extra hassle of securing a DBA?
In some situations, a DBA simply isn’t worth the extra effort. More frequently, however, businesses and professionals find that DBA designation delivers a variety of advantages that simply cannot be gained by forming an LLC.
The most compelling benefits of securing a DBA or trade name in Maryland include:
Flexibility
Businesses that operate in multiple states often take advantage of the unique flexibility that DBAs provide. Under this approach, it’s easier to expand business operations and pursue new opportunities such as special products or services. Keep in mind that a Maryland trade name covers Maryland only; each state has its own rules.
Rather than requiring existing businesses to launch completely new entities, DBAs provide more targeted branding. After all, they’re registered via existing business structures.
Credibility
If you prefer to remain a sole proprietor but don’t want to do business under your own name, a DBA is your best bet. By creating an official business name, you can shape how you’re perceived by clients, creditors, or vendors.
Many sole proprietors are surprised to discover that they’re taken far more seriously after they’ve established trade names. Filing a DBA is one of the fastest and most affordable means of gaining credibility, particularly for sole proprietors who are not yet ready to gain LLC status.
Ease of access
While it takes some modicum of effort to secure a DBA in Maryland, this is far easier than establishing an LLC. As such, the DBA approach may be preferable for sole proprietors or partners who have no interest in going the extra mile to start LLCs. Securing a DBA should also be far more affordable than starting an LLC and keeping it in good standing.
Satisfying requirements
For some entities, obtaining a DBA is primarily a matter of necessity. Sole proprietors, for example, will need to secure trade names if they don’t want to refer to their business by their own first and last names. LLCs don’t need a trade name, but an LLC that does business under a name other than its legal name must register that name first.
Disadvantages of a DBA
There’s a lot to love about DBA designation in Maryland, but this approach has its limitations. Before you complete a trade name application, it’s crucial that you understand what, exactly, a Maryland DBA can and cannot accomplish. As such, we’ve highlighted a few of the most significant disadvantages below:
- A DBA will not protect your business from liability. It bears repeating: a DBA is not the same as an LLC. It will not shield your assets in the event of a lawsuit. It exclusively provides an alternate means of naming and branding.
- You won’t receive exclusive rights to the name. A trade name isn’t a trademark and won’t protect you from infringement claims. So, while a DBA can be somewhat beneficial for branding purposes, these advantages are limited in scope if you don’t take extra effort to secure further protection.
Is a DBA in Maryland a must?
You don’t have to use a trade name. But if your business (including an LLC) operates under any name other than its legal name, Maryland law requires you to register that trade name with SDAT before you start using it. It’s perfectly acceptable to do business under your legal name, and in select situations, this is actually preferable.
As we’ve discussed, this requirement is especially relevant if you plan to remain a sole proprietor rather than start an LLC.
Filing for a DBA in Maryland
Now that you have a basic grasp of what a Maryland DBA involves and why it’s worth considering, it’s time to determine whether you actually want to move forward with securing an additional name.
It helps to understand the DBA requirements specific to the state of Maryland. To provide maximum insight, we’ve outlined all of the essential steps involved in choosing your name and registering your DBA:
Name requirements
Maryland maintains a variety of strict trade name requirements that must be considered before you select your DBA. When in doubt, avoid anything that:
- Indicates that your business functions as a financial institution. Refrain from using terms such as bank, credit union, and trust.
- Suggests status as a government entity. Steer clear of designations such as treasury or state department.
- Home improvement companies must check with the Home Improvement Commission to ensure that desired names are available.
Begin with a Maryland assumed name search
Before you register a Maryland DBA, you should feel confident that your preferred name is actually available. The Maryland Business Express website provides an easy-to-navigate search tool, which should provide valuable insight into existing business entities with similar names.
A thorough search is essential, as your failure to find similar names could result in the rejection of your trade name application. Begin the process by simply typing the name of your intended DBA in the search box. If any similar trade names exist in the state of Maryland, they should promptly appear.
To be safe, complete a few additional searches featuring terms similar to those found in your desired trade name.
Register your Maryland DBA
Once you’ve found an acceptable name, it’s time to register with the Maryland State Department of Assessments & Taxation (SDAT). Use the official trade name application to complete your request.
In addition to the application, you’ll need to submit a $25 filing fee. Checks must be payable to the Department of Assessments & Taxation. If you require expedited service, be prepared to pay an extra $50.
Same-day processing is also available, but this is far more expensive: it costs $425 for paper filings left in the drop box by 10 AM, or $325 for online filings submitted by 2:30 PM (not all documents qualify).
If you prefer to submit a hard copy of your application without rush or expedited processing, you’re welcome to hand-deliver it to SDAT’s drop box in the lobby at 123 Market Place, Baltimore, MD 21202. Check SDAT’s website for current drop box instructions.
If the owner is a registered entity, your trade name application should include its SDAT identification number, which consists of one letter followed by eight digits.
Whether filed online, by mail, or in person, the standard application will also include:
- The full name of the legal entity
- The address of the owner, or an attached sheet with all owners’ addresses
- The nature of the business
- A signature from every person listed as an owner
- The desired trade name
If you intend to file for multiple trade names, you will need to submit one application per DBA.
File online
The state of Maryland allows LLCs and other businesses to register trade names online via the Maryland Business Express website. Before completing this process, it’s necessary to create an account. It’s also worthwhile to review the state’s fee schedule. Maryland Business Express lets you choose standard or expedited processing, and online payments carry a 3% service fee.
File by mail
If you prefer to file your trade name application by mail, send both the appropriate form (and a $25 or $75 check) to the following address:
Department of Assessments and Taxation, Charter Division
700 East Pratt Street, Suite 2700
Baltimore, MD 21202
What happens when a Maryland DBA is accepted?
Although you can feel reasonably confident in your DBA’s validity if you’ve conducted a thorough name search, there is no guarantee that it will be accepted.
You’ll know for sure when the SDAT sends an official acknowledgment of acceptance. This notice will be sent to the address provided on the trade name application. Typically, the SDAT responds within four weeks of the trade name’s acceptance.
How long is your DBA valid?
Once your DBA has been accepted, it will remain in effect for five years. During the final six months of this five-year period, you will have the opportunity to renew your DBA for an additional five years (the renewal fee is $25).
If you fail to do so in a timely manner, the trade name will be canceled by the SDAT. This forces you to complete another application to keep your DBA current.
Consequences for operating With a DBA without registration
You don’t necessarily have to file for a trade name, but this is needed if you want to take full advantage of the DBA benefits highlighted above. State law mandates that all businesses operating under assumed names officially register their trade names before they start using them.
Registering keeps you compliant with state law and makes your trade name part of the public record. Banks and payment processors often ask for proof of registration.
Tax considerations
DBA designation does not equate to a separate business structure, so it shouldn’t have a discernible impact on how your business is taxed. As you determine which entity is preferable for tax reasons, look instead at the potential for pass-through treatment.
Conclusion
A Maryland DBA or trade name can be a valuable option for protecting and promoting your business. Keep in mind that a trade name doesn’t replace any business licenses and permits your company may need. While it doesn’t provide legal or tax advantages, it offers flexibility and branding opportunities that can help your company stand out. Think carefully about whether a trade name is the right choice for your Maryland business, and don’t hesitate to seek help if you find the process confusing.
If you’re considering taking the next step in formalizing your business, it’s also worth learning more about how to start an LLC in Maryland. Doing so can provide additional liability protection and structure while allowing you to continue using your DBA for marketing and branding purposes.
There’s a lot to be said for combining flexibility with peace of mind, both are well within reach when you understand your options and take the right approach.