Although starting a business is an exciting endeavor, there are other crucial considerations that must be made, such as selecting a legal structure. Limited Liability Companies (LLCs) and Doing corporate As (DBA) registrations are two popular corporate legal structures. Choosing the best option for your organization depends on your unique requirements and objectives because each offers a unique mix of benefits and drawbacks.
If you are a single proprietor today and want to become an LLC, you must submit Form 8832 to the IRS. You can select whether your LLC will be taxed as a partnership, a corporation, or a disregarded organization using this form. You should also check with your state to discover what additional procedures are necessary to set up an LLC there.
If an LLC wants to market their firm under a different name, they may decide to employ a DBA. To offer your services under the name “Smith Solutions,” for instance, if your LLC is called “Smith Consulting LLC,” you would need to register your DBA. This enables you to continue using the legal protections offered by your LLC while operating under a different name.
The fact that a DBA offers your company no legal protection is one of its key drawbacks. In the event that your company were to be sued, you personally would be the defendant in the case. A business bank account or credit card may also be difficult to obtain if you operate under a DBA because many financial institutions demand documentation of a legitimate business entity. Does a DBA Substitute Filing a Separate Tax Return?
A DBA does not submit a different tax return. Any revenue generated by a DBA is regarded as personal revenue, and it must be reported on your individual tax return. Another justification is that doing so enables them to keep their personal and corporate money separate and submit a separate tax return for their company.
In conclusion, LLCs and DBAs each have specific benefits and drawbacks. DBAs permit marketing and branding flexibility, whereas LLCs provide greater legal protection and tax flexibility. It’s crucial to thoroughly analyze your unique demands and business goals when deciding which legal form to adopt. Making the best choice for your circumstances may also be assisted by seeking legal or financial advice.