Closing a DBA: What You Need to Know

If you own a business, you might need to close your DBA (doing business as) entity at some point. You can be retiring, starting a new business, or just closing your doors. Whatever the cause, terminating a DBA involves some formalities and documentation. What you need to know about terminating a DBA, as well as other related subjects like the distinctions between dissolution and termination, and Texas LLC taxation, will all be covered in this article.

Let’s start by defining what a DBA is. A business that conducts business under a name other than that of its owner or owners is referred to as a DBA in legalese. For instance, if your firm is called “Smith’s Plumbing,” but your legal name is John Smith, you would need to file a DBA in order to use that name.

How to Finish a DBA

There are a few things you must do in order to close your DBA. You must first terminate any licenses and permissions connected to your DBA. Additionally, you must close any bank accounts connected to your DBA.

The following step is to cancel your DBA with the relevant state agency. The majority of the time, this will be the same organization where you initially filed your DBA. Your legal name, your DBA name, and your contact information must be given to the agency. To file the cancellation, you can also be charged a cost.

When it comes to closing a company entity, the words “dissolution,” “termination,” and “cancellation” may have been used interchangeably. Despite their similarities, they do not have the same meanings.

Dissolution is the process of closing down a commercial entity, like a corporation or an LLC. This entails settling any financial responsibilities or debts the company may have, allocating assets to shareholders or members, and submitting the necessary papers to the authorities. Dissolution can be voluntary on the part of the company’s owners or it might be mandated by a court.

Contrarily, termination describes the formal end of a company entity’s existence. This can take place either willingly after the company has been dissolved or involuntarily if the state revokes the company’s charter or the company is dissolved by a court order.

The phrase “cancellation” is frequently used to describe the ending of a DBA. A DBA cancellation effectively terminates your ability to do business under that name. The single proprietorship or partnership that owns the DBA may continue to exist, but it will no longer be permitted to conduct business under that name.

Let’s discuss LLCs and taxes in Texas one last time. Because they provide many of the advantages of a corporation, like restricted liability, but with more tax flexibility, limited liability companies (LLCs) are a common type of business formation.

Texas has a state franchise tax that is dependent on the annual revenue of the LLC. For the majority of LLCs, the tax rate is now 0.375%, while it might be higher for other enterprises. Federal income tax is also applied to LLCs, although the LLC does not pay taxes. Instead, the LLC’s gains and losses are distributed to each individual member, who then reports them on their individual tax returns.

Any form of business closure can be a challenging process, but with the appropriate direction, it can be completed quickly and effectively. It’s always a good idea to speak with a knowledgeable business attorney if you have questions about how to close your DBA or require assistance with any other legal issues pertaining to your company.