You can choose whether to conduct business as yourself or under a different name, sometimes referred to as a “Doing Business As” or DBA, as a sole owner. Having many DBAs can be advantageous for a number of reasons, such as growing your company’s product line or focusing on distinct markets. However, the issue of a sole proprietor having many DBAs comes up.
Yes, a lone proprietor can operate under many DBAs. The amount of DBAs a lone entrepreneur can have is actually unlimited. However, each DBA needs to be registered with the relevant municipal and state authorities, and there is a separate filing fee for each DBA. Each DBA is also required to have a separate bank account and tax ID number.
It is relatively easy to add a DBA to an existing entity if you are a S corporation. You must change your company’s records with the Internal Revenue Service (IRS) and submit a “Doing Business As” registration with the relevant state and municipal authorities. Once the registration is complete, you can start using the new DBA to conduct business.
A person who owns 2% or more of the outstanding stock or shares of a S corporation is referred to as a 2% owner. For tax purposes, these people are handled differently than conventional workers. They are subject to additional tax reporting requirements and are not eligible for several fringe benefits, such as group term life insurance.
An S corporation’s owner distributions are taxed differently from conventional income. Owners who take draws are nonetheless liable for income tax even though they are not subject to employment taxes (Social Security and Medicare taxes). The owner is obligated to pay the necessary taxes and declare the draw on their personal tax return.
Last but not least, a lot of people inquire as to whether they can move funds from their S corporation company account to their personal account. Yes, but it needs to be done correctly. On the owner’s personal tax return, the transfer must be listed as an owner draw and as income. To maintain compliance with all tax rules and regulations, it is crucial to keep correct records and consult with a tax expert.
Sole proprietors are permitted to operate under numerous DBAs, but each one must be registered with the relevant authorities, have its own bank account, and have its own tax identification number. A DBA can be easily added to an existing S corporation, but 2% owners are subject to separate tax laws. Money transfers from a business account to a personal account must be done properly and declared as owner draws in order to be taxed differently from regular revenue in a S corporation. To ensure compliance with all tax rules and regulations, it is crucial to speak with a tax expert.