Understanding the many business structures that are available to you as a business owner can help you choose the one that best suits your needs. Limited Liability Companies (LLCs) and Doing Business As (DBAs) are two popular organizational forms. There is frequently misunderstanding over whether you may LLC a DBA, even though they have separate functions.
Let’s first clarify what each structure comprises in order to respond to this query. Doing Business As is the legal term for “doing business as.” It gives a business owner a way to conduct business under a name other than their given one. For instance, John Smith, the owner of a plumbing company, could apply for a DBA under the name “Smith Plumbing” to increase the client recognition and memory of his company name.
On the other hand, an LLC is a sort of corporate structure that provides its owners with personal liability protection. As a result, the owners (sometimes referred to as “members”) are not held personally liable for the debts or legal problems of the business. This protection is comparable to that of a corporation, but LLCs have more management and tax flexibility.
So let’s get back to the core topic: can you LLC a DBA? No, a DBA is not a different legal entity from its owner, hence the answer is no. In other words, a DBA is only a name that a business uses to conduct business; it offers no inherent liability protection or tax advantages. As a result, you cannot “convert” a DBA to an LLC or use a DBA name to operate an LLC.
However, if your business already uses a DBA and you want to establish an LLC, you can do so by submitting the necessary papers to your state’s government. Although the procedure varies from state to state, it usually entails naming your LLC, appointing a registered agent, and submitting articles of organization. Additionally, you will need to get any licenses and permits required for your new business structure.
Personal liability protection and significant tax benefits are only two advantages of switching from a single proprietorship to an LLC. However, it’s crucial to keep in mind that creating an LLC has its own costs and demands, including annual fees and ongoing state government filings.
The answer to the query “does a DBA file a separate tax return?” is “no.” A DBA does not file its own tax return since, as was already mentioned, it is not a separate legal entity from its owner. Instead, Schedule C of the owner’s personal tax return is used to disclose the DBA’s earnings and outlays.
Finally, the answer to the question of whether an LLC can own another LLC is yes. An LLC can own other LLCs, corporations, or other forms of businesses since it is a distinct legal entity from its owners. This is referred to as a subsidiary structure and may provide tax and liability advantages.
In conclusion, even though a DBA and LLC have various functions, it’s crucial to comprehend how they are related and how they can affect your company. You cannot convert a sole proprietorship with a DBA into an LLC, but you can do so. Additionally, an LLC can control another LLC, and a DBA does not need to submit a separate tax return. Always seek the advice of a legal or financial professional to choose the optimal business structure for you.