A DBA, in contrast to an LLC (limited liability company), is not a distinct legal entity. An LLC is a type of corporate organization that shields its owners from personal liability and separates their personal and commercial assets. A DBA, on the other hand, is just a mechanism for a company to conduct business using a name different than its legal one.
If a business owner wants to use a name other than their official business name, they can choose to file a DBA. For instance, John Smith could create a DBA for “Sweet Delights” and use that name for his cake business even though he owns a bakery called “John’s Bakery LLC” and wishes to sell cakes under that name.
Whether to set up an LLC or run a single proprietorship depends on a number of variables. Due to the personal liability protection provided by LLCs, owners are not held personally liable for the company’s debts or legal actions. Contrarily, sole proprietorships do not provide this protection. However, compared to sole proprietorships, LLCs involve more paperwork and maintenance costs.
An LLC is permitted to use fictitious names or numerous DBAs. To be registered with the state of Illinois, each DBA must submit further documentation and pay registration fees. It is significant to note that registering a DBA does not grant the business owner or their assets any legal protection.
In conclusion, it’s critical for any business owner wishing to use a name different than their registered business name in Illinois to understand the fundamentals of a DBA. A DBA can allow a business to operate under a distinctive name even though it is not a separate legal organization. Before making a choice, it’s crucial to weigh the advantages and disadvantages of setting up an LLC vs running a sole proprietorship.