How to file taxes may be on your mind if you operate a business under a DBA (Doing Business As) name. A DBA is a made-up name that a company uses in place of its actual name. For instance, if John Smith owns a landscaping company but does business as “Green Thumb Landscaping,” he must file taxes under that name. What you need to know about filing taxes under a DBA is provided here.
It’s crucial to realize that a DBA doesn’t alter the legal makeup of your company. If your business is a sole proprietorship, you must still file your taxes on Schedule C of your Form 1040, Individual Income Tax Return. If you’re managing a partnership, you’ll send K-1 forms to each partner and file a separate tax return (Form 1065) for the partnership. You must submit a separate tax return for your business if it is set up as an LLC or corporation.
Use your company’s Employer Identification Number (EIN) rather than your personal Social Security number when filing your taxes. Additionally, you must include all of your business-related earnings and expenditures on your tax return. This covers any earnings made using your DBA name. Remember that you could be required to pay self-employment taxes (Social Security and Medicare) on the money you earn from your firm.
What are the tax advantages of a DBA then? One benefit is that you can run your company under a different name without having to establish a second legal body. If you want to test out a new company concept without committing to a complete LLC or corporation, this can be helpful. Another advantage is that it might provide your company a more established, professional image to clients and suppliers.
Do you submit both your personal and corporate taxes at the same time? Yes, if you operate as a sole proprietorship. All of your business earnings and outlays must be reported on Schedule C of your personal tax return. When filing a personal tax return, each member in a partnership must disclose their portion of the partnership’s revenue. You must submit a separate tax return for your business if it is set up as an LLC or corporation.
Also, how does a DBA operate? As was already explained, a DBA is a made-up name that a company employs in place of its official name. Additionally, it may be referred to as a “trade name” or “assumed name.” You can run your company under a different name with a DBA without setting up a different legal entity.
And finally, LLC or DBA—which is preferable? Depending on the demands of your company. Although it is easier and less expensive to set up a DBA, it offers no liability protection. An LLC can be a preferable option if you’re worried about safeguarding your private assets from business debts and legal action. Additionally, an LLC provides more flexibility in terms of management structure and tax status. To decide which choice is best for you, think about speaking with a business lawyer or accountant.
In conclusion, using a DBA to file taxes is not too difficult. Just keep in mind to file your taxes using your company’s EIN and to include all of your business-related income and expenses. Although it doesn’t alter your legal structure or offer liability protection, a DBA can be a valuable tool for conducting company under a different name. Whether to use an LLC or DBA depends heavily on your company’s needs.