One of the first considerations when creating a business is the name of the entity. A DBA (Doing Business As) and a trade name are two popular choices. Although at first glance they can appear to be comparable, there are significant variances between the two.
When a company wants to conduct business under a name other than its legal name, it employs a DBA, which is a legal alias. In sole proprietorships and partnerships, this is frequently the case when the owner(s) does not wish to use their personal name(s) as the business name. For instance, John Doe, the owner of “John Doe Landscaping,” could submit a DBA application to conduct business as “Green Thumb Landscaping.” The business is still regarded as the same entity as previously even though it has a new name because a DBA does not create a new legal entity.
On the other hand, a trade name is the name that a company uses to identify itself to the general public. This name will appear on the business’ website, business cards, and marketing materials to consumers and clients. A trade name is not a legitimate alias, unlike a DBA. In actuality, a trade name and the legal name of a business may be the same. For instance, John Doe’s trade name could still be “John Doe Landscaping” even if his landscaping company is called “John Doe Landscaping LLC.”
Let’s now discuss the topic of what an LLC is regarded as. A business form known as an LLC, or limited liability company, combines the liability protection of a corporation with the tax advantages of a partnership. This indicates that an LLC’s owners are not personally responsible for the debts or legal obligations of the business. Instead, the LLC is in charge of fulfilling these duties. An LLC is regarded as a separate legal entity from its owners from a legal perspective.
But what if your LLC was unsuccessful? You might need to file tax returns even if your LLC didn’t make any money. This is true because an LLC is a pass-through entity, meaning that its earnings and losses are transferred to its owners’ individual tax returns. It might also be necessary to include any expenses or deductions made by the LLC on the owners’ tax filings.
Let’s now discuss which structure is preferable: an LLC or a corporation. The answer relies on a number of variables, including the size of the company, the number of owners, and the company’s objectives. In general, small enterprises with a single owner or a few owners that desire liability protection and flexible tax alternatives should consider forming an LLC. For bigger enterprises with several owners who wish to raise money through the selling of stocks, a corporation is a better choice.
Let’s finally discuss how an LLC pays taxes. As was already noted, an LLC is a pass-through entity, which means that the business’s gains and losses are transferred to the owners’ individual tax returns. As a result, the LLC is exempt from paying federal income tax. However, certain states might impose state-level taxes or fees on LLCs. It’s crucial to review your state’s regulations to make sure you are compliant.
In conclusion, despite their apparent similarity, a DBA and a trade name differ significantly. Even if an LLC didn’t produce any money, it may still be required to submit tax returns because it gives liability protection and varied tax options. The demands of the business will determine whether an LLC or corporation is more advantageous, and an LLC pays taxes through the owners’ individual tax returns.