A DBA, or “doing business as,” is a legal term for a company that conducts business under a name other than that of the owner. While a DBA might provide business owners some advantages like flexibility and convenience, there are also some substantial drawbacks to take into account. The disadvantages of a DBA will be discussed in this article, along with some frequently asked questions about establishing a DBA in Washington state.
A DBA does not give the business owner any legal protection, which is one of its key drawbacks. A DBA does not establish a unique legal entity, in contrast to an LLC or a corporation. This means that any debts, litigation, or other legal troubles that result from the business are personally responsible for the business owner. Personal belongings of the owner, such their house or funds, may be at stake as a result.
A DBA also has the drawback of making it more difficult to build a business credit profile. A DBA is often ineligible for business loans or credit cards in its own name because it is not a distinct legal company. Instead, the owner of the business must obtain finance using their own personal credit, which might reduce the amount of capital available and make it more difficult to expand the company.
Additionally, a DBA may not be as trustworthy in the eyes of customers and clients as a company with a proper legal framework. A DBA can be perceived as being less legitimate or professional than a company that has gone through the official process of becoming an LLC or corporation because it is not registered with the state. In particular in industries that are competitive, this might make it more difficult to draw in and keep clients.
Last but not least, a DBA may be more challenging to transfer or sell than a company with a formal legal structure. A DBA cannot be sold or transferred on its own because it is not a distinct legal entity. Instead, the owner of the business must sell or transfer the entire company, including all assets and obligations, which is a difficult and drawn-out procedure.
You must be aware of the cost to register a business name in Washington state if you decide to go with a DBA. The Secretary of State in Washington charges $5 to register a DBA. This can be done by mail or online. However, depending on the type of trademark you desire, the cost to register a trademark for your DBA might be anywhere between $225 and $400.
You can use the Corporations and Charities Filing System of the state of Washington to do a company owner search. You can search for businesses in this database by name, owner name, or UBI number. Additionally, you can order a Certificate of Good Standing for a company, which will notify you of the company’s ownership and status.
In conclusion, even if a DBA might offer certain advantages to business owners, it’s crucial to be aware of the drawbacks before choosing to adopt this legal framework. If you are unclear whether a DBA is the best option for your company, it may be beneficial to speak with a business attorney or accountant who can offer direction and advise based on your unique needs and objectives.
There is no obvious connection between the article “The Disadvantages of a DBA: What You Need to Know” and the query of whether an LLC operating agreement is necessary in Washington State. To address the question, an LLC operating agreement is not required by Washington State law, but it is strongly advised to have one. Having one in place can help avoid problems and protect the interests of all parties involved because it is a legal document that describes who owns, manages, and operates the LLC.