What kind of legal structure to utilize when creating a business is one of the first choices you’ll have to make. A DBA (Doing Business As) and a sole proprietorship are two popular choices. Both allow people to run their own enterprises, but they differ in some important ways.
The simplest and most typical type of business structure is a sole proprietorship. It is a sole proprietorship owned and run by one individual. All facets of the business, including obligations and debts, are the owner’s personal responsibility. All profits and losses for the company are reported on the owner’s personal tax return because it is not a separate legal entity.
Contrarily, a DBA is a technique to run a business under a name other than the owner’s legal name. It may also be referred to as a “assumed name” or “fictitious name.” Although a DBA does not establish a new legal organization, it does allow the owner to conduct business under a different name.
A crucial point to keep in mind is that using a DBA does not offer any liability protection. Like a sole proprietorship, a DBA’s owner is nonetheless individually accountable for every part of the business.
Can my DBA name be stolen?
Your DBA is protected and cannot be used by anyone else if you have registered it with the relevant state or municipal entity. However, someone else could be able to use your DBA if you haven’t registered it.
An LLC may have a DBA.
Yes, a DBA is permissible for an LLC (Limited Liability Company). In reality, a DBA is frequently used by LLCs as their main business name. It’s crucial to keep in mind that the LLC, not the DBA, is the actual legal entity and offers liability protection. Is it possible to trademark my DBA? If it satisfies the criteria for a trademark, a DBA may be registered as a trademark. It’s crucial to keep in mind that trademark protection just covers the name and offers no liability protection. How much should a lone proprietor set up for taxes?
You are liable for paying self-employment taxes as a sole owner, which include Social Security and Medicare taxes. The current rate of self-employment tax is 15.3% of your net income. You’ll have to pay income taxes on your profits in addition to self-employment taxes. As a sole owner, it is advised to set aside at least 25–30% of your income for taxes.
A sole proprietorship and a DBA are both possibilities for people who want to launch their own enterprises, to sum up. While there are certain similarities between them, there are also some significant disparities in how their legal systems handle culpability. Before making a choice, it’s crucial to carefully weigh your options and speak with a legal or financial expert.
You have a few options for paying yourself as an LLC owner. One choice is to take an owner’s draw, in which case you merely remove money as needed from the LLC’s account. Another choice is to set up a formal payroll system and pay payroll taxes while paying yourself a salary. Taking distributions, which are comparable to owner’s draws but are based on the LLC’s profits and are subject to certain tax regulations, is a third choice. It’s crucial to seek advice from a financial or accounting professional to choose the most advantageous way to pay yourself from your LLC.