Last week was full of confessions for me. I told you about everything from my D+ on a high school English assignment to my poorly planned recruiting business. When I started Back’nGrooveMom, I still had my LLC from my first biz in good standing, so it made sense to continue to use it. I only needed to file for a DBA (Doing Business As).
I filed for my DBA myself which resulted in it coming back and needing to be resubmitted :). You can believe that the next time I need to do this, I will hire Nellie Akalp from CorpNet.com, who would have saved me the time that it took for me to file twice for a DBA. I am so excited to feature Nellie on the blog again today to chat about LLC’s and DBA’s and what happens after they have been CORRECTLY FILED:
You’ve filed your DBA…What’s Next? by Nellie Akalp
When many moms start out in business, they form an LLC (Limited Liability Company) and then find it necessary to file a DBA (also known as a “doing business as” or a “fictitious business name” filing) in order to conduct business under a different name. Other moms file their DBA first, then decide they need to also form an LLC to protect their personal assets. Both are big steps in the life of any business.
Over the course of my career, I’ve helped hundreds of thousands of small business owners and entrepreneurs file their DBAs, Incorporate a business, and form an LLC. And I’ve put together some of the more commonly asked questions to help you navigate all the steps after filing your DBA.
Q: I filed my DBA, then decided I needed to create an LLC or corporation. What happens to my DBA?
A: If you create the Corp/LLC under the same name as your sole proprietorship, you can start conducting business under the Corp or LLC. In this case, you can cancel the DBA (Doing Business As) that you had set up with your sole proprietorship, or just let it lapse.
Of course, closing the books on your sole proprietorship and opening them in your Corp/LLC can have some pretty hefty tax implications, so you should consult with your CPA/tax advisor on this best time of the year to do so.
Q: After filing for a DBA, should I open a bank account in the DBA’s name? Or the LLC’s name?
A: If your DBA has not been filed by the LLC and is strictly registered by yourself (as a sole proprietor), then you will need to open up a bank account under then DBA name.
If your DBA is filed under an LLC, then you should open the bank account under the LLC name. This is the best route, since the DBA falls under the umbrella of the LLC. When you open the account, you should show the bank that the LLC is doing business under different names and have them put this on record. This way, your business can accept checks written to either the LLC or DBA name without any hassle.
Also, if you opened a ‘business bank account’ for your sole proprietorship and have since formed an LLC or Inc, you’ll need to close the original account and open a new bank account under the LLC or Inc.
Q: Can I have more than one DBA under the same LLC?
A: Yes. If like most businesses you’re going to be operating under any variation of your official company name (i.e. CorpNet vs. CorpNet.com vs. CorpNet, Inc…), you will need to file DBAs for each of the variations. If you have an LLC or Inc, you should have your Corporation/LLC file the DBAs so they operate underneath your Corp/LLC.
The same holds true even if you’re going to operate multiple ventures (for example selling handmade soaps, knitwear, jewelry…) under the same company. You can establish one main company (i.e. Susy’s Corp) and then have Susy’s Corp file multiple DBAs for each of the specialized brands (i.e. Susy’s Soaps, Susy’s Knits…). This way each of the smaller companies can reflect the branding and presence best for their specific markets, yet still enjoy the legal protection of the main holding company.
Q: I used to be a sole proprietor and I had a Federal Tax ID number. Do I need to get a new Federal Tax ID number now that I’ve incorporated/formed an LLC?
A: The answer here is yes. An LLC or corporation is its own separate entity (an LLC or Corp can sue, be sued, get a loan…) and as such, it needs its own federal tax ID number, also known as an Employer Identification Number (EIN). Think of business formation like the birth of child. Once a child is born, it needs its own social security number. The same holds true for your business.
As a sole proprietor, you’re able to identify your business either with your social security number or an EIN. However, if you’re operating your business as an S Corporation, LLC, C Corporation or other legal entity, you must obtain an EIN for that entity. Otherwise, you will not be able to open up a business bank account or file your business tax returns properly.
Hope that helped and stay tuned for more including a series of in-depth articles on forming an LLC and other legal aspects of running your business.
Nellie Akalp is a passionate entrepreneur, small business advocate and mother of four. As CEO of CorpNet.com, an online legal document filing service, Nellie helps small business owners form an LLC or incorporate a business in order to start and protect their new business ventures the right way. To learn more about Nellie, watch informative videos and see how she can help your business, please visit here.