I know starting a business can bring out many emotions, but choosing the right business structure can feel overwhelming. One of the most common questions I hear is: "Can I just create a DBA since it's cheaper than an LLC?"
The short answer? It depends. Depends on what? On your business goals, liability concerns, and long-term vision. Let’s break it down so you can make an informed decision.
What Is a DBA?
A DBA (Doing Business As), also known as a fictitious name or trade name, which allows a business owner to operate under a name different from their legal name or the name of their existing business entity.
For example:
If John Smith wants to open a bakery under the name Sweet Bites Bakery, he would register Sweet Bites Bakery as a DBA instead of operating under "John Smith."
Similarly, if XYZ Enterprises, LLC wants to create a new division called Elite Marketing Solutions, they could register a DBA for that name instead of forming a separate business entity.
DBAs are not separate legal entities. They are just business names under which you operate your business.
What Is an LLC?
A Limited Liability Company (LLC) is a legal business entity that provides personal liability protection, meaning your personal assets (home, car, savings) are generally shielded from business debts and lawsuits.
LLCs offer:
Personal Liability Protection: If your business is sued or goes into debt, your personal assets are protected.
Legitimacy & Credibility: Clients and investors often take LLCs more seriously than sole proprietors using a DBA.
Flexible Taxation: LLCs can be taxed as sole proprietors, partnerships, or corporations, allowing for tax-saving opportunities.
Is a DBA Cheaper Than an LLC?
Yes, filing a DBA is usually cheaper upfront. DBA registration fees vary by state but typically range from $10 to $100. In contrast, forming an LLC requires a state filing fee (typically $50 to $500) and may involve annual renewal fees and compliance requirements, depending on the state the LLC is registered.
However, the long-term cost of a DBA can be higher if you face lawsuits, lose credibility, or miss tax advantages that LLCs offer.
LLC vs. DBA: Which One Is Right for You?
Feature | DBA | LLC |
Legal Protection | ❌ No | ✅ Yes |
Tax Benefits | ❌ Limited | ✅ Flexible |
Business Name Protection | ❌ No | ✅ Yes |
Credibility | ⚠️ Lower | ✅ Higher |
Ongoing Costs | ✅ Low | ⚠️ Varies |
When a DBA Might Be a Good Choice
You are testing a business idea before committing to an LLC.
You are a freelancer or sole proprietor who just wants a business name for branding.
You already own an LLC or Corporation and need a separate brand identity without forming a new company.
When You Should Choose an LLC Instead
You want personal liability protection to shield your assets.
You want a business structure that can grow with you and attract funding.
You want to take advantage of tax benefits that LLCs offer.
Final Thoughts: Cheaper Now or Smarter for the Future?
A DBA may save you money in the beginning, however an LLC can save you money in the long run by offering long-term protection, credibility, and financial benefits. Before deciding, consider where you want your business to be in 1, 5, or 10 years.
Need help deciding between an LLC or a DBA? I help entrepreneurs navigate business formations and make the right legal choices. Book a consultation today, and let’s set up your business the right way!
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