A DBA is a name that’s different from the legal name of the company. It is a name the business wants to use when marketing itself to the public and dealing with customers. A sole proprietor, LLC, or corporation is said to be “doing business as” whatever fictitious name it has filed.

You may have heard DBA (Doing Business As) referred to in a variety of ways. Some other names for DBA include:

• Fictitious business name
• Assumed business name
• Trade name

A DBA lets the public know the true owner of a business. The DBA or fictitious business name designation was created as a form of consumer protection, to prevent unscrupulous business owners from operating under a different name to avoid legal trouble. When a business files a DBA with its county or state, it must typically submit a notice to the local newspaper so that the community can see who is behind the business.

Advantages:

Although creating and maintaining a corporation or an LLC will probably be more complex and costly than forming a sole proprietorship or partnership, it may be worth it for your small business depending upon the type of work you plan on doing. Perhaps the main reason you would want to organize your business as an LLC or corporation is to shield yourself from any personal liability that may arise from your small business’ dealings.

Although LLCs and corporations are alike in many respects, what truly sets a corporation apart from the other types of business structures is that a corporation is its own legal and tax entity. A corporation pays its own taxes on any profits that it keeps and the owners of a corporation only pay income taxes on monies they draw from the corporation in the form of salaries, dividends and bonuses.

A LLC, just like a corporation, provides limited liability to the owners of the LLC for the business’ liabilities, including debts, judgments and others. Where the LLC differs from a corporation, however, is in terms of taxes. Unlike a corporation, a LLC is not its own, separate tax entity, and the owners of the LLC must pay personal income taxes on their share of the profits that the LLC keeps during the tax year.

Organizing your business as a corporation or a LLC makes sense in two situations. First, if the business in engaged in a dangerous activity that makes it more likely to be sued, or if the business has the potential of racking up large amounts of debt, then a corporation or a LLC may be a good idea to shield the owners from personal liability. Second, if any of the owners of a business have large amounts of personal assets that they want to shield from any potential liability associated with the business, a corporate or an LLC could be the best option.

• A C Corporation is also known as a general for-profit corporation.
• The C Corporation is the most common form of corporate entity.
• The C Corporation is formed by filing an Articles of Incorporation with the state office.
• The C Corporation is owned by shareholders and there is no limit on the number of shareholders in a C Corporation.
• The shareholders elect a Board of Directors to create and direct the high-level policies of the business. This Board of Directors then appoints corporate officers who in turn manage the day-to-day operations of the business.
• Shareholders generally have limited liability, even if they are involved in the day-to-day management while wearing the hat of an employee or a corporate officer.
• The shares of a corporation are freely transferable unless limited by the agreement of the shareholders.
• The corporation exists indefinitely, unless and until it is dissolved.
• It is a separately taxable entity, meaning that it must file its own tax return and pay corporate taxes on its profits.

An S Corporation is formed in the same way that a C Corporation. However, the S Corporation is different from a C Corporation in two significant ways:

• The S Corporation makes an election to be taxed as a pass-through entity under sub-chapter S of the Internal Revenue Code. This means that an S Corporation is not taxed separately and apart from its owners and/or shareholders. Instead, corporate profits and losses are passed-through and reported on the personal income tax returns of the shareholders, much like a partnership.
• In contrast to a C Corporation, an S Corporation has limitations on ownership.
• In an S Corporation:
  • There is a limit of up to 100 shareholders.
  • Each shareholder must be an individual or a trust (not another corporation)
  • Each individual shareholder must be a citizen of the United States or a “Resident Alien” which includes Permanent Residents (a person who has been issued a Green Card) and certain Aliens who pass the Substantial Presence Test. These residents (who pass the Substantial Presence Test) need not be permanent residents. They can be Visa holders (H1/L1) and still be considered Resident Alien per tax laws.

For those groups that are formed for charitable, educational, religious, literary, or scientific purposes, and not for the purpose of generating profits for its shareholders, a special legal entity may be formed under Section 501(c)(3) of the Internal Revenue Code. A fully and properly qualified 501(c)3 Nonprofit Corporation has the following characteristics:

• The corporation is exempt from taxation.
• Tax-exempt corporations are prohibited from paying dividends.
• Upon dissolution, corporate assets must generally be distributed to another qualified nonprofit group.
• Significant filing requirements may exist at both the State and Federal level to establish and maintain tax-exempt status.
• A nonprofit corporation may be prohibited from engaging in certain activities, including participating in political campaigns and substantial engagement in lobbying activities.