Transitioning from a DBA (Doing Business As) to an LLC (Limited Liability Company) offers businesses enhanced legal protection and credibility; discover the essential steps and benefits of making this pivotal switch in our comprehensive guide.
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Are you wondering if you can change your DBA into an LLC? You can! Moving from DBA to LLC is an important legal process, but for many entrepreneurs, it signifies the next big step for their business.
That’s because a DBA, or “doing business as” name, is much like a permit to use a business nickname. It doesn’t make your sole proprietorship into a registered business; it allows you to use a business name instead of your legal name. As a result, a lot of DBAs are owned by sole proprietors. In this guide, we’ll cover the essentials of converting a DBA into an LLC.
A DBA and LLC are two very different things. An LLC, or limited liability company, is a business entity type that registers with the state; it’s a separate legal entity from the people who own it. Thanks to that separation, an LLC offers personal liability protection for its owners (who are called “members”). Usually, if the business gets into legal or financial trouble, the members won’t be liable for it; their personal assets can’t be taken. That’s why many entrepreneurs prefer the LLC vs a sole proprietorship.
In contrast, a sole proprietorship doesn’t have personal asset protection because legally, the business and its owner are the same legal entity. And it’s crucial to note that a DBA (called an assumed name, trade name, or fictitious name in some states) leaves you exposed to unlimited liability (see doing business as definition for more). It’s not a business structure. All a DBA does is give a business owner permission to operate under a different name from their legal name.
If you’re a sole proprietor using a DBA, changing your business identity into an LLC will require some legwork. But in exchange, you’ll get the limited liability protection afforded to a state-registered business. There are five key steps you’ll need to follow to change your DBA to an LLC.
Make sure your DBA name is available to register as an LLC. When you first filed your DBA application, you probably checked that it didn’t match a name already in use in your state. It’s important to check that availability again; you’ll want to run a business LLC name availablility search. If your DBA matches the name of a registered business — or too closely resembles one, in some cases — the Secretary of State will reject your formation documents.
You should also check that your name complies with your state’s LLC naming statutes. Some states have different requirements for your entity designator. You will have to add a label like “LLC” or “Limited Liability Company” to the end of your name to demonstrate your new entity type. Some states even restrict the words you can include in an LLC name. The important thing is that you ensure that your name meets your state’s requirements.
After you check that your name’s valid for an LLC, you might want to reserve it to protect it for your exclusive use while you get set up. We can help reserve your business name easily.
Research your state’s requirements for your DBA. Every state approaches DBAs a little differently. Some states protect DBAs exclusively, like the legal name of a business. Others allow multiple businesses to use the same DBA.
If you live in a state that protects DBAs for the exclusive use of their owners, you’ll need to dissolve your DBA before filing your formation paperwork. Otherwise the state will reject your filing because of your business name. But if your state doesn’t protect DBAs for exclusive use, you can probably file your LLC paperwork without dissolving the DBA. If in doubt, we recommend consulting with your Secretary of State or the county agency where you originally submitted your trade name registration.
Formally create your LLC in your state. After you’ve determined what needs to happen with your DBA, you’ll want to file the formation paperwork for an LLC. A lot of states call this form the “Articles of Organization.” Filing these Articles is what officially creates your LLC.
You’ll have to provide a lot of basic but important information about your business on this form. For example, you’ll list your name (probably your DBA with an entity identifier like “LLC” added), your registered agent (For more information, please see our what is a registered agent page) for service of process, contact information, and other vital business info. Every state has a slightly different filing fee for this document as well. Typically, fees range from as little as $50 to as much as $500.
If you don’t have time for paperwork, we can help form your LLC for $0.
Register for an employer identification number (EIN) from the IRS. Now that your business is a separate legal entity from you personally, it may be time to get an What is an EIN. An EIN acts like a Social Security number for a business; it’s a nine-digit code that the IRS uses to identify your business at tax time. LLCs have to obtain an EIN if they have employees, have multiple members, owe excise taxes, or meet another requirement.
Some single-member limited liability companies with no employees don’t have to get one. But applying for it is free, and some banks require one before they’ll issue a business bank account. If you’d rather avoid yet another thing to file, our EIN service has your back. For more complicated tax questions, we highly recommend consulting with a tax attorney or CPA.
If you don’t intend to keep using your DBA, you’ll need to dissolve it or let it expire. Every state has a different approach to how DBAs end. In many states, a DBA must be renewed every five years or the registration will expire. Other states have permanent registrations that you’ll have to cancel. If in doubt, reach out to your Secretary of State (or county clerk) to see what the requirements are in your area.
In some cases, you might want to keep using your DBA. For example, a sole proprietor who converted into an LLC might want to maintain their social media names without adding a tag like “LLC.” Maintaining your DBA would allow you to do that.
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Starting a business can feel overwhelming, but it doesn’t have to! At ZenBusiness, we offer $0 LLC formation services, registered agent services, and even worry-free compliance packages. Our goal is to get you started on the right foot so you can focus on what truly matters: your business.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Can you switch from a DBA to an LLC?
In most cases, yes. You can register an LLC using your DBA as the new entity’s legal business name. This will create a new, distinct entity.
Which is better: a DBA or LLC?
“Better” isn’t the right word for comparing an LLC and DBA, because every entity has unique needs. A DBA is a very helpful tool for the entrepreneur who wants to get started simply; it lets them operate under a different entity name. But if an entrepreneur wants personal asset protection, then an LLC would be the better choice. A DBA doesn’t offer any legal protections, unlike the LLC.
Which is cheaper: a DBA or LLC?
In most cases, a DBA is cheaper to register and maintain than an LLC. Many states have pretty nominal registration fees for DBAs. And renewing them is often affordable and relatively infrequent. LLCs, however, typically have annual or biannual reporting requirements with the state in addition to their formation fees. In some states, these can be quite pricey.
However, if a business gets into legal trouble, the LLC might be less “expensive” for its owner because the LLC’s owner usually isn’t personally liable for the business activities. A DBA won’t shield a business owner from legal and financial consequences, which can be quite severe.
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