Yes, you can have multiple DBAs under a sole proprietorship, but it will depend on your geographic location. Depending on the state you live or hope to run your business, a sole proprietor can have multiple DBAs for unrelated businesses under the umbrella of a single taxpayer identification number (TIN) or employer identification number (EIN).
However, it is very important to note that some states don’t allow multiple DBAs so if that’s your intent, you may want to explore setting up a limited liability company (LLC) under which you can house different businesses with unique names. But if instead you choose to operate the business as an extension of your own affairs, then you are required by law to operate it under your own name.
A DBA, or doing business as, is more or less an official name for your business. Most people in the United States tend to create DBAs for their sole proprietorships, since operating this type of entity doesn’t involve creating a business name.
Although you are expected to choose a business name for an LLC, corporation, or partnership, you aren’t required to do so for a sole proprietorship. The reason is because this type of entity doesn’t operate separately and distinctly from its owner.
Howbeit, if you intend to further separate your own personal name from your work as a sole proprietor, you can create a DBA as it offers numerous advantages. Some sole proprietors find it hard to establish their credibility, especially if these individuals are trying to do work on their own without any prior business experience. When sole proprietors do business, they use their own personal assets, along with their own personal contacts.
Therefore, when creating a formal business name using a DBA, they can now create a website and e-mail address with that business name. It might also offer a better opportunity at opening a business bank account. Financial institutions tend to require that a business have a formal business name and separate Employer Identification Number (EIN) when opening a business bank account.
Additionally, since a sole proprietor doesn’t have a separate EIN, they may find it hard to open a business bank account. If a proprietor establishes a separate DBA, this might provide greater distance between the owner and his business, especially if the owner makes a conscious effort to separate himself from his business.
In the same vein, establishing a DBA might help a sole proprietor obtain a loan from a bank. Note that even if you are able to obtain lending and open a business bank account, the sole proprietor will still have to use his or her own personal social security number (SSN) and signature when filling out and signing such paperwork.
The requirements for obtaining a DBA vary by state, but some states require that you also publish your DBA name in the local newspaper for several weeks before formally using the DBA through business means.
While you cannot create more than one DBA per state, if you want to create a DBA in another state, you can do so by filling out an application and following the steps required to create a DBA in that particular state. Even if you are operating a partnership, or any other type of business, you might want to formally establish a DBA to use rather than using your business’s name.
How to Set Up a Sole Proprietorship Using a DBA
A sole proprietor is mandated by law to use his legal name to conduct business. Use of a DBA is always optional in every jurisdiction. If a sole proprietor does want to use a DBA, he must obtain permission from local authorities first. Registering a DBA with the state is just one step in officially forming a sole proprietorship. Here are few steps to consider if you want to set up sole proprietorships using DBAs;
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Check the DBA’s Name Availability
The very first thing is to do is to verify that your DBA name is available. You can start by checking with the Secretary of State and search the database of active businesses operating within your state. Go a step further and search the United States Patent and Trademark system to make sure no one else is using your DBA name as a trademark. It is imperative you make sure want your trade name is unique.
Submit an Application for the DBA
Note that to properly register your DBA, the state is expected to receive your completed application. Requirements tend to vary by jurisdiction, but normally you will have to file paperwork with your state or county and pay a filing fee.
In some states, such as California, you are expected to publish a statement about your DBA in a county newspaper for several weeks. It is typically advisable that you complete the application process before you start operating under your DBA trade name.
Acquire a State Business License
Also ensure you acquire your state business license, if required. Note that most states do not require sole proprietorships to obtain a license from the state to operate. However, some states do. So ensure to check the requirements for your state.
Acquire Necessary Licenses or Permits
You will also have to seek any applicable state or local licenses or permits to operate your proprietorship. State and local level government departments always tend to regulate certain types of businesses such as law firms and medical offices. Check your county and state’s office of business or economic development for lists of regulated occupations and necessary licenses.
Register with the State Tax Department
Also check if this step is required or necessary in your state or Local County. Ensure to register your business with the state department of taxation if you are planning to hire employees or sell products that require you to charge sales tax.
Apply for an Employer Identification Number
You will also be required to get an employer identification number with the Internal Revenue Service. Note that this is a requirement if you want to open a bank account under your DBA or hire employees. Complete online on the IRS website.
Having multiple DBAs can be of great benefit to businesses that are structured as an LLC. This is because an LLC can venture into different business markets and can operate each segment with a different DBA. But in terms of a sole proprietorship, it is necessary to only need one DBA.
Being able to apply for multiple DBAs under a sole proprietorship depends on how many your local/state government will allow. Each filing of DBA costs money, so registering multiple DBAs may be unnecessary for what you need.