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hi everyone i'm attorney aidan durham with 180 law co in colorado and you are watching all up in your business on this episode of all up in your business we're going to talk about dbas and the proper way to use the dba with your business but first don't forget to like subscribe and share and be sure to check the description for links to additional information and resources including my new business checklist which you can download for free all right so first off what is a dba dba stands for doing business as some states use different names or terms for dbas colorado for example calls it a trade name some states call it a fictitious name or an assumed name but overall a dba trade name fictitious name whatever you want to call it it's all pretty much the same registering a dba or trade name is not the same as registering a trade mark first off trademark rights apply to dbas in the same way that they apply to any other business name or brand but registering a dba or trade name doesn't confer any of the additional rights or benefits that you would get from registering a trademark with the united states patent and trademark office or even a trademark registration with your state again every state is different but typically we would register a dba by filing some kind of form with the secretary of state in the state where your business is located or registered in colorado we would file a statement of trade name to register a dba or trade name if we were registering a dba for a sole proprietorship in colorado we would use a form called statement of trade name for an individual this is because the sole proprietorship is technically the individual so it is a trade name of an individual if we were registering a trade name for a general partnership we would use a form called statement of trade name for a non-reporting entity this is because a general partnership isn't required to be registered registered with the state and therefore it's considered a non-reporting entity if we're registering a dba for an llc or a corporation we would use a form called a statement of trade name for a reporting entity because those entities are required to be filed and formed with the secretary of state and therefore they are considered reporting entities again that's just what colorado calls them each state's forms are going to be called something a little different and they're not all necessarily going to use the term trade name or dba and frankly i don't know if every state has separate forms for individuals versus reporting entities like llcs non-reporting entities basically every state's a little different so why would we use the dba or trade name in most cases as a business you would use a dba if you're going to do business as a name that's different from your business's legal name if you're operating a business as a sole proprietor or general partnership then you can register a dba so there is record of the name that you're doing business under for example if you are a business coach and your name is sarah johnson and you do business as sarah johnson then you can register a dba for sarah johnson or you can register a dba for sarah johnson business coaching or sj business coach or whatever name you're gonna do business under the dba doesn't have to include your personal name i was just using that as an example of course whatever you want your business name to be that can be the dba assuming it's you know available and you're legally allowed to use that name of course there's no real legal benefit or legal protection that you get from registering a dba in that instance it's not the same as filing or forming an llc or getting a trademark registration for example but if nothing else you get a registration for that business name with the secretary of state's office so you know if another company is thinking about registering a business for that same or a similar name they'll at least see yours there in the secretary of state's database and you know they'll know that you exist and maybe they'll decide to change their name to something else but the point is it's just getting it registered there but registering the dba or trade name doesn't give you any additional protection or rights other than what you might already have just by virtue of using that name for your business you also don't need to worry about keeping your business separate from you like you would with an llc in an llc it's important that you have a separate business bank account for example that doesn't really matter if you're operating as a sole proprietorship under a dba you certainly can have a business bank account for it and in fact i think it's you know generally a good idea just for good business practice in the sake of knowing what your business's numbers look like and for business operations but you don't have to you're not at risk of piercing the corporate veil because there is no corporate veil to be pierced you're already personally liable for anything with regard to the sole proprietorship so you don't really have anything that you need to avoid if you're operating a business as an llc or a corporation or some other kind of legal entity then you can use the dba or trade name if you're going to do business under a name that's different from the llc or corporation's name that's registered with the secretary of state for example my llc is registered as 180 loco llc and i do business as 180 loco llc so i have no need for a dba but let's say i wanted to open up a second location of my business in my state but just for fun i want to brand it under something else maybe instead of 180 i want to call it 360 law co in that case i can register a trade name under my llc for 360 locko so in other videos where i talk about llc's and avoiding the risks of llcs and piercing the corporate veil i mentioned how it's important to use the llc or similar designation because your customers and the people that your business is dealing with they need to be aware that they are dealing with a limited liability company on contracts and other legal documents it's important to include that entity designation whether it's llc or ltd limited whatever it is important to include that on those documents so it's clear that it's the llc that's entering into that agreement but that doesn't mean you have to always use llc in the name all the time you can if you want to but you don't have to you don't have to include llc in your logo for example or on marketing materials all the time if it just doesn't look right or for whatever reason you don't want to include llc in there that's okay to do and in that case just because you occasionally don't include llc in the name doesn't mean you have to register a dba for that same name without the llc it's really more about if you're doing business under a name that's different than your llc or corporation's name that's registered with the state if you want to create different brands or different lines of business all within your one llc then that's a great use of a dba or trade name you can operate multiple businesses multiple lines of business multiple brands under one entity but lik
Thanks for your comment Melony Bradbury, have a nice day.
- Destiny Prouty, Staff Member
should you create a second llc or use a dba that's the question i'm answering today one of our subscribers asked a question he said i'm looking at expanding into a new area it's an area unrelated to my first business should i create a second llc for that new business or use a dba well first off congratulations it's a great problem to have that the first business is going well you're a serial entrepreneur you're looking at launching a second business let's talk through some of the issues that arise when determining is it better to use a dba or create a whole new business entity now i'm going to use llc here for purposes of the conversation but this would equally apply to an s corporation or even a c corporation if that's what you had i'm aaron hall i'm a business attorney in minnesota i've answered a number of similar questions like should my spouse and i own llc together would a sports and fitness trainer benefit from an llc and what's the difference between an llc s corporation and sole proprietorship today we're talking about the specific scenario of you have a good business running and you're trying to decide do i now open a second business entity or use a dba dba stands for doing business as so you might for example have john smith electronics doing business as smitty electronics or doing business as smitty's pool service or doing business as smitty's camera shop as you can see a dba is just essentially an alias or a nickname for an existing business and every state has a process where you can set up a dba sometimes called an assumed name or an alias so that you can legally use a different name for the same business entity all right what are the benefits of setting up a second business entity or a second llc first you have separated the liability so if a problem happens in your first business the second business isn't liable or if a problem happens in your second business the first business isn't liable you've separated out that liability so now not only are you not personally liable as the owner for what happens in these companies they're not liable for each other i'll give you a common example many times people will set up a separate llc for each rental property because if something happens with one they don't want the other they don't want to risk losing both rental properties that's a simple example so that's the benefit of setting up a separate llc you isolate the liability to the entity where the problem happened and the other business isn't exposed to that liability what are the disadvantages of a second llc well first off you're gonna have separate accounting for both of those llc's you'll have separate payroll maybe a separate payroll company you'll have to do separate tax returns it's just kind of a pain to have to keep the formalities if you will of having a second llc so there are costs associated with that cpa costs probably attorneys costs so that's the big difference there it's just another llc or corporation to maintain what are the alternatives to a second llc well we talked about one in the beginning you could do a dba or an assumed name the problem with that again is that the liabilities are all in the same entity so if one business has a problem both businesses can go down because they're all in the same entity even though they have separate names or separate aliases separate dbas another option is to keep them all in the same entity use dbas but get insurance to limit your liability so for example you might get a million dollar insurance policy that covers a significant number of the lawsuits or risks that you might encounter so insurance is a way to minimize risk rather than setting up a separate llc another alternative to a second llc is available in some states it's called a serial llc a serial llc is a llc that is set up with uh under a specific state statute that allows you to have as many many llc's underneath it so you have one llc but then you essentially have to keep separate records for each llc within it technically they're not many llc's they're just a part of that serial llc so you kind of have a parent serial llc and then each division or each segment of that llc has um isolation from the liability of the others it's like having two or three or ten llcs but you're not having to pay the costs and have totally separate llcs let's talk about when can one llc be liable to another llc by the way this again applies to s corporations or c corporations the general rule is it's when they co-mingle assets that's the biggest issue that they basically you're having everything going to the same bank account you're keeping the books and records for both llc's and the same quickbooks file you're buying things and selling things you're treating it like one company even though they have two separate names often courts will say look one llc is the alter ego of another you're not distinguishing between the differences in the two llc's the court's not going to either and that means that if there is a lawsuit against one llc the plaintiff who initiated the lawsuit the party who sued your business may be able to pierce the veil and go after the second llc to learn more you can uh check out my video on piercing the corporate veil or piercing the llc veil it's an important legal doctrine that talks about when entities can be liable for each other can i use the same ein number for both llc's no so let's break that apart ein stands for employer identification number it is the tax id number that's given to a business you as an individual as a as a citizen of the united states you have a tax id number we call it social security number but businesses don't have social security numbers they have a different type of tax id and e i n employer identification number that is how the irs tracks all of your bank accounts your tax liability and all that you need to use a separate ein for each business that you have so if you have two llc's you get two eins they're free you set them up with the irs you want the irs to be distinguishing to between the two businesses all right so we talked about the benefits of a second llc isolating liability we talked about the disadvantages of a second llc you have to treat that as as a separate business separate payroll separate accounting we talked about the alternatives of a second llc and that would be an insurance policy a dba perhaps a serial llc if it's permitted in your state we talked about when can an llc be liable to another for another llc and that goes to the piercing the corporate veil doctrine it's basically when you co-mingle assets that's the big one and then can you use the same ein for an l for both llc's the answer is no so if you're a business owner you're successful uh you're you have one business doing well the next question to talk with your attorney about is will the new business have risks that i don't want to expose the old business to if the answer is yes set up a new llc or will the old business have risks that i don't want to set expose the new business to if the answer is yes set up a new llc you want to be able to isolate the risks by having two separate llcs so if i
Thanks Virgen your participation is very much appreciated
- Destiny Prouty
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I've studied irreligion at Lawrence Technological University in Southfield and I am an expert in elementary education. I usually feel restless. My previous job was credit adjuster I held this position for 25 years, I love talking about dandyism and kubb. Huge fan of Aaron Hernandez I practice snowmobile racing and collect brands.
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