By Stan Huser
Are you faking your business name? If you’re a sole proprietor and operate under a business name, you may be a faker, and you might be violating your state’s laws.
As a business owner, or even a self-employed solo contractor, you may not be a corporation or LLC, but you probably do operate under a business name. If so, you may need to register it under state law. It’s simple to register, and there can be negative consequences if you don’t. Here’s what’s involved.
What’s a Business Name?
Most states require you to register your business name. This is commonly known as filing a DBA, which stands for “Doing Business As.” You’ll file either with your county or with the state, and requirements will vary in each state. But the process is straightforward everywhere.
Registering your business name is a matter of public protection. The public has a right to know who you are if you operate under anything other than your actual name. You’ll have to supply your real name and address and a proof of identity to file, so the public has a way to discover who owns any business.
The exception to this rule is when you use your real name in your business name – e.g. John Smith Accounting. And if you’re an independent contractor presenting invoices in your own name, and not using a business name, then you won’t be required to register. But note that Smith Projects, for example, doesn’t provide enough of your name to qualify, so it’s a business name that must be registered.
Why a Business Name?
The advantages of using a business name occur to everyone as soon as they start writing invoices – it looks more professional.
More importantly, even as a solo contractor you’ll probably want to open a separate business account to track your expenses and income. Most banks won’t allow this without seeing a copy of your DBA.
Some states don’t require you to register – Alabama, Arizona, Kansas, New Mexico and Tennessee, for example. But all states will have a means to register your business name with the Secretary of State’s office. You may wish to do this to help protect your name from infringement.
How to File
Each state government has a website where you can pretty easily drill down to business forms and filings required in the state. The Small Business Administration has a list of state websites to get you started. Nomenclature varies across the states: they may refer to your business name as a “trade name,” “assumed name” or a “fictitious business name.”
If you’re required to file in the county your business is based in, you may need to check the county clerk’s website. In either case, you’ll have to check that your name is available and not already registered. With luck, you can do everything online.
Some states require a notarized proof of identity. Some require publication in the local newspaper of record also. In all cases, the fees involved will be nominal, and typically the registration won’t need to be renewed for a long time. Most state laws will want you to register almost as soon as you start using the name.
Penalties
If you fail to file a DBA, you could be subject to state penalties. Colorado can shut your business down, and New Hampshire forbids you even to advertise before you have your DBA. Missouri classifies failure to file as a misdemeanor with a fine of up to $1,000. Pennsylvania can fine you up to $500.
Not registering your business name also means you may not be able to enforce a contract signed in that name. If you’re cheated on an invoice or a failed delivery of goods, you may not be able to seek damages in court. State remedies can’t help you unless the name is registered.
If you have any doubts about whether you’re required to file a DBA please talk to a professional, since nothing in this article can be considered legal or accounting advice.
Lastly, note that your DBA is only a disclosure. It doesn’t give you any of the protections that come from forming a business entity such as a limited liability company (LLC) or a corporation. If it matters to you to keep your business debts separate from your personal assets, or hire employees, operate in other states, or numerous other extended uses of your business, you may want to consider forming an LLC or corporation.