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Assumed Business Names ("dba")

Updated: Nov 11, 2023

Sometimes businesses choose to operate under names that are not their legal names. If the operating name differs from the legal name, the business will usually need to make this information public. In many states, businesses file an assumed name certificate (Texas) or a fictitious name statement (California). Your jurisdiction may have another term, so for clarity, this post refers to all of them as a "dba."



What is a dba?


The term "dba" stands for "doing business as." It refers to the use of a business name that is not the legal name of the business. Oftentimes (as in this post), "dba" is used to refer to the document that your jurisdiction requires to be filed if you use a different name for your business.


Why do I need it?


For one, your state or locality probably requires you to file a dba with the state or county if you're using a trade name. This means you could face fines and other penalties for failure to have a dba. For example, in California, the rules are set forth at Cal. Bus. & Prof. Code sections 17900 to 17930. Texas mandates their use as set forth in the Texas Assumed Business or Professional Name Act (Tex. Bus. & Com. Code sections 71.001 to 71.203.


Another reason is that it might aid in your receipt of payment. If you open a bank account using your legal name, but accept payment with another name, this could create issues. If your name is "John Smith," but you operate a business as "Michael's Roofing," you'll want to ensure that your bank accepts checks written to John Smith.


This also raises issues with secured transactions. If you file a UCC-1 financing statement, you will want to signal to other potential creditors what your legal name is. You will want them to contact you if they intend to pay you for subordination or to pay off debts owed to you. Again, if they go out looking for "Michael's Roofing," but there is no dba, they might not be able to find your contact information.


Why is it required?


Aside from the reasons listed above, states require it so that consumers and creditors are able to identify the true name of the business. Suppose a consumer is injured by a product sold by "Michael's Roofing." The consumer searches her state's secretary of state's website for "Michael's Roofing" and can't find it. Whom is she going to sue? She will have to figure out the real name of the entity if she wants any judgment to be effective.


If "Michael's Roofing" does have a dba, the consumer now knows who the real owner is: John Smith. So if she wants to sue this sole proprietorship (in, for example, California), she would likely sue "John Smith, dba Michael's Roofing, an individual, rather than simply "John Smith, an individual."


It can also ensure that the correct name is on a contract. As discussed here, parties to a contract must have authority to enter the contract on behalf of a business, otherwise the business might not be bound. Suppose John Smith signs a contract for "John's Roofing." There is no mention of "John's Roofing, LLC" on the contract. A plaintiff could argue that John Smith signed on behalf of a dba sole proprietorship rather than the LLC. And this lack of formality could even lead to veil piercing issues.


When is it required?


Using a Different Name


If you are using a different name, you need to file a dba. Perhaps John Smith operates a business called "John's Roofing." He will need to review his state's rules regarding dba, but he will likely need to file a dba. See Cal. Bus. & Prof. Code section 17900(b)(1), Tex. Bus. & Com. Code section 71.002(2)(A). Perhaps John Smith forms a law firm called "John Smith, A Professional Corporation." If he puts out a sign that says "Law Office of John Smith," he will need to file a dba.


Dropping the Entity Designation


Some states require a dba when an entity drops its suffix designation. For example, suppose John Smith forms a business called "John's Roofing, LLC," but he wants to operate or advertise as "John's Roofing." Depending on his state, he will likely need to file a dba (California and Texas would require a dba in that case).


Social Media Issues


Social media often creates its own unique problems. With regard to the dba, social media handles may limit the ability of users to have an account with their legal names. "Christopher Anderson, APC" is a bit long to fit into a Twitter or Instagram handle. For that reason, many businesses will opt to drop the entity designation. But do they have to file a dba simply for having a social media account without "LLC" after the name?


I think there is a good argument that it would not be required, but of course it will likely vary from state-to-state. As long as the business's profile or biographical section states that it is owned or operated by the business's full legal name, then it should be fine. For example, "Michael's Roofing, LLC" might have Twitter account "@MichaelsRoofing." The concern about misleading consumers is far lower in such a situation, because many individuals do not use their full legal names for their social media accounts.


What happens if I don't have a dba?


You may be opening yourself up to the payment or secured transactions issues mentioned above. Your state's statute likely also includes penalties or other pitfalls to noncompliance.

For example, in some states, you may be able to defend against a lawsuit. See Tex. Bus. & Com. Code section 71.201(a). But you cannot bring a lawsuit unless you have an active dba. Tex. Bus. & Com. Code section 71.201(a), Cal. Bus. & Prof. Code section 17918. And the opposing party might be entitled to attorney's fees and costs for locating and effecting service of process on the defendant. Tex. Bus. & Com. Code section 71.201(b).


Worse yet, you could invite veil piercing. I was unable to find a case where the lack of a dba alone led to veil piercing, but it may be another factor courts will consider in that context.

Where do I file it and what else do I need to do?


You should check to see what your state's requirements are. In California, they're filed with your county's Recorder's Office, and some information must actually be published (for example, in a newspaper). In Texas, they're filed with the state Secretary of State (and do not have to be published).


Conclusion


If you own a business and you operate it under a name other than its legal name, you need to review your state's rules for when a dba is required. In California and Texas, you would be required to file a dba.

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