What is the difference between a Legal Business Name and a Trade Name/DBA?
Last Updated: 17 june 2022
Believe it or not, the name of a company is as essential as the service quality it delivers to the customers. No wonder brands like Apple, Nike, Gucci, Louis Vuitton, Chanel, and many more are recognized simply for their name in the market.
A name plays a significant role as it carries the reputation of a business and represents its services. It is the prime recognition factor for a company’s customers, employees, and competitors.
However, only some of you might know that the companies running for years with some trade names have different business names. You must have been visiting Walmart since your childhood. But only some of you might know that “Walmart” has a different business name, or we can say Legal name, i.e., “Wal-Mart Inc.”
We get it. Terms like trade, business, and Legal names are confusing. Keep reading till the end to understand about these terms and understand how they differ from each other.
What is a legal business name?
For security and other legal purposes, depending on the business structures, most businesses in the USA register their companies as entities like LLC, S-corp, or C-corp with their state.
While registering a company under a particular entity, the company files the necessary paperwork to the state with its company’s name. This registered company name is called a Legal Business name or just a Business Name or Legal name.
If a company wishes to register its name under a corporation, it must file some necessary documents like articles of incorporation. Similarly, if the company registers its business under LLC, it must file all essential LLC formation papers; only then will it be considered a registered LLC.
By following the above criteria, all the government legal authorities will identify the business with the Legal Business Name. The company can use this business name with its tax ID while submitting taxes.
The essential criteria of legal business names are that companies add the word “Inc.” if it’s a corporation, for example, Peter Pizzas Inc. Similarly, if it’s an LLC, they need to add “LLC,” like Peter Pizzas LLC.
What is a Trade name or DBA?
A Trade name is the name that a company uses to operate its services in the market basically for marketing, sales, and business purposes. It’s just that some companies wish to choose a different name than the Business name to showcase their business. If we describe the trade name meaning in simpler words, it is more like a company’s nickname. It is also known as the DBA or Doing Business As.
The companies don’t need to have different business names and trade names. It is just an option for them to choose or not to choose.
In short, a Trade name can be:
- Just a business name without an entity suffix. For example- The company with the business name- “Furious Automobiles Inc.” chooses its DBA just like “Furious Automobiles.”
- Completely different from the Business name. For example, The company with the business name- “Furious Automobiles Inc.” chooses a DBA “Prime motors.”
A company has just one Business name, but it can have multiple trade names. For example, a company with the business name “Richard Ice Creams LLC” can start different services with trade names like “Richard candies,” “Richard Pizzas,” “Richard Burgers,” etc.
Our Company Registration Process
1. Fill up the online application with your details.
2. Upload Your Documents
3. Get Approved and Receive your Documents On Your Email.
What are the pros and cons of having a DBA or Trade name?
We believe having a different trade name can or cannot be beneficial. It depends on the type of business and the present business name. Some of the basic pros and cons of having a DBA are listed below:
Pros of having a DBA:
- A DBA provides more credibility to a business.
- It gives the liberty to choose a simpler and catchy name for the business.
- Different DBAs give uniqueness to the various services of a single enterprise.
- It provides more structure to the purpose of a company.
Cons of having a DBA:
- Most states demand to register a Trade name.
- Depending on the state laws, it might or Might not provide the company with the ownership of the name chosen as a Trade name.
- Trade names don’t serve the same benefits and protections as Registered Business names.
- Too many and diverse DBAs can confuse the customers to identify the company as a Brand.
Is it necessary to register a DBA or trade name?
If we talk about registering a DBA, the requirement depends on various criteria that might vary from state to state. Sole proprietorships and partnerships must register their DBA in all the states. Mandatory or not, there are countless benefits to registering a DBA. Some of them are mentioned as follows:
- It is not expensive to register a DBA, unlike registering a business name.
- Registering a DBA needs less paperwork filing than Business name registration.
- By registering, a DBA company can open its merchant account under its DBA name also.
- DBA registration provides essential legal protection.
Until now, you must have become familiar with the terms, the Business name, and the Trade name. Additionally, you must have understood the difference between both.
So, choosing a particular name as a Business name and a different name for branding and marketing purposes is entirely normal. Further registering your business name and even Trade name is also essential.
However, doing this all on your own can be a little tricky. LottaLegal can help you with this whether you want to register your company or just looking to file your DBA. We can help you with all. Apply now to experience the ease with LottaLegal.
After hustling for ten years as an attorney, now, Jason Currie has dedicated his life to his one and only love, writing. He writes pieces on finance, business, and taxation for entrepreneurs and small or large businesses using his former proficiency in legal works. Last year, he even published one more volume of his highest-selling book regarding ways of increasing income, which was a huge success. Currently, he is living with his wife and three daughters in Los Angeles.
Mobile Notary Services: A Convenient Solution for Legal DocumentsImagine needing a crucial document notarized urgently, but you must travel to the notary service provider several times to finish your notarization. Indeed, it's time-consuming and...
In terms of various aspects, an LLC company is somewhat in between Corporations and Sole proprietorships and is considered a Hybrid Entity.
BookKeeping is crucial as it gives a precise picture of financial dealings. The company can collect the data of these transactions, organize it, store it in a particular order and finally analyze it to get clarity about the business’s financial transactions.