Purpose of Filing Fictitious Business Name Statement

Filing a fictitious business name statement costs about $99 in 2010 and could end up saving you thousands or millions of dollars and legal headaches down the road, according to "Bloomberg Businessweek." Also called a doing business as, or DBA, license, this protects your customers as well as your business, so it is good practice to get one.

The term "fictitious" often elicits negative associations, like a shady business that wants to hide its identity, but it is a legitimate legal term used for businesses. Fictitious names are another term for trade or brand name, such as Wal-Mart, and extremely common in the business world.

Without a DBA license, you must operate under your legal name or include it in your trade name, according to the U.S. Small Business Administration. If Joe Smith, for example, wants to operate an accounting business out of his home, he would call himself something such as "Joe Smith, CPA Accounting." Filing for a DBA he could use any unique name, such as "Bean Counter's Accounting Services."

Filing a DBA statement stakes your claim on the brand name you choose in your locality, but does not give you federal trademark rights.

Commercial institutions won't let you apply for business accounts until your furnish your DBA license. Also, customers can sue a business without a DBA license, but not the reverse.

Beyond protecting your right to use your business name, legally announcing your intention to use an assumed name makes naming businesses simpler for everyone. Image if states did not have a database of known business names. Several businesses could operate under the same name, by accident or intentionally. Also, when you file out a fictitious business name statement, you list your contact information -- making it easy for customers to address complaints.

Not filing for a fictitious business name could hurt your business in the future by constricting your ability to expand your services and products. If you start in a niche market, such as breakfast food with the name "Betty's Breakfast Cafe," you would need to rebuild your brand name image if you want to branch out in to pizza.