Cost and convenience are major concerns for most business owners, as evidenced by the fact that over 50 percent work out of their homes as sole proprietors. Yet these two traits combined can cost your business in credibility with customers and shareholders, who are typically more willing to do businesses with companies. The DBA ("doing business as" or assumed name) and limited liability company are two solutions to this dilemma, each with its own pros and cons.
What a DBA Does
A DBA allows you to do business as a sole proprietor or business partner without having to use your real name as the name of your business. For example, Rachel Marcus couldn't operate as a floral business called Rachel's Flowers without filing a DBA with her county clerk, city hall, secretary of state or local newspaper (depending on which method the local law requires) -- she would have to operate as Rachel Marcus. This is because a DBA isn't a type of business but rather a notice for consumers to know who is behind a company.
What an LLC Does
The flexibility of the LLC business structure has made it increasingly popular since it was established in 1977. Unlike a sole proprietorship, it gives you freedom from personal liability if someone sues your business, much like a corporation has. Yet, unlike a corporation owner, the law doesn't require you to do extensive bookkeeping for tax purposes. While a DBA typically lasts five years, your LLC can exist for as long as the members are alive.
Cost of a DBA
One major benefit of a DBA is its relatively low cost: just $10 in some places, still as low as $100 in others as of 2011. The cost to file your DBA will vary depending on where your business is located. You may have to file multiple DBAs if you have more than one business location, and state law may require you to file at the city, county, and state levels. If the law requires you to announce the DBA in a local newspaper, you may have to pay for it, but the publisher will likely file your DBA form for you.
Cost to File Articles of Organization
As of 2011, the minimum cost to file articles of organization is typically five times the minimum cost to file a DBA. The fee is as high as $800 in some states. Contact your secretary of state to find out how high the fee is in your state. If you can't afford the fee, it may be worthwhile to start your business as a sole proprietorship or partnership and use a DBA until you have enough money to form an LLC.