Can a DBA Be a Partnership? An Important Distinction
Understand the distinction between a business's legal structure and its operating name to ensure your co-owned enterprise is set up properly.
New business owners often encounter terms like “Doing Business As” (DBA) and “partnership.” Understanding the distinct roles these two play is important for establishing a business correctly. A DBA and a partnership are not interchangeable; one is a name, and the other is a business structure. This article will clarify the function of each and explain how they can be used together.
The Role of a DBA
A “Doing Business As” name, also called a fictitious or trade name, allows a business to operate under a name different from its legal one. For a sole proprietor, the legal name is their own personal name, while for a partnership, the default legal name is a combination of the partners’ last names. Registering a DBA allows these businesses to use a more descriptive name for marketing.
A DBA is not a business entity and does not create a separate legal structure. It is simply a registered name that offers no liability protection. This means there is no legal separation between the business’s debts and the owner’s personal assets. If the business incurs debt or faces a lawsuit, the owners’ personal finances are at risk.
For example, if Jane Smith starts a baking business as a sole proprietor, she can register “Jane’s Custom Cakes” as a DBA. This registration gives her the right to use the trade name. Financial institutions also require a DBA certificate to open a business bank account under the trade name.
The Nature of a Partnership
A partnership is a business structure where two or more individuals co-own a commercial enterprise, agreeing to share in the responsibilities, profits, and losses. Unlike a DBA, a partnership is a legal business entity, even though it is considered unincorporated. The creation of a partnership establishes a business that is legally distinct from a sole proprietorship.
The defining financial characteristic of a general partnership is unlimited personal liability. Each partner is personally responsible for the business’s debts and obligations. This liability is “joint and several,” meaning a creditor can pursue any single partner for the full amount of a business debt. The personal assets of all partners can be used to satisfy business liabilities.
From a tax perspective, a partnership is a pass-through entity and does not pay income tax. The partnership files an informational return with the IRS, Form 1065. The profits and losses are “passed through” to the individual partners, who report their shares on their personal tax returns using a Schedule K-1 and pay taxes at their individual rates.
Connecting a DBA to a Partnership
A partnership can register and operate under a DBA. The DBA serves as a trade name for public activities, while the partnership remains the underlying legal structure. This allows the business to use a name more suitable for branding than the legal name of the partners.
For instance, if Johnson and Lee form a partnership, their legal name might be “Johnson and Lee.” To operate a marketing firm, they can register the DBA “Main Street Marketing.” All contracts and legal obligations still belong to the partnership, but they can advertise and interact with customers under the DBA.
A partnership can also use multiple DBAs to manage different business lines under one legal entity. This is more efficient than forming a separate partnership for each venture. For example, the “Johnson and Lee” partnership could operate “Main Street Marketing” and also register a second DBA, “Downtown Web Design,” simplifying administration for tax purposes.
Registering a DBA for a Partnership
The process of registering a DBA for a partnership involves specific preparatory and procedural steps. Before filing, the partners must gather key information, including the legal name of the partnership, the names and addresses of all general partners, the primary business address, and the exact DBA name they wish to register.
The first action is to conduct a name search to ensure the desired DBA is not already in use by another business in the relevant jurisdiction. This search is done through the website of the state’s Secretary of State or the county clerk’s office. Using a name that is already registered can lead to rejection of the application. Some jurisdictions also require the publication of the new DBA in a local newspaper.
Once the name’s availability is confirmed, the partnership must obtain the correct registration form, often called an “Assumed Name Certificate” or “Fictitious Name Statement.” These forms are available from the appropriate government agency, which is commonly the county clerk or the Secretary of State. The completed form, along with a filing fee that ranges from $10 to $100, is then submitted. Registrations must be renewed periodically, often every five to ten years, to remain active.