One may ask…”What’s in a Name”? Well, to a business owner it can be one of the most important assets for creating sales, branding and reaching that target market.
A Fictitious Business Name (also known as a “DBA” which stands for “Doing Business As”) is a name a person (or entity) uses to conduct business that is something other than his/her/ its legal name. It gives the business owner an opportunity to lock down the name and start branding it without the fear someone may steal it.
A DBA is also used by individuals or entities that want to use a more “professional” sounding name for marketing purposes, or individuals or entities that want to venture into new lines of business, but don’t yet want to incur the expenses of setting up an entirely separate entity. Essentially, the fictitious business name is a simple and cost effective way to get “your name out there” without significant up-front costs.
For example, suppose John Doe is a real estate agent. He can create a fictitious business name for his real estate agent business (e.g. Simply Marvelous Realty). He could create another fictitious business name for his escrow business (e.g. Simply Marvelous Escrow), and another fictitious business name for his mortgage business (e.g. Simply Marvelous Lending), all without the need to create separate entities for each business. In addition to having different names that are more appropriately associated with each line of business, John could have separate accounting and bank accounts for each of these business names
Both individuals and entities (e.g. corporation, LLC, LP, etc.) can have any number of fictitious business names associated with it. However, the key is that, although you may have different fictitious business names registered to an individual (or entity), that one individual (or entity) to whom the different fictitious names are registered is ultimately liable for the debts and liabilities for all the fictitious names registered in his/her/its name.
In other words, there is no separate liability or asset protection between different fictitious business names registered to a single person or entity. Therefore, in the example above, although Simply Marvelous Realty, Simply Marvelous Escrow, and Simply Marvelous Lending are separate DBAs with separate bank accounts, since they are all registered under John Doe, any liabilities or debts created in ANY of these businesses would ultimately be the responsibility of John Doe, and the funds in Simply Marvelous Escrow bank account could be levied due to a judgment relating to Simply Marvelous Realty or Simply Marvelous Lending.
If the fictitious business name is registered to an entity, although use of the entity will generally shield the individual owner of the entity from personal liability for the debts and liabilities of each business using a fictitious name registered to the entity, that one entity would still be responsible for all of the debts and liabilities for all fictitious names registered to that entity.
Therefore, do not think you can get separate liability protection by establishing multiple DBAs. In general, the only way to separate out the debts and liabilities of different businesses would be to set up different entities for each business.
The rules and procedures for registering a fictitious business name varies depending on the county or state. Most of this information, procedures and forms can be found online with the county recorder’s office or state that processes fictitious business names. KKOS Lawyers can also assist you with filing and registering a fictitious business name.
Lee Chen is an associate attorney at the Irvine, California office of Kyler Kohler Ostermiller, and Sorensen, LLP (“KKOS Lawyers”) and helps clients daily around the country with business planning and entity selection. He can be reached at [email protected] or by phone at (888) 801-0010.
