As a business grows and evolves, it may become apparent that operating under a different name, or re-branding, may be beneficial. In that case, choosing a DBA may be the way to go.
To review, DBA stands for “doing business as.” In some states, this may be referred to as operating under a “trade name” or “assumed name.” Many business, and especially franchises, are set up this way.
S-corporations are taxed like partnerships and share the benefits of incorporation. The IRS limits the number of shareholders in this type of company to 100 or less. Next, consider Limited Liability Companies or LLCs. When set up under the proper guidelines, an LLC can be taxed like a partnership, which is an advantage.
If a business owner decides to add a DBA to an S-Corp or LLC, there are definite legal guidelines. Please note they vary slightly from state to state. That’s why it’s important to choose a qualified, licensed and experienced business attorney, such as Wesley Scott Jones, for such matters. Here’s a look at the steps involved:
- A meeting with all of the shareholders and board of directors must be held. In order for the inclusion of the DBA to be approved, a majority must support the action. It is essential that the proceedings of this meeting are recorded in the minutes of the company’s official log.
- Make sure that the selected DBA name does not conflict with another registered corporate name in your state or a federally registered name or trademark. This query involves checking with the U.S. Patent and Trademark Office and your secretary of state. Check their individual websites, for instructions on how to conduct these searches free of charge.
- Because each state has different laws in the way DBAs are added, it is necessary to contact the Secretary of State where your company is registered. Either the Secretary of State’s office or the State Corporations Division office can guide you through the steps and required paperwork that must be completed before a DBA can be added to an S-Corp or LLC.
- Next, new bank accounts must be established to avoid any confusion. The new accounts will need to include information about the full name of the S-Corp or LLC, plus details on the DBA name.
- Finally, the name change must be filed with the IRS. Please note:
- ***On the Form 1120-S income tax return, check the “Name Change” box in Section 1, Line H-this is where you will write the new full name of the business. The original DBA name will be listed on the form’s “Name” line.
Your “employer id numbers,” or EIN will not change, because you are not forming a new business, just being added to an existing one.
If you have further questions or would like to discuss the pros and cons of adding your DBA company to an S-Corp or LLC, contact Wes Jones. To contact our directly, call 910-256-5800.
Learn more about our practice and the other types of cases we handle by visiting our wsjlaw.com.
The office is located in Lumina Station, just before the Wrightsville Beach drawbridge. The address is 1904 Eastwood Avenue, Suite 30.