If you’re doing business in Texas, it’s a good idea to have a separate entity for your business. One question we are regularly asked is if a DBA or an LLC is better in Texas.
In short, an LLC or Inc is definitely Better than a DBA. Simply put a LLC or Inc protects you personally from liabilities of the business. A DBA offers you no protection as the business is essential you with a Different Name ( the legal term for a DBA is "Doing Business As" or "An Assume Name")
What Is an LLC?
A limited liability company (LLC) is a type of legal entity. You can form an LLC by filing a Certificate of Formation with the Texas Secretary of State’s office.
LLCs can be a great option for business owners due to their limited liability and tax flexibility.
Limited Liability
An LLC is normally considered a separate entity from its owners. In most cases, an LLC and not its owner is liable for the debts and liabilities of the business.
Business owners often use an LLC as a way to protect their personal assets. This protection does not normally apply to illegal activities or fraud.
Tax Benefits
LLCs are often prized for their tax benefits. Business income can be subject to double taxation with more complex entities, such as corporations—once at the corporate level and once on the shareholders’ personal income tax returns.
An LLC’s income, on the other hand, typically passes through directly to the owner. This helps keep the LLC’s taxes relatively simple, and it usually prevents double taxation issues.
Subsidiaries
An LLC allows you to create a network of companies for your business. This is helpful in limiting exposure from one part of your business to another. For example, you can keep products and services under different but related companies.
What Is a DBA?
DBA stands for “doing business as.” A DBA is also known as an “assumed name.” Unlike an LLC, a DBA is not a separate entity.
A DBA is actually an alternative name for your business. A plumber named Bill might have a DBA for his business called “Bill's Automotive.” Bill's Automotive isn’t separate from Joe for tax or liability purposes. It’s just a name Joe uses for his car business.
You can reserve a DBA by filing an application with the Texas Secretary of State or in the counties where you do business.
LLC vs. DBA the Good & Bad in Texas
You may be wondering if it’s worth forming an LLC or if you would be better off just filing a DBA. This decision will likely depend on the specific needs of your business. That said, there are some pros and cons which may be helpful to consider.
DBA -The Goods:
Easy to apply for,
Few restrictions, and
Affordable.
LLC The Goods:
Limited liability,
Flexible tax planning,
Ability to form subsidiaries, and
More professional.
DBAs and LLCs have several key advantages, but each has its own weaknesses too.
DBA The Bads:
No liability protection,
Not a separate entity, and
Cannot form subsidiaries.
LLC The Bads:
More expensive than a DBA,
Requires more upkeep, and
More restrictions.
Need To Form Your LLC/ INC Now?
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