Starting a small business takes more than a good idea and a lot of drive. All small business owners are required to comply with state and federal laws: which usually includes some sort of business registration and licensing. In most cases, this means registering and getting licenses. But… which one should you get: DBA vs. business license?
It is important to understand that these are two separate requirements, and each involves different steps in order to be completed. Here we will cover how to go about obtaining DBA vs. business license, so you can make sure that you don’t run afoul of any laws when starting your business.
When comparing DBA vs. business license, it’s important to note that a DBA is not a business license per se, even though many call it a “DBA business license,” “fictitious name license,” or “assumed business name.”
Everything you Need to Know About DBAs (Doing Business As)
To understand the difference between DBA and business license, first, let’s dive into DBAs.
What is a DBA?
A DBA is when you register a name that you are “doing business as” with the state or local government. They are most commonly used by sole proprietors.
What is a DBA? Well, in other words, it’s the legal name of your business. Many people think it’s a business structure, but it’s not.
If you are new to the business world, you may have never heard of a DBA. A DBA may seem a complicated concept at first sight, but actually, it’s very simple.
Let’s see an example: let’s say that Joe Johnson has a small business providing plumbing services. He can register his business under “Johnson Plumbing” to avoid any legal complications.
When comparing DBA vs. business license, the simplest way to put it is that a DBA license is a fictitious business name that allows you to do business with a name different from your own.
A DBA prevents businesses from hiding or changing their name in order to avoid lawsuits from consumers.
When do you Need it?
DBAs are very important if you have a sole proprietorship because if they do not register a DBA, any business they do will be under their business name. That means that, in the case of any legal problems, the government can go after personal finances or other properties (especially if you lose a case in court). DBAs work as legal protections.
You also may want to file a DBA if you want to change the legal name of your business or if you want to start a business separate from your main one.
You may also need it if you have a sole proprietorship and you want to open a business bank account.
Some states require you to file a DBA even if you have a partnership or a corporation, so you’ll need to make sure you are aware of the requirements in the state you are doing business in.
How to Get a DBA License?
Typically, you have to file with your Secretary of State (the state one, not the federal one). This typically involves giving information about your business and paying some registration fees.
You can also file online using a site called LegalZoom. Get here the information you need to file your DBA with LegalZoom.
Do you Have to Renew a DBA?
In some states, your DBA will not expire until you file a different business name. In other states, you must renew your DBA after a certain number of years. This all depends on where you live, so be sure to go to your Secretary of State’s website to find out the specific rules on DBAs in your state.
Check this article to have an in-depth vision on DBA
Everything you Need to Know About Business Licenses
Not it’s time to understand business licenses.
What is a Business License?
Business licenses can get a bit complicated simply because there are many different licenses required for different types of businesses.
In certain states, business licenses are broad and mandatory. Other business licenses are for very specific uses, aircraft, food, or liquor licenses. There are even business licenses to sell motor vehicles.
You need to be very careful to acquire all licensing and permits required by your state, or you risk the state fining your business or possibly shutting it down altogether.
They can expire, so you need to keep your business licenses up to date.
What Does a General Business License do?
While there are some licenses and permits that are for a specific purpose, any business is going to have to obtain a general business license before conducting business in their state.
A business license covers much more than a DBA. Generally, a business license allows the state to track your business, collect on sales tax and other fees, keep a list of your number of employees, and ensure transparency to consumers who want to look up your business.
What Types of Business Licenses Do I Need?
When asking yourself “What is a business license?” you might have realized that there are many types of business licenses.
Every state requires different types of licensing, but there are some universal licenses you will need depending on your type of business:
- General Business License: A general business license allows businesses to operate in a certain geographic location. Any business will likely require one of these.
- Occupational Licenses: An occupational license is required in order to operate your business in certain fields like medicine, law, or tax preparation.
- Health Permits: Any business serving and preparing food or drink will have to undergo routine health inspections and acquire health permits that guarantee the safety of any customer eating or drinking at the business.
- Tax Licensing: Many states require businesses to obtain tax licensing in order to pay sales tax on what they sell and thus collect sales tax.
- Fire Department Permits: If your business involves the use of any flammable liquids or will be outdoors, you may need a Fire Department permit to ensure that you will prevent any fires or harm to the public.
- Zoning Permits: Zoning permits are required before you build or use an existing building for your business. In some cases, you may need to present in front of your cities planning commission before building.
Bear in mind that this list doesn’t end here: there are many other business licenses that depend on the types of business you want to operate. For example, cleaning businesses have very specific licenses.
How to Get a Business License?
Once you know what business licenses you need, gather the documents each license requires and apply with the State, City, and County Governments.
Get here more information on business licenses and how to acquire them
Difference Between DBA and Business License
DBA vs. business license: are you still unsure about what each one is? Here’s a quick recap about each one:
- A DBA (sometimes also called a DBA business license or fictitious name license) is issued by counties. You do not necessarily need it to operate your business (although some states may require it IF you want to conduct business with a name different than the registered one).
- A business license is issued and required by the city, state, or national government. You need it to operate a small business.
When comparing DBA vs. business license, it’s important to note that a DBA is not a business license, and acquiring one is not enough to be in compliance with local laws.
DBA vs. Business License: Now You Know
We hope this article has given you a better idea of the differences between a DBA and a business license.
If you are thinking of starting up your own business, be sure to check your state and local government’s required registration, licensing, and permits. It may seem like a tedious aspect of starting a business, but it is crucial to get the right license and registration for your business if you want to avoid any legal complications.
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