Converting your DBA to an LLC protects your personal assets while also allowing you to expand your small company.
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Change a DBA to an LLC
While converting your firm from a DBA (sole proprietorship) to an LLC is not a difficult procedure, it is critical to follow the necessary steps to incorporate an LLC.
A doing business as name (DBA) is a brand name for a company, not a corporate structure. Many company owners mistake the word DBA with sole proprietorship, but they are not the same thing. In this tutorial, we shall utilise both terminologies.
How to Change Your DBA to an LLC:
1. Determine Whether You Are Allowed to Use Your DBA Name
States require LLCs to have a name that is distinct from any other registered firm. To ensure that your new LLC name is unique, you must do a search.
Assuming you have a sole proprietorship with a DBA name, your current company name must match all of your state’s criteria for an LLC. Before submitting the Articles of Organization for your new LLC, you must also convert or terminate your DBA registration.
2. Select a Registered Agent
A registered agent is a person or corporate organisation that accepts vital legal papers on your behalf. A registered agent may be a member of your LLC, or you can employ a professional business to do so.
3. Submit Your New LLC to the State
While the procedure varies by state, you must normally complete and submit the Articles of Organization (or a similarly titled document) and pay a filing fee. Depending on your state, you may be able to finish this procedure online or by mail.
4. Get an EIN
An employer identification number (EIN) is used by the US government to identify your company. It is required in order to submit taxes, create a bank account, and recruit staff. The Internal Revenue Service will provide you an EIN for free.
5. Establish a New Bank Account
To benefit from the liability protection given by an LLC, you must register a whole separate bank account for your new venture. If you continue to use an account you previously created for your DBA, you may suffer financial consequences. You should also make any required modifications to any vendor accounts, company credit cards, and so forth.
6. Terminate Your DBA
You must also legally disband your DBA (single proprietorship) with the state or municipal government where you first registered. This procedure differs depending on where you live, so check with your local company registration department.
7. Make any necessary final adjustments.
When you’ve finished converting to an LLC, be sure to update your company website, business listings, letterhead, business cards, social media platforms, and any other places that may hold outdated information about your firm.
The Advantages of Converting a DBA to an LLC
There are four major advantages of converting a DBA (sole proprietorship) to an LLC:
Liability Insurance
Limited Liability Privacy Credibility Branding
The biggest advantage of switching from a DBA (sole proprietorship) to an LLC is the liability protection that LLCs provide. Even if you have separate personal and company accounts, as a DBA (single proprietorship), your personal money (e.g., bank accounts, vehicles, real estate) may be at danger if your firm incurs debt or must pay damages as a result of a lawsuit. A limited liability company (LLC) legally separates the business from the owner and protects personal assets.
Privacy LLCs also give greater privacy than a DBA (single proprietorship), enabling owners to keep their identities hidden more readily if they so want.
Credibility
Another advantage of an LLC form is that it may make your company seem more professional and respectable, thus assisting you in gaining customers or driving sales. Furthermore, if you need to obtain funds or sell your firm, an LLC is significantly simpler to accomplish than a DBA (sole proprietorship).
LLC owners who want to identify themselves may utilise the LLC’s legal name as their brand name. To avoid using their own surnames as their company name, a DBA (sole proprietorship) must adopt a doing business as name (DBA).