by Michelle Kelsaw, MK Legal Planning
Ever wish you could change your name or use a pen name? Ever joke around with your friends about having an alter ego? Well, your business can and at times should have an alter ego or maybe two. Branding is a hot topic right now in the entrepreneurial world. There is a legal tool that can make your branding efforts much easier while at the same time ensuring that they are cohesive with your overall legal strategy.
What is a DBA?
DBA stands for “doing business as.” The formal legal term is a fictitious name registration. It simply means that you can register a name with the Missouri Secretary of State which you can then use to do business within our state.
Let’s say ABC LLC registers as a limited liability company with the Secretary of State. After ABC LLC is in business for 2 years, they take a pivot and decide to focus solely on marketing for law firms. They niche down (which is a great idea and topic to discuss another day). They want their brand to portray their new niche. They do not need to register a new LLC, change their business structure, change contracts, the operating agreement, employee agreements, supplier agreements, etc. They simply register the fictitious name of Legal Marketing Solutions with the Secretary of State. Therefore, in reality, they become ABC LLC d.b.a. Legal Marketing Solutions. They can now use either name when conducting business.
Be Careful: DBAs Must Be Properly Registered
This is where I most often see mistakes made. Fictitious name registrations must be properly registered and those registrations must accurately reflect the right information or business owners can get themselves into trouble.
To explain, let’s review one of the main reasons for registering a business entity with the Secretary of State and creating a business separate from you the owner. The most common types of legal entities that I work with are limited liability companies (LLCs) and corporations. Legally, the main reason to register any type of entity with the Secretary of State is to provide liability protection for your personal assets. This means that we want to separate everything business from everything you own personally (individually or as spouses/partners). Envision a shield being built between you and the business. The shield should provide a barrier and prevent anyone dealing with the business from taking your car, home, bank accounts, retirement accounts, kids’ college funds, etc. However, the shield must be properly built and maintained to serve that function otherwise it will not hold strong.
The Underlying Company Must Own the DBA for the Shield to Be Strong
Let’s break this down. First, the fictitious name must be properly registered with the Secretary of State to ensure that anyone dealing with the company is properly on notice of its use in business and how he/she could serve legal notices on the company or take legal actions against the company if necessary. Second, the owner of the fictitious name must be properly identified in the registration. Meaning the 100% owner of that name must be the COMPANY in order to maintain the liability protection. If I register a fictitious name and list Michele Kelsaw as the owner, even if I use it in conjunction with the activities of my already existing law firm which is an LLC, I have now destroyed that liability shield. I have unintentionally undone the good work of having an LLC in the first place and put my family’s assets and property at risk. In order to maintain that shield between business and personal, the LLC must be the 100% owner of the fictitious name.
When Might You Want to Divide and Conquer
There are times when you might want to divide and conquer. In general, one of the most common reasons I usually end up discussing establishing two separate companies, even if the players are the same, deals with a decision to spread the risk between more than one company. These are decisions that should be discussed with your trusted legal advisor and are the very types of situations that I assist business owners with daily here at MK Legal Planning.
This article is a production of MK Legal Planning. Michele Kelsaw, Attorney at Law, MBA, is an attorney and entrepreneur with a passion for all things business. Michele offers legal strategy and support to business owners. The first step in working with Michele is to schedule a Legal Strategy Session. Contact Michele at (573) 578-2848 or email firstname.lastname@example.org to schedule your session. Check out her blog at https://www.mklegalplanning.com/blog or email us to be added to her weekly email newsletter.
The choice of a lawyer is an important decision and should not be based solely upon advertisements. This publication is for informational purposes. Nothing in this publication is legal advice. This publication does not create an attorney-client relationship with the firm or its attorney. © 2019 MK Legal Planning.