Today’s blog post is on registering a business as a “dba” or “doing business as”. We also call a dba an “alias”; an “assumed business name” or “assumed name”, or “fictitious name”. All mean the same thing; however in North Carolina the statutory term is “assumed business name” if we’re striving for accuracy.
In the next few weeks I’m going to publish articles in regarding all the legal requirements for starting up a new, multi-owner business. The articles will be in no particular order. I’ll cover: determining the form of business; registering with the state; negotiating and drafting bylaws or the operating agreement; what initial resolutions you should adopt (and what are resolutions in the first place); creating and maintaining a “corporate record”; and today, what is a “dba”.
Registration of Business v. Operational Name
The first point to remember when naming your business is that the formal name under which the business is registered with the Secretary of State does *not* have to be the name under which the business holds itself out to the public as. The company “Gap, Inc.” operates under several different names, including Gap, Banana Republic, and Old Navy. The business is registered as “Gap, Inc.” and for all legal purposes that is its name: registration, taxes, payroll, contracts, liability. However, each “division” has its own name / brand for purposes of marketing to the consumer. Registration of business v. operational name.
Why Register as a dba?
Because the statute requires it. Beyond that, lawyers try to give the “why” behind the statute, when possible, In the case of dba registration, the purpose is to create a registry where interested persons or entities can determine what entity is the rightful, legal owner of a dba. Short version: registration tells the other lawyer who to sue.
When to Register as a dba?
Here is where it gets a little tricky. The answer depends on what state the business is registered and operating in. Each state has differing requirements. In North Carolina, where I mostly practice, the statute only says that a business entity must file with the county an assumed name certificate if it engages in business under the assumed name. Compare that with Illinois law which allows for the use of an assumed name (divisional designation or trade name, it’s called) so long as the business clearly discloses its registered name. Does the Illinois exception apply in North Carolina? I don’t know, but it can be shown as good faith evidence of trying to comply.
Not exactly clear but it gives some guidance. I recommend that my NC clients register their assumed or trade name when it is mostly impractical to give the registered name of their business in most advertising. If the business is registered as “Tony and Bob’s Restaurants Inc.” and they operate hot dog stands called simply “TB’s Best Hot Dogs”, a road sign, napkins, window signage, etc., would look cluttered and silly if they all had “operated by Tony and Bob’s Restaurants Inc.” somewhere at the bottom.
Go ahead and register the assumed name.
On the other hand, it may be simpler to just disclose the registered name on your advertising. “Tony and Bob’s Roofing” and then at the bottom of the advertisement, road sign, vehicle wrap, “a division of Tony and Bob’s Construction Contractors, Inc.”
It’s a choice that I leave to my clients, and neither is right or wrong.
How to Register a dba in North Carolina
When in doubt, I tell my clients to just go ahead and register. It’s a simple form and a low fee payment, filed with the local county register of deeds. Go to their website and click a few buttons, you’ll find it. The Register then sends the application to Raleigh, where the SOS keeps a centralized database, and your dba registration is then associated with your business registration.
Frankly, it’s not something I lose sleep over, so long as my clients are disclosing, in some way, the registered owner of the dba or division, in their contracts and advertising. I don’t even do dba registrations for my new business clients because it’s such a simple process.
Conclusion on dba registration
If you have any questions on this go ahead and contact me. Stay tuned for more parts to this series on the new business startup cycle.
Contact me if you have any questions on any business transaction. In western North Carolina, Asheville, Waynesville, Hendersonville at (312) 671-6453.
Email me at: palermo@palermolaw.com.
Be sure to check out my other blog posts HERE. Be sure to listen to my podcasts with Matt Mittan at BizRadio.US