There are a number of reasons why a business might want to operate under a name that is different from its official name. All states and most foreign countries therefore allow the use of "assumed names."
Any business entity can use an assumed name. But they must be properly registered. And the rules for registration are not uniform from one jurisdiction to another. The process itself, however, is very inexpensive. This article provides details on how to choose, register, and use an assumed name.
Author: Mike Armour
The "Whys" and "Hows" of Having an Assumed Name
for Your Business
Part 1 of a Two-Part Tutorial
Every state and most foreign countries allow you to operate your business under an assumed name. These are sometimes referred to as "fictitious names," since they are not the real name of your business.
Your assumed name may also be called your "trade name," because it is a name under which you have chosen to do business.
Having an assumed or fictitious name does not preclude you from using the official name of your business in situations where you deem it appropriate to do so. And in some cases you may be required to do so. This is particularly true for certain government filings, legal actions, or court transactions. (If you are a sole proprietor, your personal name serves as your legal name in legal and court proceedings.)
Designations for Assumed or Fictitious Names
Operating under an assumed name is described as "doing business as" this fictitious name. As a rule, "doing business as" is shortened to "DBA" or "dba." And using an assumed name is sometimes described as "having a DBA."
So when registering at a hotel, you might see a sign near the registration desk saying something like "Manchester Guest Properties, Inc. dba Premier Hotels."
Across the U.S. there are other common variants of "DBA," such as "d/b/a" or "d.b.a." And some states use the phrase "trading as" (abbreviated "t/a"). This preserves the long-established practice in Great Britain, Ireland, and many nations with a British colonial heritage. Elsewhere many nations prefer the term "operating as" with the abbreviation "o/a."
The Purpose of Assumed Names
There are a variety of reasons for having an assumed name.
- If you operate as a sole proprietor, a DBA separates your company's identity from your personal identity and allows you to open checking and business accounts in the name of your DBA rather than your own name. This facilitates the segregation of business funds from personal funds; and in the event of an income tax audit, this segregation makes it easier to document which expenditures were for business purposes and which ones were for personal purposes.
- Corporations, partnerships, and limited liability companies frequently use multiple DBA's to separate various lines of business in which the company participates. This allows the corporation to treat each business separately for accounting purposes, but to file one income tax return on which the income and expenses from all of these businesses are consolidated for reporting purposes.
- And businesses of all types make use of a DBA for branding or marketing purposes. The DBA gives them the freedom to operate under a name that has marketing advantages over the legal name of the business.
Marketing Advantages of Assumed or Fictitious Names
From a marketing standpoint, one of the primary reasons for an assumed name is to give the business a trade name that is easier to remember or more descriptive of the products or services that it offers.
We could illustrate by considering a company named "Thomas Johnson Retail Investments, LLC" which opens a store to sell plants and garden supplies. No one is going to associate "Thomas Johnson Retail Investments, LLC" with the gardening industry. And besides, the name is not easily remembered. So the company might choose a more customer-friendly trade name, such as "Tom's Nursery."
Assumed names are particularly common among franchise owners, again to gain marketing advantages. Let's imagine that you buy a franchise from the XYZ Restaurants, Inc. Your business is ABC Holdings, LLC. But you want your restaurant to be identified in the public's mind with the nationally-recognized franchise brand. So you would register an assumed name for ABC Holdings, LLC that makes it obvious that your restaurant is part of the XYZ chain.
Your assumed name would contain the phrase "XYZ Restaurant," to which you might append the name of your city or the section of town in which your restaurant is located. In this way you distinguish your business from other restaurants in the chain who have "XYZ Restaurant" in their own assumed name.
Assumed names also allow you to associate your business with something popular or well-known in the community.
- Surrounding the campus of major universities you will find dozens of small businesses that use the school's mascot in their assumed name.
- Or in the vicinity of high-traffic recreational areas, such as national parks or large lakes, many businesses will incorporate the name of the local attraction into their assumed name.
Still another reason for having an assumed name is to test its receptivity in the marketplace. If you're starting a business, you can choose a rather plain vanilla legal name, then try out an assumed name that you think is promising.
If the name proves to have genuine marketing power, you can stick with it. On the other hand, if you recognize later that another name would have been better, you can inexpensively switch to the second assumed name without the cost and paperwork of renaming the original company
Don't Forget Internet Marketing
One additional consideration in choosing an assumed name — and a consideration that has grown in significance in recent years — is having a company name that is search engine friendly.
Years ago, in creating a fictitious name for one of my companies, I reflected carefully and finally settled on one that seemed well-chosen.
In short order, however, I realized that the name was competing with businesses in an unrelated industry for search engine rankings. And these long-established companies, with more mature web sites, were crowding me out of high visibility in the primary search engines.
I had never envisioned this possibility when I chose the name. So I decided to change to another assumed name that avoided this conflict. It took only a few dollars and the filing of a one-page document to effect the change. And within a matter of weeks I was at the top of search engine rankings.