When running a business, it’s important to protect yourself and your assets from potential risks and liabilities. One common method of safeguarding your business is through insurance coverage. Additionally, for entrepreneurs operating under a “Doing Business As” (DBA) name, understanding the relationship between insurance and DBAs is crucial. In this article, we will provide a quick explanation of insurance and DBAs, their significance, and how they intersect to ensure comprehensive business protection.
Insurance is a risk management tool that provides financial protection against potential losses or damages. Business insurance policies are designed to mitigate the financial impact of unexpected events that may affect a company’s operations, assets, or personnel. By paying regular premiums, businesses transfer the risk to insurance providers, who then assume responsibility for covering certain types of losses as specified in the policy.
Common Types of Business Insurance
Several types of insurance coverage are available to businesses, each serving a specific purpose. Some commonly sought-after policies include:
- General Liability Insurance: Protects businesses from third-party claims of bodily injury, property damage, or personal injury caused by business operations.
- Property Insurance: Covers damage or loss of business property due to events such as fire, theft, vandalism, or natural disasters.
- Professional Liability Insurance: Also known as errors and omissions insurance, it provides coverage for professionals who offer services or advice, protecting against claims of negligence or mistakes.
- Workers’ Compensation Insurance: Required in most jurisdictions, it provides benefits to employees who suffer work-related injuries or illnesses.
- Product Liability Insurance: Offers protection against claims arising from injuries or damages caused by a defective product.
Insurance and DBAs
A Doing Business As (DBA) name, also known as a trade name or fictitious name, is an assumed business name that differs from the legal name of the individual or entity operating the business. DBAs allow businesses to operate under a name that better reflects their brand without going through the process of forming a new legal entity.
When it comes to insurance, it is important to ensure that the policy covers both the legal entity and any DBAs associated with the business. This means that if you operate your business under a DBA, you must inform your insurance provider about the additional name you are using. Failure to disclose DBAs to your insurer may result in coverage gaps, leaving your business exposed to potential risks and liabilities.
By including your DBA in the insurance policy, you ensure that the coverage extends to all aspects of your business, regardless of the name under which it operates. This is particularly important in cases where legal actions or claims are filed against your DBA name.
Insurance and DBAs play vital roles in protecting businesses from potential risks and liabilities. Business owners should understand the different types of insurance coverage available and choose policies that align with their specific needs. Additionally, entrepreneurs operating under a DBA name must ensure that their insurance policies include coverage for both the legal entity and any DBAs associated with the business. By adequately addressing insurance needs and disclosing DBAs to insurers, business owners can enjoy comprehensive protection and peace of mind in their day-to-day operations.
The first question for today:
I have an LLC and want to do a DBA. I have insurance for work that would be done under the DBA. The insurance is in my name, not the DBA. Is that a problem? I am and will be the only employee under the DBA.
This is the type of question that may require subsequent follow-up questions from an attorney to advise you on what is specific to your circumstances, but I am going to use that question as a prompt to cover some of the big issues that are here so that people can address some of the common misunderstandings with DBAs.
Alright, so let’s imagine you have an LLC. So that is a registered limited liability company in your state. You want to now add a DBA. Okay, well, the question is, what is a DBA? DBA stands for Doing Business As, and I think that language is really helpful because it is not a separate entity. It is just, for example, an LLC doing business as, and then a new name.
So, for example, you might have Goldilocks Cookies LLC, but then Goldilocks starts making brownies. So Goldilocks might set up a DBA called Goldilocks Brownies. Legally, it is Goldilocks Cookies LLC doing business as Goldilocks Brownies. Is Goldilocks Brownies a separate business entity? No, it is simply another name for Goldilocks Cookies LLC.
States sometimes call it an assumed name. You might think of it as an alias or a nickname. For example, if Robert also is known as Bob, it doesn’t mean we have two people; Bob and Robert aren’t two people. It is just a nickname. Bob is a nickname for Robert. So when you think about a DBA, think about nicknames. That will help avoid some of the common confusion people have about whether a DBA is a separate business entity.
Okay. Let’s go back to the question. I have insurance for work that would be done under the DBA. Well, as we just discussed, a DBA is not a separate entity. It is just a new name for the existing entity. So if you have insurance, that would be done under a DBA. What you really mean is the insurance would be done under the LLC. And that is great. That is exactly how insurance should be set up.
Back to the question. The insurance is in my name and not the DBA. Okay. Well, let’s think about that. The insurance can either be in the LLC or your name. And it matters because if a lawsuit is against the LLC and you were sued personally, the question then is, okay, are you covered?
And the reverse is also true. If you have insurance under the LLC and they sue you personally, or vice versa, they sue the LLC and not you personally, you get the idea that you need the policy under the proper person or entity.
So what do we do? Do we have it under the LLC or the individual? Well, a lot of times, insurance companies will let you do both. So that is certainly an option. You just need to make sure both are what is called named “insured.” So you want to make sure that if the LLC owns the policy, you individually are a named insured.
Is it a problem to have an LLC with a DBA and insurance? And I think the question there is how do we avoid having liability if we got this insurance policy that is supposed to cover us?
So here is how you do it. You have an LLC for your business. You can have a DBA for that. That just means a nickname. But the insurance policy can be in the name of the LLC, and you individually are the named insured. Or, you can have the insurance policy be in your name, and the LLC is a named insured.
I am Aaron Hall, an attorney for business owners and entrepreneurial companies. You can find more about me at aaronhall.com. You can get the free download we talked about earlier at aaronhall.com/free. And if you have questions to follow up from today, feel free to put them in the comment section below. I will either address them in a future live video session, or I will use your questions to create an entirely separate video to help you and other business owners, educating you to help make your company better and hopefully improve your success in life. It was a pleasure talking with you here today.