Demystifying DBAs: Renewal, IRS Filing, and EIN Requirements

Running a business involves navigating a labyrinth of legal and administrative tasks. One such task that often crops up is the need for a DBA, or “Doing Business As” name. A DBA, also known as a fictitious business name or trade name, is an essential aspect of branding and operations for many businesses. However, questions about its renewal, IRS filing, and the requirement for a separate Employer Identification Number (EIN) can be confusing. In this article, we’ll demystify these aspects to help business owners make informed decisions.

DBA Renewal: Is It Necessary Every Year?

The need to renew a DBA varies depending on the jurisdiction in which your business operates. Generally, DBAs are registered at the state or county level, and the renewal requirements can differ significantly from one location to another. While some jurisdictions may require annual renewal, others might ask for renewal every few years.

Before assuming your DBA needs yearly renewal, it’s crucial to check with the appropriate local government agency responsible for business registrations. Typically, businesses will receive notices about the upcoming renewal deadlines, but it’s ultimately the owner’s responsibility to ensure their DBA remains current and compliant. Failing to renew a DBA could result in penalties, loss of the business’s legal protection, or even the right to use the chosen name.

DBA and IRS Filing: Do You Need to File with the IRS?

Registering a DBA doesn’t automatically trigger a requirement to file with the Internal Revenue Service (IRS). The IRS primarily deals with federal tax matters, and registering a DBA is a state or local requirement. In most cases, you don’t need to notify the IRS about your DBA name change, as long as you keep your official legal business name consistent when filing taxes.

However, there are situations where you might need to notify the IRS. For instance, if your business operates as a sole proprietorship and you use a DBA, you should report your business income using your personal Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). If you’ve obtained an EIN for your business, you would use it regardless of whether you have a DBA.

In contrast, businesses structured as corporations, partnerships, or LLCs (Limited Liability Companies) that are required to have their own EIN should use that EIN when filing taxes, regardless of whether they have a DBA.

EIN and DBAs: One or Many?

An Employer Identification Number (EIN) is a unique identification number assigned by the IRS to businesses for tax purposes. Generally, a single EIN suffices for a business entity regardless of whether it operates under multiple DBAs.

If your business operates as a sole proprietorship and you have multiple DBAs, you can use your personal SSN or ITIN to report income. In this case, a separate EIN isn’t required for each DBA. However, if your business is a separate legal entity like a corporation or LLC, you would use the same EIN for tax purposes regardless of the number of DBAs your business operates under.

It’s important to maintain consistency when reporting income and taxes. The EIN should be linked to the legal entity, and all DBAs associated with that entity should be reported under the same EIN.

Conclusion

Understanding the nuances of DBA renewal, IRS filing, and EIN requirements is vital for maintaining legal compliance and smooth business operations. Always research the specific regulations in your jurisdiction and consider seeking legal or professional advice if you’re uncertain about any aspect of these processes. By staying informed and proactive, you can ensure that your business’s branding and operations remain in good standing with the law.

Video Transcript

Do You Need to Renew Your DBA Every Year?

Do you need to renew your DBA every year? Generally, yes. Once you set up a DBA, which is a fictitious name for your LLC or corporation, it is an alias. It is a nickname. You typically need to renew that every year because it is filed with the state, whichever state your business is in, so that everybody knows, or at least this is the theory, that everybody is on notice that you have an LLC or a corporation, which also goes by whatever the DBA name is.

DBA stands for Doing Business As, so the LLC can operate under its own name and do business as whatever fictitious name or assumed name you have made up. But yes, you generally have to renew that each year. If you don’t, sometimes in the state you are permitted to pay to have it essentially filed and resolved or backdated. Other times, you lose it and you have to request that DBA again.

Legal Considerations for DBA Renewal

By the way, if that happens to you, I recommend working with an attorney, especially if somebody else has filed for that DBA first, like if a competitor comes in to use it, because you may still have common law trademark rights to your DBA name, even if you temporarily forgot to renew it or register it.

Do You Need to File Your DBA with the IRS?

Do you need to file your DBA with the IRS? The IRS doesn’t care about your DBA. The IRS cares about your entity and whether it is paying taxes. Now, usually, the IRS forms have a spot to designate whether your business has a DBA or operates under another name. And you need to put that in there because IRS filings need to be accurate.

But here is an important distinction. The DBA isn’t filing taxes. Why? Because the DBA is a nickname. For example, my name is Aaron, but if people call me Bud, like let’s say I grew up and I had a nickname Bud, do I need to file taxes as Bud as well as Aaron? No, I don’t have to file taxes because I have other nicknames. I have to file taxes under my legal name. LLCs and corporations are the same thing. They have to file taxes under their legal name. A DBA or alias does not create a new duty to file a separate tax return. All of the money generated by the business, which happens to use nicknames or DBAs, is filed as that business. So the DBA money essentially is already included in the business. There is no reason for a DBA to file a separate tax return.

Conclusion

All right, I’m Aaron Hall. I am an attorney for business owners and entrepreneurs.

I do this educational channel to help you spot issues to discuss with your attorney, to help you identify ways to avoid problems. But keep in mind, it is an educational channel. This is not a replacement for using an attorney who understands the law in your state, and in your jurisdiction, and can take the time to understand your particular goals and concerns, and exceptions that might apply to you.

I would love for you to get the exclusive free resource that we make available to subscribers. It is a list of common legal problems and how to avoid them. And then videos. Educational videos talking about how to avoid those problems in your company and set your company up for success. You can get that at AaronHall.com/free, enter your email address, and we will start sending you that information by email. If you have other questions, feel free to continue to add them here. I will use those questions to answer in a future live Q&A. It was great being with you today. I look forward to seeing you again at the next live session.