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TimberJon

DBA for sidework/consulting, and separate LLC?

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Hi all,  I'm a freelance IT / SMB consultant. I want to get a DBA for the "biz name" I use, lets call that BIZ-A.

 

Aside from that, I'm starting a serious for-profit company under another name, BIZ-B. It has a specific name already as I own the web domain. So in trying to understand how LLC's are registered, does the business name default to my name unless I specify a "trade name"? Or is the LLC only in my name and I then have to register a DBA under it?

 

Alternatively, I've always considered using my BIZ-A name as the parent company for BIZ-B, and C, D, Etc... since I am on track to being a serial entrepreneur. So is this model do-able? Would I then register BIZ-B as a DBA trade name under BIZ-A and it is ultimately responsible for all record keeping for BIZ-B, C, etc?

 

So, as I see it...

Scenario 1) DBA my BIZ-A name, and separately LLC BIZ-B. Understand that I have to pay to register/file both here.

Scenario 2) LLC with my BIZ-A name, and DBA both the IT sidework company and also DBA my larger primary company under it so that both are separate tax-wise. I'm seeing the startup costs as higher here but then if I end up selling either down the road, it would be easier no?

 

Hm I just read that as an LLC, all taxes for the business or multiple pass through me anyways? But isn't it true that a DBA get's assigned an EIN for tax purposes, and would not an LLC also get a separate EIN? Trying to figure out the basic plan here.

Facts007 likes this

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An individual can have several DBAs and they will all be "his/her" businesses. An LLC can be a separate business entity for all or some purposes. A one person LLC is treated as a sole proprietor for tax purposes, a 2 or more owner LLC can be treated as a partnership for tax purposes. Most entrepreneurs form a separate LLC or Corporation for each business, because they do not want the creditors of one business, to be able to get to the assets of the other business for payment of debt. Which would be best for you would depend upon the nature of the businesses and what you are tyring to accomplish. DBAs and LLCs have tax id numbers to be used when they have employees, but it does not change how they are taxed, Schedule C of the owner of a DBA and Schedule C of the owner of a one man LLC unless certain elections are properly and timely made. I would suggest it would be worth your while to spend a few hours with a business attorney to get these set up properly. The money you spend now getting it done right, can save you big bucks if it is screwed up.

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Registering a LLC is similar to registering a corporation, When you register a corporation or LLC, you give the entity a name of your own choosing. It does not jsut default to your name. You have to give it a name. The name cannot be, of course, the name that some other business entity in the state is already using. You also should not use a name that is protected as a trademark of some other firm. If you decide you want to conduct the business of the corporation or LLC under a name different from the name you gave the entity, then the corporation or LLC would file for a trade name. A good example of this is the Subway sandwich chain. The corporation that operates Subway is Doctor’s Associates, Inc. It conducts it’s Subway business under the tradename Subway. Subway is also a registered trademark of Doctor’s Associates.  It could conduct other businesses using other tradenames if it wanted. Or it could organize subsidiary corporations or LLCs to conduct other businesses.

 

Your trade name for your sole proprietorship is just simply an alternative name you use for business. As a sole proprietor, there is no separate business entity. You and the business are the same. You may operate as many businesses as a sole proprietor as you want, and have separate trade names for each one. You could also organize a LLC and either give it the name you are using as a tradename or give it a different name and then assign the tradename you are using to the LLC to use as a tradename. The LLC may then conduct other businesses and use different tradenames for each one.

 

These are just a few possibilities. There are an almost endless variety of structures you can set up to run multiple businesses. The best tend to be fairly simple set-ups. I've seen clients set up ridiculoulsly complex structures thinking they were achieving something slick when in fact all they really did was make things more cumbersome and expensive for themselves.

 

As for taxation, a LLC with a single member is by default treated by the IRS and most states as simply a sole proprietorship of the owner. That means that you are directly taxed on the income the LLC earns, just like a sole proprietorship. You'd file a Schedule C with your personal income tax return to report the income//loss of the LLC. An EIN is just a number that you need from the IRS in order to file any kind of return with the IRS other than a personal income tax return. If you do not need to file any returns with the IRS other than personal income tax returns then you do not need an EIN. You may also elect for the LLC to be taxed as a C-corporation, in which case the corporation files the tax return and pays the tax on the income, or elect for it to be taxed as a S-corporation, in which case the S-corporation files an information return with the IRS but the income still passes through to you to report on your personal income tax return (on Schedule E instead of Schedule C). The tax effects of each choice will be a bit different, so the choice you make will impact how much tax you pay, 

 

I suggest you consult a business attorney and a tax attorney for advice on what set up will be best for you taking into account your situation, what kinds kinds of business you plan to conduct, and what your goals are. 

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All good info. So what I take from this is: If I DBA my side biz since there's very little liability to me tax or otherwise, I'm just saving a little $ in the registration. I can still separately register the LLC with myself as the sole proprietor/officer and bam, get on with it all. I don't want to make anything complicated, and I think it will be years before there's any talk of selling or upgrading from a DBA/LLC to Corp, etc. The funds will be ready later for such a thing. Sound right?

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