In today's Freedom Friday blog and email newsletter, I want to talk about an issue that comes up on occasion and came up recently with one of my clients. That issue is why a DBA might be a bad idea for your small business. Besides my business law practice, I also handle some debt settlement work. If you are a small business owner, it is very important for you to manage your debts wisely, and not just any debts for your small business, but also your personal debts.
The reason why it is critical to manage your personal debts wisely is that if a creditor gets a judgment against you, you do not want the creditor to be able to attach or seize any assets belonging to your small business. The best way to prevent this from happening is make sure you keep your business debts and personal debts separate. But, what if you are operating under a DBA or a trade name?
“DBA” stands for “doing business as.” There are a few different types of situations where you might have a DBA. A safe situation for a DBA is when you have an LLC, and then the LLC has a DBA or trade name. However, if your DBA is for you personally, and you really are operating as a sole proprietor, your personal assets can be at great risk to creditors if you get a judgment against you personally.
A major disadvantage with a DBA is that a DBA does not provide any liability protection or a barrier to your personal assets (and vice versa). When someone operates under a DBA, they're basically operating as a sole proprietor, and that is a very bad idea for your small business, because it will open you, as the small business owner, up to unlimited personal liability. This means that if you operate your small business as DBA to you individually as person, or you are even doing business in your own personal name, that if you personally get a judgment against you for personal loans or personal credit cards, then those creditors can seize or attach assets of your small business. In other words, a DBA is a very bad idea for your small business if it is tied to your personal name, and you have a lot of credit card or other debt personally. You do not want to put the assets of your small business at risk to your personal creditors, and in such instances, you should seriously consider operating your small business as an LLC and not a DBA.
If you're interested in starting a small business in 2022, or you have any business law or business litigation needs anywhere in the State of Oklahoma, please contact me at [email protected] to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/