A Silent Partner: What You Need to Know About This Business Relationship

ByVladana Donevski
June 07,2022

When most people think of business partnerships, they think of two or more people jointly managing daily operations. However, you can opt for another type of partnership where one party isn’t involved in day-to-day management. Enter the silent partner.

So, what exactly does this partner do, and what are the benefits and drawbacks of this type of business relationship? In this article, we will answer these questions and more.

What Is a Silent Partner?

A silent partner is an individual or entity that provides financial backing for a business venture without being actively involved in the day-to-day operations. Silent partners are also sometimes called limited partners, as their liability is usually limited to the amount of money invested even if the business declares bankruptcy.

Occasionally, if asked to, the silent business partners can provide guidance and help with networking and finding new potential business partners. It is not uncommon for silent investors to be called upon in case there is a dispute between other active partners to mediate the situation.

However, most of the time, the silent partner remains silent. By entering into such a partnership, the silent partner has full confidence in other partners to handle daily operations and grow the business, so they typically have no issues with taking the back seat in the daily management of the company.

Who Can Become a Silent Partner?

Becoming a silent partner in a small business isn’t a complicated process. Individuals, trusts, and corporations can all serve as silent partners. For small businesses and startups, silent partners can even be friends and family.

However, most of the time, it is a business or an investor that benefits from partnering with your company in one way or another. In some cases, a business may even have two or more partners that are silent, as long as it works for both parties.

We'll tell you how to find a silent business partner a bit later. But first, we’ll go over the benefits of having one and how the arrangement is supposed to work.

The Benefits of Having a Silent Partner

There are several benefits that come with having a silent partner, but the main one is financial.

Provides the Needed Capital With No Interference

First, it allows you to raise capital without having someone interfere in how your business is run.

A silent partner doesn’t interfere in the day-to-day decision-making process, either because they don't know much about the industry or lack any interest in managing daily operations. Silent partner business opportunities are ideal for those who have confidence in the management team and are interested in investments that deliver passive income.

Those investments can provide much-needed capital for businesses that are just getting started without any revisions to the business plan or the marketing strategy. In addition, this financial support can help cover unexpected costs or help the company expand its operations.

New Networking Opportunities

Silent partners, just like angel investors, are also usually well-connected and can use their networks to help the new business in a variety of ways. For example, a silent partner or investor may be able to introduce the company to potential customers or help it to secure favorable contracts.

Overall, silent partnerships can be a great way for many entrepreneurs and new businesses to get the business off the ground.

How Does Having a Silent Partner Work?

As with any other partnership, the silent partnership should be formalized in writing. However, to do so, your business must be registered first.

Registering the Business

Any business with two or more owners can either be structured as a general partnership or a limited liability company (LLC). Different states have different rules for registering these partnerships, and you should inform yourself about the relevant laws and requirements.

Silent Partnership Agreement

The next step is inking the agreement. It should include the roles and responsibilities of all parties involved, the amount being invested, the stake owned by each party, as well as how the profits are distributed. 

Most importantly, it should outline the legal responsibilities of all parties. Silent partners are typically liable for losses up to their invested amount, which makes this a safe investment without the threat of unlimited liability.

It also outlines the procedure if one partner wants to sell their stake in the business or if the entire business is sold. A silent partner agreement helps to protect both partners by clearly defining their rights and obligations.

By having a silent partnership agreement in place, the partners can avoid potential conflict and ensure that their business runs smoothly. So, if you are considering entering into a silent partnership, it is important to have an attorney review the business agreement to ensure that it meets your needs and provides adequate protection.

How Does a Silent Partner Get Paid?

Typically, silent partners receive a fixed percentage of the profits on a monthly, quarterly, or yearly basis. In some cases, they may also receive a portion of the proceeds from the sale of the business. 

Silent partners don’t get paid like business owners. Their earnings depend on the amount they invest in the business and what percentage of the business they own. If the business partner buys 10% of the shares with their investment, they will typically receive 10% of the profits.

The exact details of the payment terms should be outlined in the partnership agreement.

Silent Partners vs. Investors

Both silent partners and investors provide financial backing for businesses, but there are a few key differences between the two. The most important of these is the level of involvement each type of shareholder has in the business.

Silent partners, as mentioned before, are typically passive investors who do not take an active role in managing the company. On the other hand, investors often have a say in how the business is run and may provide input on major decisions.

Another key difference concerns the silent business partner's low level of risk. Silent partners are typically liable up to the amount they invest and as such don’t risk losing anything more than the actual investment. Unlike most regular investors, they are also immune from any legal action being taken against the business. Finally, silent partners typically invest their own personal funds, while investors may use borrowed money to finance their investment.

How to Find a Silent Partner?

If you're interested in finding a silent partner, there are a few places you can look. Similarly to finding an angel investor, you can start by networking with individuals and businesses in your industry.

You can also search online for directories of potential investors or work with a business broker to connect with a potential silent partner company. The silent investor doesn't have to be an individual. The business operating in your niche can also be a silent investor.

Pros and Cons of a Silent Partnership

When starting a business, there are benefits and potential pitfalls to bringing a silent partner onboard. It’s important to thoroughly examine both the pros and cons before pulling the trigger on this business arrangement. 

The pros of having a silent partner in a small business:

  1. Silent partners can provide much-needed financial support when you’re trying to get your business off the ground.
  2. They can also have a valuable advisory role.
  3. Having a silent partner onboard can also be helpful in building credibility and attracting other investors.
  4. Finally, silent partners can provide an important buffer during difficult times or periods of transition. While they may not be directly involved in running the business, their support can be crucial during tough times.

Cons of Having a Silent Partner in Business

  1. The silent partner may not be as invested in the success of the business as the active partner. 
  2. Silent partners are often not familiar with all aspects of the business, which can limit their ability to provide useful input.
  3. Finally, it is important to remember that a silent partner has a percentage of the business but doesn’t get involved in strategizing or managing operations. As such, if the business fails, silent partners are inclined to blame the management team.

In Conclusion

Silent partnerships are common practice in the business world, and for small businesses that are just starting out, they can be a crucial ingredient for success. Silent partners offer up the cash without demanding changes to daily operations or influencing your decision-making process. However, most silent partners lack the experience and business knowledge to have an effective advisory role. Make sure this is an appropriate arrangement for your company before signing any silent partner business agreements.

FAQ
Is being a silent partner illegal?

Silent partnerships are legitimate business arrangements. Silent partners are typically investment firms or wealthy individuals who provide funding for a business with little to no say in day-to-day operations. In return for their investment, they usually receive a percentage of the profits.

What rights does a silent partner have?

While they may not be involved in day-to-day operations, silent business partner rights still exist. Silent partners are entitled to earn investment returns proportionate to the investment and have the right to review financial statements as well as provide input on any changes to the partnership agreement.

Is there any difference between a silent partner and a secret partner?

There are a few key differences between silent and secret partners. A silent partner is typically someone who invests money in a business but does not take an active role in its operation. A secret partner, on the other hand, is somebody who is involved in the business but whose involvement is not publicly known. Silent partners are usually more hands-off, while secret partners may be more actively involved in day-to-day operations.

More From Our Blog

Setting up a business can be a lengthy process filled with challenges and tough decisions. A business bank account is required for the majority of businesses, whether it’s a small business, a sole proprietorship, or a large corporation. However, before opening an account, there are some factors you should consider to ensure that you’ve picked the best option. We’ll go over the benefits of having a business account, how to open a business bank account with the proper documentation, as well as how to pick the account and bank that will be tailored to your needs. Benefits of Setting Up a Business Bank Account A business bank account can facilitate your business ventures and is a requirement for some types of enterprises. Even if you’re a sole proprietor, having an account for your business offers a number of advantages that a personal bank account simply can’t provide. You Can Separate Your Business and Personal Funds Having separate accounts allows you to keep better track of your company’s financial records and income. Additionally, using a single account for your business and personal assets puts your personal savings at greater risk in case legal proceedings are initiated against your company. Therefore, it’s a wise decision to protect your personal savings by having an independent small business bank account. You Can Accept Payments via Credit Cards Accepting and processing credit or debit card transactions is not possible with a personal bank account. Sticking with personal accounts may limit your clients' payment options, as they will only be able to pay with checks or cash, which could be inconvenient for some.  Others Can Access Your Business Funds You probably won't be the only one who needs to use the company's funds. When you open a business banking account, you can give your employees access to it, allowing them to execute numerous financial transactions on the company's behalf. After all, using your personal bank accounts with your business partners and colleagues is inconvenient. You Can Get Personalized Banking Assistance and Appear More Professional Developing a business relationship with your bank ensures that you’ll receive personalized assistance in achieving your company objectives. You can obtain valuable financial guidance, and getting a line of credit or a loan will be a lot easier. Clients may also feel more comfortable making payments to a company rather than to you personally. Decide on the Account Your Business Needs Traditional and online banks provide a similar range of banking accounts, however, their specific services and rates may differ. The advantage of a traditional bank is that there are more products to choose from, and the customer service is better, while an online bank is more convenient for clients who prefer to do everything remotely. Your business might need more than one type of bank account, so let’s check out some of the most common options for opening business accounts. Business Savings Account If your company doesn't plan on spending the money immediately and would rather invest it in the future, a business savings account is the way to go. Over time, money in a savings account earns interest, however, those funds might be more difficult to access.  Business Checking Account Checking accounts are designed primarily for receiving and making payments. In this case, finding the right checking account for your small business is crucial. You also have the option of opening an online checking account if your business doesn’t plan on dealing with cash transactions. Business Merchant Account Merchant accounts are ideal if your business plans on accepting debit and credit card payments. They are a secure way for you to accept electronic payments. For this type of account, you must partner with a merchant acquiring bank, which acts as an intermediary when it comes to processing credit and debit card payments. What Do You Need To Open a Business Bank Account? Ensure you have all of the relevant documentation ready before deciding where to open your bank account. The documents you'll need will vary depending on the legal form of your business, and we'll go over some of the most common ones. Your Personal ID Every signer on a business bank account must submit their Social Security number and an ID document, such as a passport or driver's license, regardless of the business type. This step is the same as opening a personal bank account. Social Security Number or Employer Identification Number  Nowadays, the majority of banking institutions need business clients to supply their EIN to open a business savings or checking account. In order to apply for an EIN (if you don’t have one), you need to fill out an application form on the IRS website with a valid SSN. In some cases, sole proprietors are allowed to open a small business account using only their SSN. Your Company’s Formation Documents These documents should contain essential information about your business, like the name of the person in charge of financial management, the company’s structure, and how it will operate. For a corporation, articles of incorporation are necessary, whereas for an LLC, articles of organization are required. Business Licenses Before you can open a bank account for your business, the bank will request documentation that your company has all the necessary licenses to operate. Of course, the procedures for obtaining a business license differ by location, so it’s advisable to do some research before submitting your documents. Monthly Credit Card Income Businesses that need to process credit and debit card payments and transactions usually opt for merchant accounts. Accordingly, they need to provide the bank with their credit card revenue on a monthly basis.  Choose the Right Banks for Business Accounts and Apply After you've decided on the types of bank accounts that are suitable for your enterprise, you'll need to pick the right bank that will suit your business requirements. We’ll list some of the key factors you should consider before making a decision. Fees Business banking accounts usually come with monthly maintenance fees, ATM fees, cash deposit fees, and wire transfer fees. If you exceed your monthly transaction limit, you may also be charged per-transaction costs. These fees and their impact on your business are important factors to consider when choosing the bank. Tools for Account Management A good business account should allow you to make payments on the go, check your balance, and transfer funds from one account to another. All of this should be possible through a user-friendly smartphone app, an online account, or a third-party application provided by the bank of your choosing. Interest Rates If you opted for a business savings account, then interest rates are of primary importance. Certain business checking accounts also provide interest, so be sure to compare the rates and other criteria before making a commitment. Variety of Bank Accounts Not only do you need a bank that offers the business bank accounts you require right now, but you should anticipate the future requirements of your business as well. For example, make sure your bank offers lines of credit or a business credit card if you think you'll need them in the long run. Branch and ATM Locations As part of your preliminary research, you should look into each bank’s map of branch and ATM locations. Some may be closer to your area and therefore more convenient, so it's definitely worth exploring. Deposit Your Funds and Start Banking You're ready to open your company bank account now that you've chosen a bank and account type, and gathered all of the paperwork for your business entity. Applying for an account shouldn’t take long, and you can do it online in most cases. It’s a good idea to double-check all the information so you don't encounter any problems with the IRS or your bank afterwards. Depositing money in your business banking account is the final step of this process. Usually, you’ll be asked for a minimum deposit, which can be made by submitting cash, transferring money from some other account to yours (via wire or electronic transfer), or by a check payable to your business. Final Thoughts If you’re planning to grow your business and turn it into a profitable venture, creating a business bank account will be a necessary step toward that goal. By describing the procedure in detail, we hope to have made the process of how to create a business bank account easier for you. It just requires you to take several factors into consideration, and opt for the one that is perfect for your business needs. As a result, you’ll be able to focus on your bread and butter, safe in the knowledge that your finances are in good hands.
By Milica Milenkovic · July 12,2022
When you're starting a website for your small business, there are many factors to consider - from the domain name to the monthly bandwidth for the website. Many new website owners have problems estimating how much bandwidth they need. Is 5 GB a month enough? Or maybe 100 GB? Furthermore, are those unlimited plans truly unlimited? That's what we're here to answer today. Read on to learn more. Measuring Bandwidth Every website on the internet generates some amount of traffic whenever people visit it. When an internet page loads, it needs to pull up all the files included, like images, audio, and script files, which all need to be downloaded to the client's web browser. The same goes for any data that travels from the client's computer to your website. That traffic is called bandwidth, and it's most commonly measured in bits per second (bps). When you decide to make a website, your bandwidth will most likely have a monthly cap set by the hosting company. This is usually presented in gigabytes (GB), although some providers measure it in megabytes (MB). If you exceed your bandwidth limit, your hosting provider may charge you extra or even shut down your website until the next billing cycle. There's a common misunderstanding that bandwidth affects how fast your website works. However, it will not affect how many visitors you may have on your website at the same time before slowdowns happen or, worse, the website crashes. That is only determined by the actual hardware the server is equipped with, along with the physical distance from the server, i.e., ping times. That’s why many businesses choose to host their websites on a VPS platform instead of a traditional, shared server. Determining How Much Bandwidth You Need The average bandwidth for a website isn't universal. Therefore, in this section, we'll list a few essential factors for determining how much bandwidth to order when setting up your web hosting account. Type of Website Different types of websites have different bandwidth needs. A simple blog with text and a few pictures will need way less bandwidth than a video streaming site or an online store. To put it simply - the more complicated your platform is, the higher the chances it will require more bandwidth leeway. Size of Website Website size is another determining factor in the amount of hosting bandwidth you need. A static website with just a few pages will obviously use less than a website with hundreds or thousands of pages. The number of files on your website is important as well. If you have a lot of high-quality images, for example, those will take up more space and, therefore, use more bandwidth than plain text. Number of Visitors The more people visit your website, the more bandwidth it will use. However, other factors play into this as well. For example, if most of your visitors are just browsing through your website and not interacting with it much, they won't use as much bandwidth as visitors watching videos or downloading files. Average Time Spent on Website Another factor determining the necessary bandwidth for all websites is how much time people spend there. If your visitors are there for a long time, they’re more likely to interact with what you have on it, which means they'll be using more bandwidth than visitors who just spend a few seconds on your site before they click away. Average Pageviews per Visit If people only visit one page on your website, they won't use as much bandwidth as visitors looking through multiple pages. Since each page on your website uses some amount of bandwidth, so the more pages someone visits, the more bandwidth they'll use. Calculating the Necessary Bandwidth for a Website Now that we've gone over all the factors affecting how much bandwidth you need, let's talk about how to actually calculate it. You need to determine the average number of visitors your website has in a month by looking at your website's traffic data in the admin panel. If you don't have that, you can use a tool like Google Analytics to get it. Then, you need to multiply that by average page views per visit and average time spent on it. This will give you the total number of page views for your website in a month. Finally, multiply the total number of pageviews by the average page size. This will give you the total monthly website bandwidth. Let's say you have an eCommerce website with an average of 10,000 visitors per month. Each visitor spends an average of two minutes on the site and views an average of three pages. The average page size is 500 KB. The formula goes like this: 10,000 visitors x 3 pages/visit x 2 minutes/visit x 500 KB/page = 30 GB/month This means you would need at least 30 GB of bandwidth per month for your website, but it would be advisable to have more. You can now start shopping around for hosting plans that offer the right amount of resources for your needs. Optimizing Your Website's Bandwidth Usage There are a few things you can do to reduce the amount of bandwidth your website uses. One of the most important things is to optimize your images. This means saving them in a suitable format and using the appropriate resolution. You should also consider using a content delivery network (CDN) to serve your static content. This can help reduce the load on your server and, as a result, your bandwidth usage. A web hosting plan should have enough resources for your website. This includes things like storage space, CPU power, and, of course, bandwidth. Your monthly bandwidth limit is fundamental if the website attracts a lot of traffic or uses a lot of data-heavy content, like videos and high-resolution images. If you're not sure how much data you need, you can use the formula from the section above to get a rough estimate and plan accordingly. Remember that this is just an estimate, and your actual bandwidth usage may be higher or lower than shown here. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need. Bandwidth Myths Debunked We've mentioned some common misconceptions about server bandwidth and how it affects websites. Let's look at some other popular cases of false advertising often used by hosting providers to lure inexperienced customers. Myth 1: More Bandwidth Means More Speed Many people believe that having more bandwidth will make their website faster. However, this is not necessarily true. Bandwidth only affects the speed of data transfer, not the actual loading time of your website. This means that, if your website is already fast, adding more bandwidth won't make it any quicker. The only thing that matters is the hardware your web host is using - i.e., its processing power and how fast the storage is. Myth 2: You Only Need Enough Bandwidth For Your Average Traffic Another common myth is that you only need enough bandwidth to cover your average traffic. However, this isn't always the case, as you can easily exceed this website bandwidth limit. If you have traffic spikes, you may need more bandwidth to accommodate them. It's important to keep this in mind when choosing a hosting plan. Myth 3: You Don't Need Bandwidth If You're Not Getting Much Traffic Likewise, many people believe you don't need much bandwidth if you're not getting much traffic. Again, a common misconception. Even with low traffic, you may still need a lot of bandwidth if you're using data-heavy content like videos and high-resolution images on each web page. Myth 4: Bandwidth Can Be Unlimited You might've seen a web hosting company advertising plans with unlimited bandwidth. Web hosting bandwidth is a finite resource. Most web hosts will impose limitations or even shut down your website if you use too much bandwidth. Hosting companies often advertise unlimited bandwidth, or unmetered bandwidth as it's often called, for plans dedicated to hosting WordPress websites and blogs. But, there's often a caveat: Fine print stating you'll either have limited speed after X amount of traffic or imposing some other limitation to what you can do with the website. As you can see, there are a lot of myths about bandwidth. It's important to understand how bandwidth works so you can make sure you have the right amount for your website. Conclusion We hope this article has helped you understand bandwidth and how it affects your website. It's a good idea to have an estimate of how much website-hosting bandwidth you need before launching your platform. Keep in mind that your actual bandwidth usage may be higher or lower than average. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need. This way, you won't have to worry about running into any problems down the road.
By Bojan Jovanovic · June 10,2022
If you’ve ever tried to set up a business, you know how difficult it can be to decide on the structure the business should take. Once that’s out of the way, it’s time to work on branding, at which point you need to choose a name. Many business owners don’t want to associate their names or surnames directly with their brand; instead, they’ll use a “doing business as” name (DBA). In this article, we’ll explain what a DBA is, how to get a DBA, why you might need one, and any other related issues that might be causing you confusion. We’ll get right into it with a definition. DBA Definition A DBA is a pseudonym or alternative name that differs from the legal name of the business or that of its owner(s). It can be used to refer to the business as a whole or partially in instances where the owner(s) want to operate the business under a name other than its legally registered name. It’s also referred to as a fictitious business name, trade name (in Colorado, for example), or assumed name, depending on your location. A DBA doesn’t have anything to do with a business’s structure; it’s merely an official nickname used to present a brand to the public. A sole proprietorship, partnership, LLC, or any other business structure can get a DBA.  One famous example of this is Meta, Facebook’s newly renamed parent company. The company’s legal name is Meta Platforms, Inc., but its DBA is simply Meta. The original business entity and structure remain the same, but once the business owners create a DBA, they can market their company much more effectively using the DBA name. DBAs are not separate legal entities and will not offer you any asset or liability protection, no matter your business structure. They do, however, allow you to receive payments, open bank accounts, and market your business under that name. You may or may not need to register your DBA; this varies by state. It’s also important to note that DBA registration is not the same as registering a trademark; upon registration of your DBA, you should bear in mind that the additional rights and benefits associated with trademarks don’t apply to DBAs, unless you go through a separate trademarking process.  Registering a DBA  So, how do you go about registering your DBA? In the USA, you can do this by filling out the required paperwork and paying the filing fee at your local, state, or county agency, depending on the state. In this section, we’ll answer some questions associated with registering a DBA to give you a better understanding of how it works. Who Needs To File a DBA? Although businesses can go without filing a DBA, having a trading name can be great for branding purposes. Any formal or informal business that intends to trade under a name other than their legal one - or that may do so in the future - needs to file a DBA in most states. This is to prevent random “businesses” springing up under false names to defraud unsuspecting individuals. The main purpose of DBA filing is to prevent such cases of fraud. Once registered, the status of the business, its structure, and its ownership become clear not only to clients, but also to the state authorities where the business is registered. This way, everyone knows who they’re dealing with, especially if and when legal issues arise. DBAs are potentially more useful for partnerships than for sole proprietorships, simply because without a DBA, the business name will carry the surname of all partners. The more partners there are, the messier this can get.  A “doing business as” (DBA) name is also advised for formal business structures like an LLC. That way, if the business owner(s) want a rebrand, changing their DBA is much easier than filing for a legal name change. What Names Can Be Used as DBAs? You have great flexibility when picking a name for your DBA. It could be an acronym or an abridged version of your own name, a play on words, or an entirely new name. Filing a DBA with a brand new name is common among business entities trying to rebrand or branch out to focus on a single aspect of the business. You’re at liberty to be more specific about the nature of the business through the name of the DBA for the sake of creating awareness. When Should You File a DBA? You don’t have to file your DBA at any specific time, but it makes sense to do so early on, before you invest in branding. Don’t worry, though - even if you’ve been trading for years without a DBA, it’s not too late to get one.  Reasons to get a DBA later on include business expansion, rebranding, requirements from your bank, and bidding for contracts. The financial status of the company should also be considered when determining when to file a DBA. Registering multiple DBAs at once can get costly, so it’s worth considering whether you really need a DBA and, if so, how many. A better strategy might be to register separate business structures instead of piling up a series of liabilities on one business. In some jurisdictions, you’ll be required to file your DBA within 30 to 60 days after its first use. Step-by-Step Guide to DBA Registration The process for registering a DBA varies based on the state where your business is located or was registered. You should visit the county clerk at the closest registry or the website of the Secretary of State to find out what peculiar requirements apply to your jurisdiction. Your state may also require you to place a local newspaper ad for a stipulated amount of time. The filing fees range from $10 to $100.  You can manage the process yourself or hire the services of a professional to do it for you. Step 1 - Check business name availability  Conducting a name search by yourself or through the state will show you whether the name in question is available at both state and local levels. You should also be aware of the naming requirements applicable in your state. After you’ve confirmed the name’s availability, you can also conduct a quick web search to see if the URL is available and buy the domain name. After all, your business will likely need a website.  Step 2 - Ensure you fulfill the operating requirements After securing your DBA name, you may be required by your state to carry out business operations before proceeding with the registration process. Some examples of preliminary operations include printing branding materials like complimentary cards, staff identity cards (where necessary), and brochures. Step 3 - Complete the necessary forms  At this point, you’ll need to submit your proprietor information, including contact information, telephone numbers, and email addresses. This stage can be completed online. The completed forms can be handed back to the appropriate officer(s) in charge either online or via email. Whether approved or denied, you will be informed appropriately and this concludes the necessary steps to set up DBA. Other Things To Note About Filing a DBA 1. Restrictions on names Depending on your jurisdiction and the registration status of your main business, you may not be able to use certain words in the name of your DBA, including “Inc.” and “Corp.” at the end of the name. This will usually only apply if your business isn’t incorporated.  2. Announcement of your DBA When you start a business and need to find out how to get a DBA in your state, you may want to look out for requirements about announcing your trading name. Some states will ask that you announce your DBA in a local publication for a specific period. This is to create awareness that your legal business name and DBA belong to you and have been duly registered. 3. Certificate of good standing In some jurisdictions, you may be required to present a certificate of good standing from the office of the Secretary of State before your DBA registration can be accepted. This requirement is mostly for LLCs to show proof of the good standing of the business and its owner(s). 4. DBA renewals DBAs expire and need to be renewed after a certain period. In the majority of states, the lifespan of a DBA is five years. Take note of the registration date and the eventual expiry date to avoid any dramas. 5. Information change If the information you provided at the point of the DBA filing changes, your DBA may need to be revised. This can include changes to the structure of the business or to your principal address. 6. Employer Identification Number To protect your privacy and keep your personal and business matters separate, you’re advised to apply for an EIN. Having this number means you don’t need to use your Social Security number for your business identity. Advantages of Registering a DBA 1. Targeted branding When you need to branch out or focus on a certain aspect of your business, you may do so by getting a DBA registered and marketing it to your target audience. You’re at liberty to create separate logos, websites, and anything else related to branding to fit the description of what you’re registering as a DBA. This way, that aspect of the business can stand alone and have a more focused appeal. 2. Privacy protection Since the legal name of a business is usually the name of its owner(s), it makes sense to apply for a DBA. For some businesses, using a DBA ensures the protection of the owner’s privacy and reduces the number of unsolicited postcards and catalogs sent to your address. Privacy protection also helps reduce unsolicited calls, most of which probably aren’t from potential customers. Some of those calls may even be prank calls. You should consider creating a DBA if you don’t run a business that requires using your name to give you some form of leverage and boost personal branding. 3. Business flexibility For a business that already exists and is looking to expand, a DBA affords you the flexibility to do so while avoiding the need to register a new business entity. This flexibility even allows you to expand your business to a region where your legal business name has already been registered.  Flexibility also means that you can decide to use more fun and relatable names for your DBA. So if you haven’t already done so, the time to follow our guide on how to get a DBA is now! 4. Ease of legal compliance Fraudulent businesses and schemes can wreak havoc, and getting a DBA is the surest way to protect yourself and your business from avoidable legal issues. If you trade under another name in a state where you need a DBA but you haven’t done the paperwork, you’ll be in trouble.  The last thing you want is to end up defending a lawsuit that could have been avoided by filing the correct ‘doing business as’ paperwork. There’s no reason not to; it’s quick, easy, and not too expensive. Disadvantages of a DBA 1. Little or no liability protection Unlike registering certain types of businesses, getting a DBA doesn’t protect your assets from liability if your company gets hit with a lawsuit. The DBA does nothing to separate you from your business; it’s simply a legally recognized alias.  Of course, that’s not the purpose of a fictitious business name. Whether you’re opening an LLC or a corporation, you shouldn’t rely on your DBA for protection. 2. Maintenance difficulties Managing too many DBAs under one legal business entity can be a hassle, especially when you’re planning on doing business internationally. That’s because some other countries will also require you to file registration of trade name paperwork.  When you have to repeat that process for multiple DBAs across dozens of countries, then keep on top of renewals, there’s every chance some important admin could slip through the cracks and cause you some major headaches.  3. No extra tax benefits When you register a business name in the form of a DBA, you’re only getting an alias you can use for clearer branding. You shouldn’t expect the DBA to affect your company’s tax status - that all comes down to your business structure. 4. Lack of exclusivity of business names Seeing as a DBA is not a trademark, it doesn’t offer you exclusive rights to the name you have chosen; it only allows you to conduct business under that name. This means that multiple businesses can conduct business using the same or very similar DBAs. By extension, you can’t use DBAs for legal paperwork, since they aren’t legal entities. It should be noted, however, that you can trademark a business name if you desire some extra protection. Final Thoughts Registering a DBA is an easy and inexpensive way to expand your business and create brand awareness. It’s the best way for small businesses to experiment with other goods or services without having to break the bank or go through the process of registering a brand new business. At the same time, you can also enjoy the privacy a DBA affords you. Now that you know how to get a DBA, we encourage you to follow the steps discussed here and get one if your business needs it.
By Dragomir Simovic · June 10,2022

Leave your comment

Your email address will not be published.


There are no comments yet