Choosing Flexibility & Protection
Either you have a lovely idea for a start-up, or you’ve been working your side-hustle for a while and want to go legitimate and get you (and your business) some protection. However, you aren’t sure whether you should incorporate, form a limited liability company, or do nothing. What do you HAVE to do? What protections, and responsibilities come with the DBA, LLC or Corp process?
I’ve run PDX Loves Signing, LLC since 2009, helped a friend set up (and then shut down) their DBA, and now assist in the running of Accessible Signed Library, Inc (a non-profit, which has other requirements not mentioned in this article). I’ve used different “DIY” companies to start each, and while I do have a personal favorite, that has more to do with comfort than it does to do with which one is better.
So, what’s the difference between a DBA, an LLC, and a Corp?
Let’s see if we can simplify them:
DBA — Doing Business As
* Think of a DBA as a stage name or nom de plume. How one goes about making one a legal entity varies a bit (according to state law), but it generally only requires filing a certificate with the secretary of state or the registrar. It only costs about $50 to $100 to do.
* This doesn’t provide any protection from lawsuits, and persons who provide services under a DBA can be personally sued for anything their business does that upsets someone. You. as someone running your business through a DBA, could lose your home, savings, and get your wages garnished in a settlement.
* Taxes are also not separated, so your business income and your personal income ae considered the same.
LLC — Limited Liability Company
* You need a name for the LLC, usually including articles of incorporation, with the secretary of state. This process can vary a bit depending on the state in which you are filing. It costs about $500–1000 in fees (plus figuring out how to file, although companies like Legal Zoom will help file all the appropriate paperwork for a small fee. You also will, most likely, need a registered agent (depending on the state) and while you can find someone to do it for free, it can be easier to pay someone like NRAI (National Registered Agents, Inc) to do all that paperwork for you.
* After setting up your LLC, you can also file for an EIN (employee identification number) with the IRS. This means you can then choose to file as a sole proprietorship (if there is only one owner), a corporation, or a partnership.*
INC — Incorporated
*Corporations are much like LLCs except they are a little less flexible in their management structures, are recognized outside the US, and can involve more shareholders. There’s also a difference between S-corps and C-corps, which have different options and restrictions based on the needs of the various shareholders, the nations they hail from, etc. Again, companies like Rocket Lawyer can help you set one up, or you can meet with a business attorney to do so.
- ALL of these have costs and benefits that will vary depending on the size and assets of your business. Please speak to a tax professional about how to file, as this is not mean to be tax advice.
Carissa Martos is a teacher, author, ASL interpreter, and activist in Portland. Born in Los Angeles, she graduated from UC Berkeley before completing her MS in Education in Oregon. Married for 15 years, she’s raising a teen and a tween. She’s worked in everything from retail and health care to customer service, and her writing can be found at www.BleedingKeystrokesYellowWallpaper.com