It’s not uncommon to see that a business has an assumed name or often states that it is ‘doing business as’ (‘DBA’) a name other than the business owner’s name or the name of the underlying business entity. You may see this on a check or document from the business, a publication in the local newspaper, or registration on the Minnesota Secretary of State’s website. So, why is this done?
Minnesota Statute 333.01 requires that a person conducts business under their true full name or register the business with the Minnesota Secretary of State. This law also applies to entities such as corporations, LLCs, and partnerships that already may be registered with the MN Secretary of State but desire to use a different name to conduct business. The primary purpose of this law is consumer protection. We need to know who we are doing business with and where they can be found.
Most businesses don’t use an old-fashioned business name such as, ‘Thomas E. Smith, Proprietor’ but prefer a name such as Smith Grocery Store or Pine Cone Foods. Now, business names are much more generic, such as IKEA or Publix, and these names have little correlation to the underlying business owners. If a customer or other person needs to figure out who owns a business, it could be very hard to do so without an assumed name or other registration.
To conduct business using an assumed name, a person or entity must file a registration with the Minnesota Secretary of State and include on the registration the names of the owners of the business – whether a person or other entity – and a principal place of business in the form of a street address and not just a PO Box. The certificate must then be published in a legal newspaper, for two consecutive weeks, in the county in which the business has a principal office. The Certificate of Assumed Name Registration with the Affidavit of Publication together complete the registration process. The assumed name registration much be renewed on an annual basis with the Secretary of State; it does not need to be published again at the time of renewal.
What’s important to note is that registering an assumed name alone does not provide any liability protection to the business owners. In contrast, forming an entity such as a limited liability company (LLC) or corporation does provide the liability shield to the underlying owners protecting their personal and other assets. It’s not much more difficult or complicated to form an entity, operate a business as an entity, and doing so provides real advantages. As far as tax treatment, flow through taxation which is similar to doing business as an individual or individuals from a tax standpoint is available for both types of entities.
Furthermore, registering an assumed name provides little if any protection from someone else using the same business name. Forming an entity and registering a trade name provides much greater protection under the law.
So, if you’re starting a business and considering just using an assumed name, it might be worth your time to talk to your tax advisor and attorney about forming an entity instead.
Any requests for topic suggestions may be sent to firstname.lastname@example.org. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.