Can You Build Business Credit with a DBA

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Building Business Credit with a DBA

As a small business owner, you may be wondering if you can build business credit with a DBA (Doing Business As) name. The answer is that although it may be possible, it also may not be the best choice for your business. Here’s what you need to know about building business credit with a DBA.

What is a DBA?

A DBA is a legal name used by a business instead of the owner’s name. In some states, it may allow business owners to operate under a different name without having to form a separate legal entity. For example, if your name is John Smith and you own a landscaping business, you can register your business as “John Smith Landscaping” instead of “John Smith.”

How to Build Business Credit with a DBA

To build business credit with a DBA, you need to establish credit accounts in the name of your business. This may include but is not limited to opening business banking accounts, obtaining business credit cards, and securing trade credit accounts with suppliers. By using your DBA name on all of these accounts, you can potentially start to build a credit history for your business.

The Risks of Building Business Credit with a DBA

While it is possible to build business credit with a DBA, there are some risks involved. One of the main risks is that a DBA does not offer any liability protection for the business owner. If your business is sued, your personal assets may be at risk. This is because, in most states, a DBA does not really create a separate legal entity for your business.

Why Forming an LLC or Incorporating Could Potentially Be a Better Option

In order to possibly protect your personal assets and potentially limit your personal liability, you may wish to discuss with an attorney the possibility of forming an LLC (Limited Liability Company) or incorporating your business. These legal structures create a separate entity for your business, which means that your personal assets are not at risk in the event of a lawsuit or bankruptcy.

In addition to potentially providing certain liability protections, forming an LLC or incorporating your business could offer additional benefits. For example, LLC’s or certain corporations could potentially help you establish credibility with your customers and vendors, and even possibly provide tax benefits.

Conclusion

While it is possible to build business credit with a DBA, it may not be the best option for your business. Building credit with a DBA does not offer any liability protection for the business owner, which can put personal assets at risk in the event of a lawsuit or bankruptcy. To protect your personal assets and establish credibility with customers and vendors, it is recommended that you speak with a business attorney about possibly forming an LLC or incorporating your business. By doing so, you may be able to limit your personal liability and take advantage of other benefits that come with having a separate legal entity for your business.

*The preceding article does NOT constitute legal advice and should NOT be taken as such. Please see a business attorney for legal advice. You can compare business credit services and more here.

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