The Sole Proprietor Complex: DBA v. Exorbitant Filing Fees
June 27, 2014 by Katherine Imp
If you are a producer or freelance artist working under a DBA without the protection of a business entity, stop. I’m getting nervous for you, and I don’t even know you.
The phrase “Doing Business As,” or DBA, is a legal term that refers to a business name that is different from your personal name, the names of your partners, or the officially registered name of your LLC or corporation. DBAs are often used by up-and-coming artists, producers, and small business owners because it allows them to advertise their business under a fictitious name, including open a bank account, accept payments, and create contracts, without much paperwork or financial investment. Some states don’t even require the DBA to be registered with the local government agency at all.
However, a DBA, without an accompanying business entity (like an LLC or corporation) opens the door to personal liability for company debts and obligations. Meaning, you could lose your home, car, television, photography equipment, Gucci sunglasses—anything you own of value.
The “DBA” was not created for you. It was created for corporations and franchises to do business under fictitious names so that they could hide the name of the entity that was actually legally responsible for their operation.
So, what is the alternative?
Despite what you may think, creating an LLC or corporation is not that difficult or expensive. And though you may feel like $500-$1000 is a waste of money when you’re just starting out, you’ll be grateful later on when something goes wrong and you’re protected from liability.
In Illinois, the Secretary of State requires a $500 filing fee to create a Limited Liability Company (LLC). That fee will be paid with submission of your Articles of Organization, and the Secretary of State, in turn, sends you a file-stamped copy to complete the transaction.
The filing fee for corporations is less ($150), but corporations in Illinois are subject to a franchise tax, determinable from such factors as ‘paid-in capitol’ and the portion of your business conducted within the state.
If you qualify for pro bono service, Lawyers for the Creative Arts has a number of attorneys that can help you choose the entity that works best for your business, and draft the associated Operating Agreement (for an LLC) or Corporate Bylaws (for a corporation). If you don’t qualify, there are plenty of attorneys that would be able to assist you for an additional $500-$1000, depending on the complexity of the entity you are trying to create.
When you create your own enterprise—whether it’s a feature film, a graphics design company, or a food truck—the last thing you want to do is hassle with the Secretary of State. I hear you. But, if you take away nothing else from this article, remember this: fictitious name, fictitious protection.
Katherine (Kate) Imp is an entertainment attorney at Ramo Law PC and Chicago native. She specializes in film finance, production and distribution for clients in Illinois and across the country. Contact Kate at @KatherineImp or firstname.lastname@example.org.
Disclaimer: The information in this column is intended for general information purposes only and should not be construed as legal advice.