Updated: Jun 14, 2019
I get a lot of the same questions from other small business owners, soon-to-be business owners, and even clients so it seemed fitting to have FAQs easily accessible for YOU!
This weeks roundup talks about entities and payment processing fees. Check them out below and comment below or on my FB page, Washburn's Consulting Services for your questions to be featured.
1. What is a DBA?
A DBA is an acronym for Doing Business As. It is a registration with your state to use a trade name (fictitious name - whatever you want to call it, it is all the same). But, let's take a step back, there is a common misconception that a DBA is an entity. A DBA is not an entity, it is just a registration of a trade name. Any entity can have a DBA, a sole-proprietor, LLC, Partnership etc. A lot of people say that they are filed as a DBA, but you're filed as a Sole-Proprietor as again, a DBA is not an entity. States have various laws regarding the registration of a trade name (DBA). Some states require you to file a DBA if you will not be operating under your legal name, some require it if you will not be using your last name (but you are using your first name), etc. Each state has different laws and requirements.
2. Dave Ramsey said not to incorporate if you don't have assets.
That is a statement, but still, something to address. I follow Dave Ramsey as well, but I see other business owners instruct -soon-to-be business owners not to file anything with the state because Dave Ramsey said so. You do not have to incorporate right away as an LLC or another entity, but you do have to see what your state, city, and county require you to do if you will simply run as a Sole-Proprietor. Typically it is just a business license that is under $30, but you do have to file something!! Dave Ramsey is not above legal requirements. Also, if your state does not require something, check your city and county as at least one of them will. A lot of times we only research state requirements and nothing else.
3. What entity should I incorporate as?
There is no one size fits all for every business. They are all unique and entities should be selected based on YOUR business. Do your research, consult with a qualified business consultant (hi!), lawyer or accountant.
4. Does an LLC protect all of my personal assets?
No. [insert gasp] LLCs protect 99% of your personal assets but there are exceptions to that. If you obtain a loan from the bank, you will have to personally, as an individual, guarantee that loan and if you default on said loan, they can pursue you and your assets personally.
5. Can I pass on service fees from my payment processor on to my customer?
Yes. Visa and MasterCard mandate everything regarding debit and credit cards and we ALL have to follow those rules. They allow business owners to pass on credit card transaction fees to the customer (you cannot pass on debit card fees or ACH fees) with a few requirements. You have to disclose to your customer that they are paying the fee and what the fee is (Ex. 3%, 1.9%) and you cannot profit from passing that fee on, meaning you can only pass on the exact fee and nothing more.