Breaking Down the DBA in Contracts
What does DBA mean?
The term "DBA" is an acronym for the phrase "doing business as." The term describes a situation where an individual or a sole proprietorship agrees to conduct business under a name other than its own. The term is printed alongside a business’s actual name in certain legal documents to make it clear that even though it is listed under a different name, the business is essentially the same.
Why is DBA important?
DBAs are essential for businesses, particularly when they are entering into contracts with other individuals or businesses. It helps to ensure that anyone who later reads a contract will know who was subject to the terms of that contract.
A business with a registered name may continue to function under that name and use the title in contracts. However, if it wishes to use another name, a DBA is required to signify that the literal entity that signed the deal goes by a different title. This could potentially preserve a level of transparency for the consumer or the other party involved in the contract.
Using the DBA
There are many circumstances that may require the use of a DBA. If you run a consulting company that specializes in different areas , for example, you may decide that you want to offer services under a different name to attract different types of customers. If you contract with another business that has a similar focus, this could lead to confusion about which company is responsible for certain tasks.
You may also want to use a DBA when your business becomes part of a business that requires a different name. Taking the example of the consultant listed above, if this consultant were to merge with another consulting company, it may be appropriate to create a new DBA that represents the new entity that would enter into contracts with clients. This would enable the integrity and success of your business to continue even after the merger and without affecting the name of the previous business entity.
Because DBAs are used to represent a legal distinction for an individual or business involved in a contract, it is imperative that the correct DBA is used if a sole proprietorship has more than one DBA. Be sure to remember this when developing contracts that involve your business name or reputation.
Legal Guidelines for Doing Business As
To ensure clarity and avoid misunderstandings or potential litigation, many people who contract with a DBA should adopt a procedure that they can follow each and every time they need to use the name "doing business as." This will let the other party know who they should be contracting with. You should make sure your contract includes the following information: (i) the DBA that will be used in the contract (e.g., "a limited liability company organized under the laws of the State of New York, doing business as REGUS BUSINESS CENTRES OF NEW YORK LLC"); (ii) the legal entity name of the business that will be using the DBA; and, (iii) the address of the principal office of the business.
Here are the legal prerequisites for using this procedure:
(i) The first step is to file a Certificate of Assumed Name with the New York Secretary of State. This filing must be accompanied by a $25 filing fee.
(ii) The next step is to publish notice of the DBA in two newspapers for six consecutive weeks. For a Limited Liability Company, only one paper needs to be circulated daily and the other paper needs to be circulated on weekends. The cost will depend upon which newspaper you publish in and can range from approximately $500-$1,000.
(iii) After the six week period is up, you should file an Affidavit of Publication with the New York Secretary of State. Acknowledgments are generally obtained when you publish the notices, evidencing that the papers have published the notices. There is a $25 filing fee for this; however, you may also have to pay a small fee for a notary public signature on the affidavit.
(iv) After satisfying the publication requirement and filing the affidavit, you can then use the legal name of the business in conjunction with the DBA for any contracts.
Note: For a DBA of a Corporation, the newspaper to be used depends upon the county in which the corporation is located. For a DBA of a Limited Liability Company, the newspaper to be used depends upon the county in which the Limited Liability Company’s principal office is located.
It should be noted that there are no forms available for obtaining a DBA other than the Certificate of Assumed Name. However, the Affidavit of Publication is a standardized form that is generally accepted by the New York Secretary of State.
While preparing the above documents may appear cumbersome initially, the expenses related to the legal prerequisites for using a DBA can end up being dwarfed by the costs associated with litigating a contract, which relies upon a DBA for its enforcement. In addition, it is worth noting that (i) the failure to comply with the statutory procedures when forming a DBA does not undermine the usefulness of the DBA; and (ii) simply failing to register or renew the DBA will not prevent the filing of a suit in your DBA name; however, it might impair your ability to collect on any judgment, award or settlement because you may not be able to register your DBA until you file a renewal deed.
How to Incorporate a DBA Into a Contract
In general, adding "doing business as" into your contract is a straightforward process. However, there are two very specific parts of the contract that require a DBA, and how you add a DBA to each part of the contract can vary. Here are the two main sections of a contract that will require a DBA, and some examples of how to correctly format it.
Contracts have headings, which define who is agreeing to what. Headings list both parties’ names, contact information, and possibly even the date of the agreement. Both parties will need to include their DBA in their heading, like this:
This contract is between:
The Contoso Corporation, a Delaware corporation, dba Contoso Software, Located at One Microsoft Way, Redmond, WA, 98050 USA
And:
The Pepto Corporation, a Texas limited liability corporation dba Pepto Software, located at 57 Calle Hinds St, Austin, TX, 78705 USA
As you can see, it is very simple to add DBA to a contract heading. Most marketplaces like Fiverr or Upwork will automatically collect this information for you, so you don’t normally have to worry about it yourself, but if you are creating your own contracts, you’ll need to include it here.
The second part of a contract that requires DBA information is if you need to sign or initial it. This is less frequent than the heading, but it is also very simple. Here’s what you would write if you need to sign or initial a contract, but you also have a DBA:
If you’re currently doing business as Contoso Software, please [circle one] sign or initial below.
Signed,
[Your Name Here]
contso.com
[Signature Here]
OR
Signed,
[Your Name Here]
Contoso Software
[Signature Here]
When you don’t have to worry about using a DBA in that section of the contract, it’s perfectly acceptable to just use your regular name.
Common Errors When Incorporating a DBA Into a Contract
Mistakes can be fatal when it comes to the use of a DBA in a contract. Here are some of the more common errors that could get you into trouble:
Not specifying the DBA at all
This is the easiest mistake to make. Just because you’re doing business as "XYZ Custom Design & Manufacturing" doesn’t mean that you have to include that name in every contract. But if it’s not in the contract, you could be leaving yourself vulnerable to challenges down the road about who the contract was actually between or whether its terms were violated. You may think that everyone knows who you are and who you’re doing business as, but that may not be the case; this is an assumption that can be all too easily proven wrong.
Using an incorrect term
Be careful with descriptions. For example, if your "doing business as" is XYZ Custom Design & Manufacturing, people may refer to you as "XYZ Mfg." This saves a couple syllables but it’s not strictly accurate, especially if you have more than one entity in your company or are planning to expand. That does not mean you need to write out your full name every time. Instead, you could simply refer to your company as "XYZ’s Manufacturing Div/Mfg." and XYZ’s Design Div/Design." If you’re the only entity, then the abbreviation will be obvious; if you have multiple entities, it still makes it clear which side of the business the party is dealing with .
Another mistake is to not be specific about what the business is for, and this occurs on two fronts: naming the business and naming the purpose. It’s important to pay attention to precisely how the DBA name is spelled and used. Is it "XYZ Custom Design & Manufacturing," or "XYZ Manufacturing & Design, Inc.?" Is it "XYZ Real Estate" or "XYZ, Inc.?" Getting either one of these wrong could effectively make you two different companies, then the contract could be invalidated as void on a technicality (and without legal cover, could result in significant loss).
Not making it clear where your offices are located
If you’re signing the contract from a different state than your company is based from, make sure to include which jurisdiction should be used should any questions or conflict arise. From law firms to real estate offices to distributors and manufacturers, companies may be headquartered in one state or region but have their main operating facilities in another, so including the specific address will allow the other party to know who they are working with as well as give the judge in a court hearing or dispute resolution information if they are required to identify you or the business for purposes of enforcement.
DBA Contract Clauses and Provisions
A discussion of contract terms cannot be complete without a reference to the relevance of the entity type. The following are some examples of DBA clauses that are commonly found in contracts:
(a) Jurisdiction of Corporate Entity – it’s critical that any reference to the party as a corporation is for the correct legal entity. Consider the following clause:
Company XYZ does hereby agree to manufacture 100 units of the ABC product at its facility located at 123 Main Street, Any City, USA, ABC 00001.
What if the corporation’s proper name is ABC Corporation not Company XYZ? In such case, unless the contract is assigned to Company XYZ by ABC Corporation (assuming the contract allows for assignment), an attempting to sue the Company XYZ may prove fruitless as there is no jurisdiction over the legal entity known as Company XYZ.
Some contracts attempt to avoid this issue by using the following clause:
Company XYZ, d/b/a ABC Corporation.
The above attempts to circumvent issues arising out of the fact that Company XYZ is not ABC Corporation, but makes it clear that ABC Corporation is the actual legal operating entity, as opposed to ABC Incorporated or another similarly named entity.
Merely referencing Company XYZ, d/b/a ABC Corporation may not be sufficient, depending upon the contract. If the contract is for sale of goods and services and the Buyer is making payments, which will be made payable to ABC Corporation, then the Seller better be ABC Corporation because banks have a tendency to not distinguish between ABC Corporation, d/b/a Company XYZ and Company XYZ.
Above, however, ABC Corporation is identified as the legal party to the contract. Some readers may believe that laws relating to "Doing Business As" entities eliminate this potential problem. However, the reality is that many consumers or small entities do not understand the requirements for fictitious names and have their lessors, suppliers or contractors do it for them. DBAs are more frequently treated as the correct legal name for tax purposes in most states, as the legal name is complicated to determine.
Relying on the DBA will usually only work if the party that does not have the legal right to do business under its fictitious name acts as the agent for the actual entity. One way to avoid these problems is to amend the contract utilizing a simple amendment or other modification of contract to identify the correct legal contracting party where the name of the entity named in the original contract is different from the actual entity.
In order to avoid any such problems, one option is to use the following:
Company XYZ, a d/b/a to ABC Incorporation, a corporation of the State of Michigan, Article of Incorporation #
The above is likely the safest option, especially when parties are acting in their corporate capacities, but it requires some work because of the need to disclose the specific details regarding the entity to be bound.
(b) Other contract clauses may include DBA related clauses attached to the end of the contract or application. Some example clauses are reproduced below:
Sample Terms and Conditions of Service
When term "Company" refers to any subsidiary.
DBA and Intended Limited Intended Audiences
Client Service representatives may quote or limit data to news media and other affiliates for purposes of distributing compiled and summarizing the subject matter of this contract rather than specific content.
Seeking Legal Guidance
While this article may provide you with each of the areas for consideration when entering into a contract in your DBA name, we strongly recommend consulting with a licensed attorney experienced in corporate law , and particularly in contracts, so that all legal considerations are made by someone who has experience in this area of law.