Tax Advantages/Disadvantages of DBA

Discussion in 'Business Operations' started by ag2112, Apr 6, 2012.

  1. ag2112

    ag2112 LawnSite Member
    Messages: 43

    Hey guys, I'm currently a DBA thinking about going LLC, I did a little research, but found conflicting accounts (from CPAs and internet) on taxes on a DBA, I heard that you can write off everything just as if you were an LLC, and also heard that with a full-time job you can't write off any business expenses if its a part-time lawn business, which it is.

    Anyone else have a full-time job and run their business on the side? What tax write offs are there? Does it work out in your favor?
  2. waterwiseguy

    waterwiseguy LawnSite Member
    Messages: 1

    I'm just a contractor, not an accountant, but to my business the chief advantage to an LLC is liability protection. DBA simply means your business is not operating with your name on the title and you're a single proprietorship. As a single proprietor if your business is sued you stand the chance to lose not only it's assets but your own personal assets. In an LLC if you're sued you can only lose your business assets, your home is not on the auction block.

    As far as taxes go, as I understand it and have been paying taxes, the IRS makes no distinction between income from a single prop. or an LLC and neither does my state (Oregon). It's all the same pot. I don't see any different tax advantages. The liability protection though makes it priceless.

    Bear in mind that LLC formation is governed by state regulations and not federal so your particular state might have have different state tax rules.
  3. tonygreek

    tonygreek LawnSite Gold Member
    Messages: 3,804

    In this instance, you are referring to your personal name "Doing business as" for your sole proprietorship business. To clarify, any entity can have/be a DBA.

    For example, you can have one company (an LLC) that has multiple DBA's. For example "Bob's Internet Services, LLC" dba "" and dba "", would allow business to be done under those names, receive payments made out to each, but deposited to the account of Bob's Internet Servicees, LLC.

    Tax-wise, LLCs are a pass-through entity, no different than a sole proprietorship or partnership. As mentioned, a key is the liability protection, but you have to make sure every single thing you do, especially including the finances, is completely untangled from your personal world, such as credit cards, bank accounts, etc. It doesn't take much to "pierce the corporate veil", opening yourself up to the liabilities you are trying to shield your personal self from.

    As for write-offs, you can write off any legitimate business expenses, whether part-time or full-time, regardless of additional employment elsewhere.
  4. ptjackson

    ptjackson LawnSite Member
    Messages: 211

    exactly what Tony said.

    The LLC was created to be taxed like a sole proprietorship/partnership but have the liability protection of a corporation. Corporations have the MOST liability protections but are costly to setup and maintain. Additionally, they are subject to double tax, both the corp pays tax and then the owner pays tax on the profits distributed.

    All in all a good CPA shouldn't cost you that much and should be able to help guide you. If they can't find a new CPA.

    As Tony said though, if you aren't careful you end up creating no benefit if you don't segregate things properly. The real benefit is that if a rock comes off a mower and puts grandma in the hospital the worse thing that happens is you lose your business assets but not your car, house and retirement.
  5. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Messages: 3,465

    I think what they are saying is,if your doing this and are taking losses for so many years in a row it becomes a hobby so you don't get take write offs.

    fixed it,
    Last edited: Apr 6, 2012
  6. ptjackson

    ptjackson LawnSite Member
    Messages: 211

    grandview I assume you mean "loss" just a typo right?

    If so I think you are correct but an LLC I don't think helps with that at all. Three years of loss in a row is a hobby. You need to show a profit at least in year 4 and then you can have a loss again.

    Make sure and consult a tax professional :)

    CLARK LAWN LawnSite Silver Member
    Messages: 2,526

    You guys really need to look further into what an LLC is. Yes it does separate you from your business, however, you still can personally be sued if you cause damage to someones property or person. It will help protect you of an employee causes the damage but if you are solo they can and will go after you personally still.
    Posted via Mobile Device
  8. lawnkingforever

    lawnkingforever LawnSite Bronze Member
    Messages: 1,280

    Posted via Mobile Device
  9. lawnkingforever

    lawnkingforever LawnSite Bronze Member
    Messages: 1,280

    My research netted the same info. As a solo LLC your protection from getting sued is not absolute. As a solo LCO there is no real benefit to being an LLC, it is just a personal preference.
    Posted via Mobile Device
  10. tonygreek

    tonygreek LawnSite Gold Member
    Messages: 3,804

    Of course you can you can be sued for anything, but if established, and followed through with correctly, it mitigates your personal liabilities. There is no panacea for personal lawsuits, but it does help a judge see that your personal self can be released from a suit.

Share This Page