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Why Should I Form an Entity? Isn't my DBA Enough?

Updated: Jan 17, 2021

Although forming a DBA (Doing Business As) is the easiest and least expensive process for starting your own business, you have no protection from liability if sued. What does this mean? Here is an example:

You form a DBA and file it with the name ABC Construction. Your client believes you did not fulfill the contract you agreed to and sues you. The judge decides that you owe your client $100,000. Your client cannot only collect from assets that ABC Construction owns, but anything you own personally as well such as your ranch, investment properties etc.

To avoid these types of situations, we recommend forming a business entity that provides limited liability protection. Examples of these entities include a Limited Partnership (LP), a Limited Liability Partnership (LLP), a Limited Liability Company (LLC), and a Corporation.

We often get asked "Isn't Liability Insurance Enough?" The usual answer is no. Insurance is highly recommended, but it is important to remember that insurance coverage is specific, does not encompass everything, and contains policy limits. Additionally, business insurance only protects the assets of the business while a limited liability entity protects the assets of the owners.

If we can help you start your business, or start protecting you and your already established business, please give us a call at 903-347-3060.

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