Why do I need a D.B.A.?

Question

I just picked up my first free-lancing gig. My new "client" told me to get a D.B.A. before submitting my first invoice.

Why do I need one, and why can't she just write a check in my name?

Answer 1

She is attempting to avoid employer tax issues and is completely right.

If she cuts you a check in your name, and she has any "real" employee on the payroll that does the same or similar job that you are doing, the IRS has ruled that you are an employee. So she would be required by law to withhold taxes, pay taxes, insurance, unemployment, etc., etc.

If her company pays you more than $600 in a year, the money will be reported via a 1099 form, and legally you have to claim the income. Setting up a DBA will make it easier to claim your business expenses against your income. It is a good thing for you too.

Congrats on your first gig! Way to go!

Answer 2

DBA stands for "Doing Business As" - that is, say your name is John Smith, but they need a "company name" for their recordkeeping databases. So, on paper, you could become "John Smith dba Whiz-Bang Productions". Your state may even allow you to register that trade name (Whiz-Bang Productions, for example) so nobody else can use it, like a trademark.

Then, on invoices, letterhead, business cards, etc. you could call your "company" Whiz-Bang Productions, but for all government paperwork like tax returns would use your legal name (John Smith).

Answer 3

she is requiring that you be licensed to do business.