In Texas, an LLC and a DBA solve different problems: an LLC is a separate legal entity that shields your personal assets from business debts and lawsuits, while a DBA (what Texas calls an “assumed name”) is just a registered trade name that gives you no liability protection at all. Choosing between an LLC and a DBA in Texas usually comes down to how much personal risk you’re willing to carry — and many owners end up filing both, using the LLC for protection and the DBA so the company can trade under a customer-facing brand.
What Each One Actually Is
A DBA lets you do business under a name that isn’t your legal name. For an individual, any name that doesn’t include your surname counts as an assumed name. For an LLC, it’s any name other than the one on the Certificate of Formation.1State of Texas. Texas Business and Commerce Code 71.002 – Definitions A DBA creates no business entity. It does not separate your personal finances from your business finances. It’s a public record linking a trade name to a real person or company, and nothing more.
An LLC is a legal entity created by filing a Certificate of Formation with the Texas Secretary of State. Once formed, the LLC exists as its own “person” under the law — it can own property, sign contracts, and open bank accounts in its own name. The owners are called members, and the LLC’s debts belong to the LLC, not to them personally. The Certificate of Formation must include the LLC’s name, its purpose, a registered agent and office address, and whether the company will be run by managers or by its members directly.2State of Texas. Texas Business Organizations Code 3.005 – Certificate of Formation
The Liability Difference Is the Whole Point
This is why most people form an LLC instead of just filing a DBA. An LLC puts a legal wall between the business and the owner’s personal wealth. If a customer slips and falls, or a vendor sues over an unpaid invoice, the claim is against the LLC. Your personal savings, your home equity, and your retirement accounts stay out of it.
A DBA provides none of that. A sole proprietor with a DBA is the business in the eyes of the law. Every dollar of business debt is personal debt. Every judgment against the business is a judgment against the owner. For any business that signs leases, hires employees, carries inventory, or interacts with the public, that gap is the single biggest reason to form an LLC.
The protection isn’t automatic forever. Texas courts can “pierce the veil” and reach an owner personally under the standards in Section 21.223 of the Business Organizations Code, which Texas applies to LLCs as well.3State of Texas. Texas Business Organizations Code 101.002 – Applicability of Other Laws Doing this requires proof of actual fraud, but the surest way to invite an argument is to commingle funds — paying personal bills from the business account, running personal purchases through the company card, or treating the LLC as a personal checking account. Keep a dedicated business account and clean records.
What It Costs to Set Each One Up
An LLC costs more and takes more paperwork, but neither process is complicated.
Filing an LLC
You file a Certificate of Formation with the Texas Secretary of State and pay a $300 filing fee.4Office of the Texas Secretary of State. Business Filings and Trademarks Fee Schedule The form asks for the LLC’s name, purpose, registered agent and office, organizer information, management structure, and whether the LLC will exist perpetually or for a set number of years. A manager-managed LLC must list each initial manager; a member-managed one must list each initial member.5Justia Law. Texas Business Organizations Code 3.010 – Supplemental Provisions Required in Certificate of Formation of Limited Liability Company The LLC exists the moment the Secretary of State accepts the filing.
Filing a DBA
Where you file depends on who owns the business. A sole proprietor or general partnership files an Assumed Name Certificate with the county clerk in each county where the business operates. County clerks set their own fees — Dallas County, for example, charges $23 for the first signature plus $0.50 for each additional owner.6Dallas County. County Clerk Recording Division – Filing Fees and Payment Information
LLCs, corporations, and limited partnerships follow a different rule. Since 2019, these entities file their assumed name certificates with the Texas Secretary of State instead of the county clerk, and the fee is $25.7Office of the Texas Secretary of State. Form 503 – Instructions for Assumed Name Certificate If your LLC wants to operate under a different brand name, the filing goes to Austin, not the local courthouse.
What You Have to Keep Up With
An assumed name certificate is valid for up to ten years and can be renewed for successive ten-year terms. A DBA held by a sole proprietor has no annual state filing obligations beyond that.
An LLC has more to keep up with. Every LLC doing business in Texas owes a franchise tax report to the Texas Comptroller each year. For the 2026 report year, entities with annualized total revenue at or below $2,650,000 owe no tax, but they still must file a Public Information Report.8Texas Comptroller of Public Accounts. Franchise Tax Rates, Thresholds and Deduction Limits9Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later The Public Information Report updates the Comptroller on your officers, directors, and mailing address. Skip it and the LLC can lose its good standing. One narrow exception: qualifying new veteran-owned businesses are exempt from both the franchise tax report and the Public Information Report for their first five years.10Texas Comptroller of Public Accounts. Texas Franchise Tax Report Forms for 2025
How Taxes Actually Work
The IRS doesn’t care what your business is called, so a DBA has no effect on how you’re taxed. More surprising: a single-member LLC is taxed by default the same way as a sole proprietorship. The IRS treats it as a “disregarded entity,” and all income and expenses flow through to your personal return on Schedule C.11Internal Revenue Service. Single Member Limited Liability Companies You pay self-employment tax on net earnings the same way a sole proprietor does.
A multi-member LLC defaults to partnership taxation, with each member reporting their share on Schedule K-1. The LLC itself pays no federal income tax unless it affirmatively elects to be taxed as a corporation. That election exists — an LLC can file Form 2553 to be taxed as an S corporation and potentially save on self-employment tax once profits are large enough to justify running payroll and filing Form 1120-S. If you want to form an LLC primarily for tax reasons, talk to an accountant before you do; the liability protection is the reliable benefit, not the tax treatment.
When You’ll Want Both
LLC and DBA aren’t an either-or. Say you form “Smith Holdings LLC” but want the restaurant to face the public as “The Jalapeño Kitchen.” Because that trade name differs from the name on the Certificate of Formation, the LLC files an assumed name certificate with the Secretary of State for $25.7Office of the Texas Secretary of State. Form 503 – Instructions for Assumed Name Certificate This setup also lets a single LLC run multiple brands under separate assumed names while keeping everything under one legal entity. The LLC’s liability protection covers activity conducted under any of its registered assumed names.
How to Decide
If you’re putting a catchy name on a low-risk side project, a DBA takes minutes and costs a fraction of what an LLC does. But a DBA alone leaves your personal assets completely exposed. For any business that signs leases, hires people, holds inventory, or takes on clients, the $300 LLC filing and the annual franchise tax paperwork are worth it for the liability wall alone. Many Texas owners settle on the combination: an LLC for legal protection, and a DBA on top so the LLC can trade under a brand that customers actually remember.