Can I just create a business name and conduct business that way?

RussR

RussR

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Russ
Looking for general advice. You are not my lawyer or accountant...

I have up to this point billed all of my pilot and CFI services under my own name. They pay "RussR" and I file Schedule C with my business income and expenses. I have not seen the need to establish an LLC or anything of that nature for my level of business.

I have a new client who for reasons I'm not quite clear on, says his accountant requires him to pay "business - to - business" and therefore would really like to pay me as "RussR Aviation Enterprises" or whatever.

So the general question is, do I NEED to create an LLC (etc.) to rename my business like this, or can I just deem that I am now "RussR Aviation Enterprises", let him pay me as such, but otherwise just continue on with how I've been doing things? How does this affect banking?

I imagine this may vary by state and locality. But I really prefer the simple approach, since I don't think an LLC (etc.) will offer any worthwhile liability shield or tax advantages for a single-person pilot and CFI operation like mine.
 
It's called a DBA 'doing business as'. Its not a separate legal entity like a LLC or corporation, just a name you as sole proprietor assume to promote your business. Depending on the state, you file the DBA with the secretary of state, the state corporation commission or the local court. It is basically a posting in a public place for anyone to know what real person (or corporation) a ficticious name refers back to. This is done so nobody can 'hide' behind a ficticious name and skip out of obligations. It doesn't establish anything, it just creates a 'pointer' from the assumed name to your real name.

You can call yourself anything you want, except:
- pretending that you are a legal entity like a corp or llc
- pretending that you hold a credential that you dont actually hold
- the name of an existing business or something that is easily confused

So 'RussR Aviation' is probably ok.
'Fixed Wing Aviation Training' is ok
'Dr. Russ Flying Clinic' probably not.
'Superfragilicious flying emporium' would be ok.
Russ Aviation Enterprises, LLP would not be ok.

Once you have the DBA (its a piece of paper from the state), your bank would typically allow you to open a business account under 'RussR Aviation' (or allow you to deposit checks made out to the ficticious name into your personal account). You can invoice under the ficticious name and the customer could write the check to 'RussR Aviation'. If you get business checks they would also have the assumed name on them. You are still the owner of the account and responsible for anything that happens with it.

You can also obtain a separate tax identification number for the DBA. That way, if a customer asks for a W9 form to pay you as independent contractor, you dont have to give him your social but rather the federal employer ID you obtained for the business. The 1099 you receive from the customer at the end of the year would be made out to 'RussR Aviation' with the FEIN instead of your social (two years in, the feds will hassle you for employee witholding taxes, you just file a declaration that you have 0 employees and that takes care of that).

Here is what a DBA doesn't do:
- affect your taxes. You still file a schedule C for the DBA and deduct the same expenses
- affect your liability for business debts, you are still 100% responsible
- affect your personal liability for your actions as CFI
 
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RussR said:
Looking for general advice. You are not my lawyer or accountant...

I have up to this point billed all of my pilot and CFI services under my own name. They pay "RussR" and I file Schedule C with my business income and expenses. I have not seen the need to establish an LLC or anything of that nature for my level of business.

I have a new client who for reasons I'm not quite clear on, says his accountant requires him to pay "business - to - business" and therefore would really like to pay me as "RussR Aviation Enterprises" or whatever.

So the general question is, do I NEED to create an LLC (etc.) to rename my business like this, or can I just deem that I am now "RussR Aviation Enterprises", let him pay me as such, but otherwise just continue on with how I've been doing things? How does this affect banking?

I imagine this may vary by state and locality. But I really prefer the simple approach, since I don't think an LLC (etc.) will offer any worthwhile liability shield or tax advantages for a single-person pilot and CFI operation like mine.
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My wife filed a fictitious name thing. Known as DBA, doing business as without creating a company. It was in California.
 
And you don’t necessarily even need a business bank account. I ran a side business for close to 20 years and deposited all of the checks to my personal account. I got a business permit from the state for the DBA company name, gave the bank a copy, and we were good to go. I took PayPal payments, checks, and for quite a while had a merchant account and took credit cards as well. Never did have an actual business account.
 
RussR said:
Looking for general advice. You are not my lawyer or accountant...

I have up to this point billed all of my pilot and CFI services under my own name. They pay "RussR" and I file Schedule C with my business income and expenses. I have not seen the need to establish an LLC or anything of that nature for my level of business.

I have a new client who for reasons I'm not quite clear on, says his accountant requires him to pay "business - to - business" and therefore would really like to pay me as "RussR Aviation Enterprises" or whatever.

So the general question is, do I NEED to create an LLC (etc.) to rename my business like this, or can I just deem that I am now "RussR Aviation Enterprises", let him pay me as such, but otherwise just continue on with how I've been doing things? How does this affect banking?

I imagine this may vary by state and locality. But I really prefer the simple approach, since I don't think an LLC (etc.) will offer any worthwhile liability shield or tax advantages for a single-person pilot and CFI operation like mine.
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I wonder if the accountant is requiring B2B for tax purposes, e.g. anything paid to you is pre-tax dollars or some sort of a business write-off. From my POV, that's your client's problem, not yours.

I set up a sole-proprietorship 25 years ago (since shut down) for similar reasons, opened a bank account in that name, like you put everything on schedule C (which is what C is for). No one had any problems making payments to that sole-proprietorship. Don't know what's involved in your state, but Colorado never said boo to me. Didn't have a sales license or anything. Look into the rules in your state, might be the solution. In fact, check out the details on Schedule C - top line is your name, line C is the Business Name. There it is, already set up for you.

Come to think of it, you may not need to do anything other than talking with your bank and having your business name attached to your personal accounts, altho it might be better for record keeping to have a separate account.
 
DaleB said:
And you don’t necessarily even need a business bank account.
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In fact, upon further reflection, business accounts suck anyway. We formed an LLC to own our rental houses, and business bank accounts royally suck. All that stuff your regular bank does for free? Statements, bill pay, all that stuff? Pay up, sucker.
 
murphey said:
I wonder if the accountant is requiring B2B for tax purposes, e.g. anything paid to you is pre-tax dollars or some sort of a business write-off. From my POV, that's your client's problem, not yours.
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Unless you are the postal service, thats not how you run a customer facing business.

The CFI I did my IR with had a dba for that very reason. He did recurrent training and contract flying for a couple of business owners. Their accountants also wanted some kind of business name for the checks to be made out to. If it's a business name, there is no need to get into the weeds about employee/IC determinations etc. Its just one invoice among many. Your customer wants it, you do it (if you want them to be your customer).
 
One downside of presenting yourself as a business with a separate name etc. is that the airport authority may start bugging you to apply under their uniform commercial standards. As an individual CFI it is easier to fly under the radar than if you show up with a businessy name.
 
If you execute legal documents or in some cases do business with the public under a name that is not that of a person or a corporation/LLC, many localities require you to register that "fictitious" name (often called a DBA or TA). I've done so for a few different organizations including our local chapter of the Navion Society. The bank will often want it if you're going to deposit/cash checks made out to the fictitious name. It's usually just a matter of filling out a form at the local courthouse (some enlightened jurisdictions will let you do it on line these days).
 
You are a business. Your business entity is a sole proprietorship. Which, is a non-incorporated individual conducting business. A DBA doesn't change anything for the purpose of your client. Presumably your client intends on deducting flight training as a business expense. He just needs a W9 from you with your tax id on it and he or she is good to go.
 
Blech. I'd say if the client wants to do business with a business he should go find a business to do business with.
 
The accountant may just be lazy. If you pay a corporation or an LLC you don’t have to fill out a 1099 at the end of the year. You do need to fill out one for individuals if you pay them more than $600.
 
If you want to be a garden-variety sole proprietorship, call your business anything you want.
 
Salty said:
Blech. I'd say if the client wants to do business with a business he should go find a business to do business with.
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That seems more than a bit short-sighted and anti-good business. Do you reject a lot of clients that way? Filing a DBA in OK costs $25. This client has the potential to be very lucrative for me. If he or his accountant want me to have a business name, hey for $25 I can handle that.

Seems kind of like the CFIs that will only take cash - it kind of limits how people can pay you. Why wouldn't you want to meet what the customer wants? Heck, I currently accept cash, checks, credit cards, and Venmo. If someone asked to use Apple Pay, I'd set up an account and take it. it's all money.
 
RussR said:
That seems more than a bit short-sighted and anti-good business. Do you reject a lot of clients that way? Filing a DBA in OK costs $25. This client has the potential to be very lucrative for me. If he or his accountant want me to have a business name, hey for $25 I can handle that.

Seems kind of like the CFIs that will only take cash - it kind of limits how people can pay you. Why wouldn't you want to meet what the customer wants? Heck, I currently accept cash, checks, credit cards, and Venmo. If someone asked to use Apple Pay, I'd set up an account and take it. it's all money.
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If it works for you then do it. My point was just that an independent instructor has advantages, and a business that hires out instructors have their advantages. If he's expecting you to provide the perks of an independent and a business, then it might get "blechy" in other ways down the road. But I don't know your situation. I just know if I was going to an independent instructor, I'm intentionally avoiding a business so why would I expect that independent guy to act like a business?
 
write-stuff said:
If you want to be a garden-variety sole proprietorship, call your business anything you want.
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Again, depending on where you live, you may need to register the fictitious name. There's no flavors to a sole-proprietorship. It's either a sole proprietorship or it's something else.
 
Salty said:
If it works for you then do it. My point was just that an independent instructor has advantages, and a business that hires out instructors have their advantages. If he's expecting you to provide the perks of an independent and a business, then it might get "blechy" in other ways down the road. But I don't know your situation. I just know if I was going to an independent instructor, I'm intentionally avoiding a business so why would I expect that independent guy to act like a business?
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Having a trade-name, separate tax ID and a letterhead doesn't take away his ability to act as an independent flight instructor. If someone wanted to pay him in gold dubloons or write him a check as a person, there is nothing that keeps him from accepting that. He is still the same sole proprietor, whether his customer deals with him as 'Russ' or under the assumed name makes no difference.
 
JScarry said:
The accountant may just be lazy. If you pay a corporation or an LLC you don’t have to fill out a 1099 at the end of the year. You do need to fill out one for individuals if you pay them more than $600.
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THIS is the issue! The accountant is lazy. Liability is the only issue for you as as a CFI so if your insurance covers you properly then all the other extra work with an LLC or S Corp may not be needed. Though there are some potential tax benefits you should discuss with your own lawyer/CPA.


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Unless you are going to use your name or something close, you will want to check with the Secretary of State’s corporations office to make sure the name you want to use is not being used by someone else. Check all of the filings available to you (corporations, LLC, etc.) including the dba list if it’s maintained at the state level. In some states, it is maintained at the county level so you should check there if that’s how your state rolls. Cease and desist letters can be nasty if you end up “squatting” on someone else’s name.
 
You can send cease and desist letters all you want, but it has squat to do with the laws for corporate name uniqueness. Most states prohibit the exact same name being registered for multiple entities (LLCs and Corporations, but not fictitious names). However, it takes little change to generate a unique name. For example, my LLC has LC on the end of it and if someone registers the same name with LLC on the end, that would be fine with the commonwealth.

On the other hand, a company that uses a name (whether it is their personal or corporate name or not) in commerce may acquire trademark (or probably in this case servicemark) rights to it. Even similar names can be held as infringing if they can be argued to cause confusion in the marketplace. In addition, certain marks are determined to be sufficiently famous that even use that wouldn't raise confusion (Let's say I want to call it the Coca-Cola Flight School), would be determined as diluting the fame of the mark.
 
Regarding checking accounts, my (possibly dated) impression is that the IRS does not like mixing business and personal monies and generally prefers that a business account (dba) be set up separately from personal accounts. Money can be transferred into & out of the business account as individual transactions, leaving a paper trail. As a Sole Proprietor, this is how I am set up. My bank does get a little testy if a check is made out to me and I try to deposit it in the business account. YBMV
 
Ken Whitson said:
Regarding checking accounts, my (possibly dated) impression is that the IRS does not like mixing business and personal monies and generally prefers that a business account (dba) be set up separately from personal accounts. Money can be transferred into & out of the business account as individual transactions, leaving a paper trail. As a Sole Proprietor, this is how I am set up. My bank does get a little testy if a check is made out to me and I try to deposit it in the business account. YBMV
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I'm not clear how the IRS would even know, as they don't have access to your bank accounts. But certainly, from an accounting perspective, yes.
 
Sac Arrow said:
I'm not clear how the IRS would even know, as they don't have access to your bank accounts. But certainly, from an accounting perspective, yes.
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You're right, the IRS doesn't know; it is just guidelines of what is preferred. Or, I should say, what was preferred a few decades ago when I set up my own business, and I just continued doing it that way.
 
Clip4 said:
For banking purposes, get an LLC.
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How do you propose that a LLC is beneficial in this setting ?

- For a new single member LLC, the bank will require a personal guarantee anyway.

- For a personal service like flight instruction, the liability follows the person, not the LLC. The LLC liability protection is only for business debts

- for taxes, he files on a schedule C whether he is a dba sole proprietor or whether he has a LLC. The single member disregarded entity doesn't suddenly make a non-deductible expense deductible.
 
Sac Arrow said:
I'm not clear how the IRS would even know, as they don't have access to your bank accounts. But certainly, from an accounting perspective, yes.
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They don't know until they do a limited audit. I found that if you post book losses on a business for two years in a row, the audit letter doesn't take long. Not a big deal, but it's easier to show that your business is a legit separate activity from your personal finances if you keep all the business income/ expenses in a separate checking account. So everything relating to the 'RussR Aviation Ventures' schedule C shows up on the same bank statement. Makes responding to an audit very simple.
 
Clip4 said:
For banking purposes, get an LLC.
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That’s not very good advice. An LLC will not protect him from personal liability and in CA at least, it will cost an additional $825 in taxes each year. A sole proprietorship works fine for any bank.
 
JScarry said:
That’s not very good advice. An LLC will not protect him from personal liability and in CA at least, it will cost an additional $825 in taxes each year. A sole proprietorship works fine for any bank.
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This. Some banks will require a fictitious name registration before they'll accept checks in the fictitious name. In California, it's a local municipality thing and most don't charge antyhing. The biggest risk is that if you were operating under the table, that the revenooers will now know you are in business.
 
Something else occurred to me. Many people are under the mistaken impression that you can get around paying payroll taxes and treating people as employees if you pay an LLC or corporation for services rendered. You probably can get away with it until an employee complains, but there is an IRS test to determine if someone is an employee or legitimate contractor. How you pay them (LLC or sole proprietor) doesn’t factor into it.
 
JScarry said:
Many people are under the mistaken impression that you can get around paying payroll taxes and treating people as employees if you pay an LLC or corporation for services rendered.
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Unless you have the contractor/corp fill out a W-9 as I usually did/do with my LLCs. Then it's just a 1099-MISC to report the income.
 
Bell206 said:
Unless you have the contractor/corp fill out a W-9 as I usually did/do with my LLCs. Then it's just a 1099-MISC to report the income.
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There is a points test to determine whether the relationship has more employee characteristics vs. IC characteristics. The IRS or state UI dept. determination of employee status does not depend on the type of tax form you receive.

The IRS doesn't care that much as it only changes who pays the taxes to them, the total amount of tax due remains almost the same. The state UI folks are the ones who are cut out of the deal in IC relationships, all it takes to kick off an investigation is for a former IC to file a UI claim.

All these places tend not to care much about a flight school or car repair shop. They care more when it involves someone like Toll Brothers or Amazon.
 
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