We have just started a homeschooling co-op this year and have already received an EIN and opened a checking account. We are the R__ville Homeschool Educational Organization, which is quite a mouthful. We are known as “D____ Academy” and would like our members to be able to write checks out to D___ Academy and have that printed on our checks.
However, when we opened our account the bank would not allow us to put D___ Academy on the checking account even though our EIN paperwork showed that our DBA was D___ Academy. We were told we needed to file for a fictitious business name. I’ve tried to do some research as to what is required to do this for our county (as it appears that is who this is filed through). However, it has just confused me more and makes me wonder if there are other filings that we need to be doing such as a business license with the county or city.
I’m trying to determine if I am on the right track or if I’m just getting worried over nothing. I want to ensure we get things set up properly so we don’t have issues later.
Any advice or guidance you may have would be much appreciated.
Sorry it seemed so difficult to open a simple checking account.
The bank is correct. You should file for a fictitious business name. Here in Ohio it is done at the state level, not the county level. You didn’t mention what state you are in, so I can’t help much. I had to file a one page form with Ohio’s Secretary of State (and pay $50; Ohio is a high tax state!) to register the name HomeschoolCPA as belonging to me, Carol Topp, CPA. My checking account only says Carol Topp, CPA. But now if someone writes a check to Homeschool CPA, I can deposit it into Carol Topp, CPA’s checking account.
There are at least 2 reasons for filing a DBA or fictitious name:
1. The citizens of your state are entitled to know who owns a business (or in your case, who runs a nonprofit organization). This protects us as consumers from getting ripped off. A business owner cannot hide behind his business name. Every business must be tied to a person or group of people.
2. The bank is also protecting its customers. If someone found a check made out to D___ Academy, but wanted it to be deposited into Joe’s Bakery’s checking account, the bank would be suspicious that someone had stolen the D___ Academy check.
Unfortunately, the EIN is an IRS document and very easy to get, so the bank won’t put any merit in the EIN application. The state DBA or fictitious name filing usually comes with an affidavit or some type of certificate (I got one from Ohio when I filed).
I understand your concern over other filings. It’s not easy figuring out what to do and what you might be missing. In general you need abusiness license if your state requires it for your profession such as Barbers, Attorneys, Doctors, Dentists, Contractors, Insurance Brokers, Opticians, Veterinarians. For example, as a CPA I am licensed in Ohio. Nonprofit groups do not usually need a business license.
Nonprofit organizations may need a vendors license if they are selling merchandise and then they may owe sales tax too. It varies by each state. For example, here in Ohio we can sell merchandise 4 days a year and not have to collect sales tax. In Indiana, they can sell 30 days a year and not bother with collecting sales tax.
This website is very helpful for determining the nonprofit requirements by state: Hurwit Associates Nonprofit Library
Use the State-by-State Filings on the left column.
I hope that helps!
Carol Topp, CPA