LLC vs Trademark?
Trademarks are one of the best ways to protect your LLC's brand and its products or services. They not only protect a business's image from misuse by others, trademarks also help customers become familiar with a business and encourage brand loyalty. Let’s take a look at how trademarks might benefit your LLC.
In this article:
What is a Trademark?
Differences Between an LLC and a Trademark?
What Should I Do First: Form an LLC or Get a Trademark?
Advantages of a Trademark
Disadvantages of a Trademark
How to Register a Trademark
What is a Trademark?
Trademarks are all around us, from the golden arches of McDonald’s, to the NFL’s “Super Bowl,” or the specific color of pink in Owens-Corning’s fiberglass insulation. Trademarks help to identify and distinguish the brand from others and can take the form of words, logos, phrases, colors, and even sounds. Listen to the Yahoo! yodeling jingle “yahoOOOOoooo!” and you’re hearing a trademark.
Most importantly, trademarks provide a degree of legal protection for these words, sounds, and images. Your business owns a trademark once it starts to use it in commerce—no registration required. However, these common law protections can be narrow in scope. A registered trademark offers more protection.
When you register your trademark at the federal level, you not only get to use the ® symbol, you’re also afforded some additional legal protections. If another business attempts to copy or otherwise use your brand to sell their products or services, you’ll be able to sue for infringement in federal court (a course of action only available when your mark is federally registered).
Differences Between an LLC and a Trademark?
An LLC is a type of business entity that helps shield your assets via limited liability protection. A trademark helps protect aspects of your brand. While LLCs and trademarks can both be useful business tools, they are fundamentally different. They serve different purposes and are dissimilar when it comes to legal protection, registration requirements, and costs.
- Legal Protection
LLCs are legal business entities that protect the personal assets of business owners from lawsuits and bankruptcies. Trademarks are a type of intellectual property, protecting elements of a company’s brand like its name and logo.
- State vs. Federal Registration
In the US, there are two types of trademark registration: state and federal. Just like an LLC, which is registered at the state level, a state trademark requires the owner to file paperwork with state authorities and pay the accompanying fees. Registering a state trademark doesn’t offer protection beyond state boundaries. However, federally registering a trademark with the United States Patent and Trademark Office (USPTO) offers robust legal protection for your mark, and gives you the right to use the mark exclusively throughout the US. - Filing Costs and Requirements
You can register an LLC in under a week in most states, whereas a federal trademark can take close to a year to get approved (assuming everything goes well and there aren’t delays). The USPTO charges the same filing fee per trademark no matter what state you’re located in. LLC filing fees, however, are wholly dependent on the state. For example, Massachusetts charges $500 to form an LLC, whereas Iowa charges $50. Both LLCs and trademarks must meet ongoing compliance expectations, though trademark renewals are periodic, not annual.
Business Entity Registration Protects Your Assets
Registering your LLC with your state will protect you and your business in a few ways. One is personal asset protection should your LLC be sued. For example, if creditors take your LLC to court, only the LLC’s money and assets are typically on the table—your personal 401k, house and more are usually off limits. It works the other way too—if you’re personally sued, your business assets are protected.
That’s not to say that an LLC won’t also help protect your name and brand to some extent. When you register your LLC with your state, the LLC’s business name is better protected in that state—but not in any other state. If you form Pete’s Pizza, LLC in Texas, no one else in Texas can use your business name. But without a registered trademark, someone could likely open a Pete’s Pizza across the border in Oklahoma unscathed.
Trademark Registration Protects Your Brand
If you have plans to expand your operation, or want to keep your options open, a trademark makes sense. A trademark locks in your brand and image and keeps any unscrupulous Oklahoma pizza thief from snaking your hard-earned business name out from under you.
When you apply, and are granted, a federally registered trademark from the USPTO, you’ll have exclusive rights at both the state and federal level, to use Pete’s Pizza. A trademark prevents anyone else from selling similar goods and services within the US under your business name. Whereas an LLC affords you liability protection from frivolous lawsuits, it may not be enough to keep your brand safe from business owners who want to knock off your concept. A registered trademark, standing on the shoulders of an LLC, will give your business firmer ground to stand on while also protecting your business name nationwide.
What Should I Do First: Form an LLC or Get a Trademark?
Generally speaking, it makes the most sense to form your business before applying for a trademark. Why? In your trademark application you’ll need to list an owner, and often it makes the most have the business fill that role.
However, every situation is different. If you apply for your trademark under Intent to Use status (meaning you’re not using your mark yet, but will be soon), it might make sense to apply for a trademark before filing your LLC.
Advantages of a Trademark
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- Protects Your Brand
As mentioned above, once you have registered your trademark, the USPTO will have it in their database, which means any other business that wants to file for a similar trademark will be legally dissuaded from stepping onto your trademark turf. This also means that companies who are selling similar goods/services can’t use your trademark for their own purposes, and if you find out that they are, you can take legal action against them. - Increases Value
Having a trademark, or multiple trademarks, adds value to your business. Potential buyers will feel more secure knowing that they’re not just buying a business that anyone can knock off—they’re buying a trademarked brand. - Addresses Cybersquatting
The Anti-Cybersquatting Consumer Protection Act (ACPA) allows trademark owners to bring a lawsuit against a person who has a bad-faith intent to profit from the trademark, traffics in, or uses a domain name that in the case of a distinctive mark, is identical or confusingly similar to that mark. In plain English this means that nefarious computer geeks can’t buy a domain name that has been, or is similar to a registered trademark.
- Protects Your Brand
- Can Last IndefinitelyA federal trademark can last forever as long as proper paperwork and fees are filed, and the trademark is in use. Pepsi-Cola and Levi Strauss, & Co. own trademarks that are over 100 years old.
Disadvantages of a Trademark
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- Long Waits
Applying and receiving a trademark can take a year or longer. If you’re the impatient type, you may not be happy with waiting around for your mark to be approved. - Increased Costs
It’s up to you to decide if the juice is worth the squeeze when it comes to filing for a trademark. It costs a minimum of $350 to register a trademark in a single class. (A class relates to the type of goods/services you offer. If you offer numerous things, registering in multiple classes increases the breadth of your protection.) In addition to your trademark application fees, you’ll be hit with general trademark compliance fees at year six, renewal fees at year ten, and additional renewals every ten years thereafter. - Extra Paperwork
As a business owner, you already have a ton of work. Applying for and receiving a trademark is an added wrinkle that you might not have the energy to take on. It’s up to you to decide if a trademark is worth it.
- Long Waits
How to Register a Trademark
Your widget business is booming and you want to protect your brand. It may be time to consider registering for federal trademark protection.
First, you need to search the federal database to ensure that what you want to trademark isn’t already protected as a trademark. You can do this with the USPTO’s Trademark Search. It behooves you to search not only for the name you want, but for similar names that might be in use. Your trademark registration could be denied if the name you want is too similar to a trademark already registered within the same class.
The USPTO has 45 different categories, or classes, for trademarks. These classes help differentiate and keep track of the different types of trademarks that businesses register. An example would be Dove shampoo and body lotions versus Dove chocolates. Dove soap and Dove chocolate are two separate companies with the same trademark name, organized into different classes. Due diligence at this stage will save you a headache down the road.
Once you’ve searched and made sure that the trademark you want to use is available, it’s time to prepare the application.
Here are some of the application’s main areas of focus:
- The name and address of the trademark owner.
- A name and address for future correspondence.
- A drawing of the desired mark. If you are only applying for a word mark and don’t want to include a design element, you can just type in the word(s).
- A description of goods or services covered by the trademark application.
- The class of goods or services. You can use the Trademark ID Manual to determine your class(es).
- An example of the mark in use as well as the date it was first used. (If you’re not using your mark yet, you’ll file under a different status.)
- A dated signature from you or an authorized representative.
- The appropriate fee for the type and number of classes included on the application.
The base fee for a trademark application is $350. You’ll include the application fee when you file. Once you’ve submitted your application, you will receive a confirmation receipt from the USPTO and a serial number that you can use to check the status of your application in the Trademark Status & Document Retrieval (TSDR) portal.
Trademarks can take quite awhile to work their way through the system. Once you file, it can take anywhere from four to six months for it to get to the review process. Final trademark approval can take up to eight months or longer.
If your application is approved (cross fingers), a notice will then be published in the USPTO’s Official Gazette for 30 days. This will allow for anyone who may be opposed to your trademark to speak up if they believe it could damage their business or trademark. If an opposition is filed, there will be a court hearing with an aim to come to a resolution. If no opposition is filed, the USPTO will register the mark and issue you a certificate of registration.
In order to keep your registration alive, you’ll need to regularly demonstrate use of your trademark. But that’s not all. Maintenance and renewal filings/fees are due between years five and six post-registration, again at year ten, and every ten years to follow.
Failure to properly submit these filings and fees may result in your trademark registration being canceled. The USPTO will send email updates to make sure you don’t miss any important filing dates, but it is still on the holder of the trademark to pay attention to due dates.
Make Your Mark
One of your business’s most valuable assets is its image. Forming an LLC with the state will guarantee you some level of protection, but in order to really cover all your bases, you might want to consider a federally registered trademark. Should a nefarious operator duplicate your product, a properly registered trademark will strengthen your legal position and protect the brand you’ve worked so hard to build.
Now that you’ve learned how a trademark can better protect your LLC…