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If you’re starting a new business or have even been in business for a while, you maybe have wondered about a trademark vs LLC and which is a good fit for your business. Should you get one or both? What exactly do they each do for your business?
Trademarks and LLCs are two of the most common legal tools business owners use. But they actually accomplish two very different things.
In this post, I’ll explain exactly what trademarks and LLCs are, why they matter for your small business, and when you need one or both. Let’s get to it!
- Trademarks and LLCs are Two Very Different Things: They serve distinct legal purposes for small businesses. Trademarks protect the visual brand identity, including names, logos, and slogans, while LLCs provide a legal separation between personal and business finances to limit liability.
- Most Small Businesses Need an LLC: For most small businesses, forming an LLC is highly recommended due to its importance for liability protection and tax benefits. This legal structure safeguards personal assets in case of legal issues, providing a crucial layer of protection.
- Consider Both for Comprehensive Protection: To establish a robust legal foundation and achieve comprehensive legal and financial protection, the article suggests considering both an LLC and trademark registration. This combination is particularly beneficial if your business has a unique name, valuable brand assets, plans for franchising or licensing, or a desire for maximum legal protection as it scales up.
Do I Need a Trademark or LLC for My Small Business?
The short answer – it depends on your specific business! Here are some guidelines:
- Most small businesses will want to form an LLC for liability protection and tax benefits.
- If your business has a unique name, logo, slogan, etc. registering it as a trademark is smart to prevent imitation.
- For comprehensive protection as you grow, both trademarks and an LLC are recommended.
But they protect your business in different ways:
- Trademarks legally protect your brand identity like names, logos, and slogans.
- LLCs separate your personal and business finances to limit liability.
Let’s explore what each of these means so you know when to use trademarks vs LLCs.
What is a Trademark?
A trademark is a word, phrase, symbol, design or some combination that identifies the source of a company’s products or services.
Some well-known trademark examples include:
- McDonald’s golden arches
- Apple’s apple logo
- IKEA’s blue and yellow branding
Basically – trademarks represent the visual identity of your business brand. How customers recognize you and distinguish you from competitors.
Why Do Trademarks Matter?
Trademarks are important because they give you exclusive rights to use that identity in commerce.
For example, the Nike swoosh or Chick-fil-A’s “Eat Mor Chikin” cow campaign. Their trademarks prevent other businesses from using those brand assets.
Without trademarks, another business could potentially use your company name, logo, slogans, branding fonts, etc. This could confuse customers and divert business away from you.
What Can Be Trademarked?
Some of the most common small business trademarks include:
- Your business name
- Unique fonts
- Package designs
But you can also trademark:
- Podcast and book titles
- Course names
- Software and app icons
- And more!
Basically, if it represents your brand identity you use in business, you can trademark it.
What is an LLC?
An LLC stands for “Limited Liability Company.”
It’s a business structure that separates your personal finances from the company’s finances. The LLC becomes its own legal entity.
This separation gives you “limited liability” meaning your personal assets are protected if the business is sued or goes bankrupt. Only the LLC’s assets are at risk.
Forming an LLC also allows you to:
- Open business bank accounts
- Apply for licenses and permits
- Potentially reduce personal taxes
LLCs make your business look more legitimate to partners and customers as well.
LLC vs Sole Proprietorship
Without an LLC, by default your business is considered a “sole proprietorship.” Meaning there is no legal separation between you and your business.
This exposes you to MUCH more personal liability. If your business gets sued or goes under, your personal assets could be seized to cover the debts.
That’s why going from sole proprietor to LLC is so important – it adds that legal separation and asset protection.
Key Differences Between LLCs and Trademarks
Now that you know the basics of each, let’s recap the key differences:
They Protect Different Elements of Your Business
- Trademarks protect your visual brand identity – name, logo, slogans, fonts, etc.
- LLCs protect your personal assets and limit financial liability
They Are Registered Through Different Processes
- Trademarks are registered federally through the US Patent and Trademark Office (USPTO).
- LLCs are registered locally through your state government.
They Give You Different Legal Rights
- A federally registered trademark provides exclusive national rights to that brand identity.
- An LLC gives you rights to legally operate as a business entity in your state.
They Have Different Ongoing Requirements
- Trademarks must be renewed every 10 years and actively used in business.
- LLCs require annual reports and fees to stay legally compliant.
Most Small Businesses Need an LLC, Trademarks are Optional
For most small business owners, having an LLC set up is non-negotiable for liability and tax reasons.
Trademark registration is optional but can provide valuable protection for unique brand assets.
Should I Get a Trademark AND LLC?
For comprehensive legal and financial protection as you grow, my recommendation is to get both an LLC and trademark important brand assets.
Here are some scenarios where having both makes good business sense:
You Have a Distinctive Business Name
If your business name is unique or memorable, registering it as a trademark prevents competitors from using it. Even if you’re a sole proprietorship for now.
Your Logo or Brand Identity is Worth Protecting
Same goes for logos, fonts, colors, slogans or other visual branding you want to lock down. Trademarks will stop imitation.
You Plan to Franchise or License Your Business
If your goal is to franchise your business model or license your brand, trademark registration is a must. It legally protects your IP assets.
You Simply Want Maximum Legal Protection
For small business owners who want the most comprehensive protection possible as they scale up, trademarks and LLCs check all the legal boxes.
Think through your specific risks and goals. For most, having both offers great benefits with few downsides.
How Do I Get a Trademark and LLC?
If you’ve decided to get both a trademark and an LLC, here are the next steps:
Apply for Your LLC
Forming an LLC is done through your state government, usually the Secretary of State or Division of Corporations. Legal services like LegalZoom can also handle it for you.
State LLC formation fees are typically $50 – $500 depending on your state.
Register Your Trademarks
The federal trademark registration process includes:
- Search – Thoroughly search federal and state records to ensure your mark is unique and available to register.
- Application – Complete the USPTO application with your brand details, business services, and other required info.
- Review – The USPTO does a comprehensive review to make sure your application meets all legal requirements. Approval takes around 6-12 months.
- Use – Once registered, you must actively use your trademarks in commerce within 6 months.
Full federal trademark registration costs between $225 – $400 per class of goods/services. I’d recommend working with an IP lawyer to ensure everything is properly formatted, classified, and filed.
Trademarks vs LLCs: Key Takeaways
As you can see, while trademarks and LLCs complement each other, they serve very different legal purposes:
- Trademarks legally protect your visual brand identity assets
- LLCs legally separate personal and business finances
My advice to most business owners is:
- Set up an LLC right away for liability and tax benefits
- Trademark your name, logo, and other brand assets if they are unique and worth protecting
Having both establishes a fantastic legal foundation for your company as you start growing.
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