LLC vs Trademark?
Trademarks are one of the best ways to protect your LLC's brand and its products or services. Trademarks not only protect a business's image from misuse by others, but they also help customers become familiar with a business and encourage brand loyalty. Let’s take a look at the wide world of trademarks and how they 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, drawings, shapes, 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—but protections are fairly limited. A registered trademark offers more protection. When you register your trademark you not only get a cool ® symbol which denotes that you’ve taken the proper legal steps to federally register your business’s mark, you are also afforded some pretty awesome legal protections. If another business attempts to copy or otherwise use your brand to sell their products or services, you will have legal recourse to take them to federal court, where you’ll have over a century of case law and rulings in your corner.
Differences Between an LLC and a Trademark?
LLCs and trademarks may share key similarities, but they are fundamentally different, particularly when it comes to legal protection, registration, costs, and requirements.
- Legal Protection
LLCs and trademarks are each an integral part of the business world, but both serve different purposes. While LLCs are legal business entities that protect the personal assets of business owners from lawsuits and bankruptcies, trademarks protect the intellectual property of the business.
- State vs. Federal Registration
The US has two types of trademark registration, state and federal. Just like an LLC, a state trademark requires the owner to file paperwork with state authorities and pay the accompanying fees. Unlike forming or registering an LLC, registering a state trademark won’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 up to a full year to get approved. The USPTO charges the same filing fee per trademark whether your business is in Minnesota or California. LLCs, however, must pay state filing fees, which 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 trademarks have fewer annual requirements.
Or, to look at it more generally, an LLC protects your assets while a trademark protects your brand.
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 open a Pete’s Pizza across the border in Oklahoma.
Trademark Registration Protects Your Brand
That’s why if you have plans to expand your operation, 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 the business before you worry about applying for a trademark. The reason for this is because the trademark is going to be owned by someone, and normally you’d want the business, in this case your LLC, to be the owner of the trademark.
However, if you are more interested in securing your federal rights to the trademark before you put it out into the world, it may make more sense to apply for the trademark first.
Advantages of a Trademark
- 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 the same goods can never use your name, and if you find out that they do, 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.
- Can Last Indefinitely
A 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
- 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. While the $250 (or $350 depending on your choice of application) filing fee may not seem like a lot, you pay per trademark, and if you are interested in multiple marks, the process can lighten your wallet real quick. In addition to your trademark application fees, you’ll be hit with general trademark compliance fees at year six, and renewal fees at year ten. At minimum you’ll be paying $500 to keep your trademark alive and well during its first decade.
- 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.
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 Electronic Search System. 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. Since 2020, the USPTO application process is all online, though they do allow for paper applications for special cases.
The trademark application has 10 main areas of focus:
- The name and address of the applicant. If an LLC owns the trademark, the applicant is the LLC.
- The citizenship and legal entity of the applicant.
- A name and address for future correspondence.
- A drawing of the desired mark (if you are only applying for the name and don’t want to include a design element, you can just type in the name).
- A thorough description of the mark.
- A specific list of services or goods covered by the trademark application.
- The class of services or goods. You can use the Trademark ID Manual to determine which class or classes cover your goods and services.
- An example of the mark in use as well as the date it was first used.
- A dated signature from you or an authorized representative.
- The appropriate fee for the type and number of classes included on the application.
Once you have filled out the application, you have two filing options:
- TEAS Plus ($250 per class of trademark): This is the most popular, least expensive, and quickest option, but it also has less flexibility with regards to the technical requirements that must be met when the application is submitted. TEAS Plus allows the applicant to choose from the pre-approved list of descriptions of goods/services that the USPTO provides.
- TEAS Standard ($350 per class of trademark): While it takes more time to process and is more expensive, TEAS Standard allows applicants the opportunity to create a customized goods/services category for their trademark. TEAS Standard can help applicants better explain their desired mark, and dispel any possible confusion between other similar marks.
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 submit your initial application, 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. Break out the margaritas and celebrate.
In order to remain in compliance with your trademark, you’ll need to regularly demonstrate use of your trademark. But that’s not all. Every sixth year you’ll need to pay a $100 fee (per class of trademark) and file a Section 8 Declaration of Continued Use.And every tenth year, you’ll need to file both a Section 8 Declaration and a Section 9 Renewal Application, which is a combined cost of $500.
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…
