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In case you’re starting a recent business or have even been in business for some time, you perhaps have wondered a couple of trademark vs LLC and which is a superb fit for your online business. Do you have to get one or each? What exactly do they each do for your online business?
Trademarks and LLCs are two of probably the most common legal tools business owners use. But they really accomplish two very various things.
On this post, I’ll explain exactly what trademarks and LLCs are, why they matter to your small business, and whenever you need one or each. 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 funds to limit liability.
- Most Small Businesses Need an LLC: For many small businesses, forming an LLC is very really helpful attributable to its importance for liability protection and tax advantages. This legal structure safeguards personal assets in case of legal issues, providing a vital layer of protection.
- Consider Each for Comprehensive Protection: To determine a sturdy legal foundation and achieve comprehensive legal and financial protection, the article suggests considering each an LLC and trademark registration. This mix is especially useful if your online business has a novel name, invaluable brand assets, plans for franchising or licensing, or a desire for max legal protection because it scales up.
Do I Need a Trademark or LLC for My Small Business?
The short answer – it depends upon your specific business! Listed below are some guidelines:
- Most small businesses will need to form an LLC for liability protection and tax advantages.
- If your online business has a novel name, logo, slogan, etc. registering it as a trademark is sensible to stop imitation.
- For comprehensive protection as you grow, each trademarks and an LLC are really helpful.
But they protect your online business in alternative ways:
- Trademarks legally protect your brand identity like names, logos, and slogans.
- LLCs separate your personal and business funds to limit liability.
Let’s explore what each of those means so you already know when to make use of trademarks vs LLCs.
What’s a Trademark?
A trademark is a word, phrase, symbol, design or some combination that identifies the source of an organization’s services or products.
Some well-known trademark examples include:
- McDonald’s golden arches
- Apple’s apple logo
- IKEA’s blue and yellow branding
Principally – trademarks represent the visual identity of your online business brand. How customers recognize you and distinguish you from competitors.
Why Do Trademarks Matter?
Trademarks are necessary because they provide you with exclusive rights to make use of that identity in commerce.
For instance, 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, one other business could potentially use your organization name, logo, slogans, branding fonts, etc. This might confuse customers and divert business away from you.
What Can Be Trademarked?
A number of the most typical small business trademarks include:
- What you are promoting name
- Logos
- Taglines
- Unique fonts
- Package designs
But you can too trademark:
- Podcast and book titles
- Course names
- Software and app icons
- And more!
Principally, if it represents your brand identity you employ in business, you may trademark it.
What’s an LLC?
An LLC stands for “Limited Liability Company.”
It’s a business structure that separates your personal funds from the corporate’s funds. 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 in danger.
Forming an LLC also means that you can:
- Open business bank accounts
- Apply for licenses and permits
- Potentially reduce personal taxes
LLCs make your online business look more legitimate to partners and customers as well.
LLC vs Sole Proprietorship
Without an LLC, by default your online business is taken into account a “sole proprietorship.” Meaning there isn’t a legal separation between you and your online business.
This exposes you to MUCH more personal liability. If your online business gets sued or goes under, your personal assets may very well be seized to cover the debts.
That’s why going from sole proprietor to LLC is so necessary – it adds that legal separation and asset protection.
Key Differences Between LLCs and Trademarks
Now that you already know the fundamentals of every, let’s recap the important thing 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 should be renewed every 10 years and actively utilized in business.
- LLCs require annual reports and fees to remain legally compliant.
Most Small Businesses Need an LLC, Trademarks are Optional
For many small business owners, having an LLC arrange is non-negotiable for liability and tax reasons.
Trademark registration is optional but can provide invaluable protection for unique brand assets.
Should I Get a Trademark AND LLC?
For comprehensive legal and financial protection as you grow, my advice is to get each an LLC and trademark necessary brand assets.
Listed below are some scenarios where having each makes good business sense:
You Have a Distinctive Business Name
If your online business name is exclusive or memorable, registering it as a trademark prevents competitors from using it. Even if you happen to’re a sole proprietorship for now.
Your Logo or Brand Identity is Price Protecting
Same goes for logos, fonts, colours, slogans or other visual branding you need to lock down. Trademarks will stop imitation.
You Plan to Franchise or License Your Business
In case your goal is to franchise your online 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 probably the most comprehensive protection possible as they scale up, trademarks and LLCs check all of the legal boxes.
Think through your specific risks and goals. For many, having each offers great advantages with few downsides.
How Do I Get a Trademark and LLC?
In case you’ve decided to get each a trademark and an LLC, listed here are the subsequent steps:
Apply for Your LLC
Forming an LLC is completed through your state government, normally the Secretary of State or Division of Corporations. Legal services like LegalZoom may handle it for you.
State LLC formation fees are typically $50 – $500 depending in your state.
Register Your Trademarks
The federal trademark registration process includes:
- Search – Thoroughly search federal and state records to make sure your mark is exclusive and available to register.
- Application – Complete the USPTO application together with your brand details, business services, and other required info.
- Review – The USPTO does a comprehensive review to be certain your application meets all legal requirements. Approval takes around 6-12 months.
- Use – Once registered, you could actively use your trademarks in commerce inside 6 months.
Full federal trademark registration costs between $225 – $400 per class of products/services. I’d recommend working with an IP lawyer to make sure every thing is correctly formatted, classified, and filed.
Trademarks vs LLCs: Key Takeaways
As you may see, while trademarks and LLCs complement one another, they serve very different legal purposes:
- Trademarks legally protect your visual brand identity assets
- LLCs legally separate personal and business funds
My advice to most business owners is:
- Arrange an LLC immediately for liability and tax advantages
- Trademark your name, logo, and other brand assets in the event that they are unique and value protecting
Having each establishes a improbable legal foundation to your company as you begin growing.
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