LLCs and trademarks are useful tools in any entrepreneur’s utility belt. Learn more about how they can work together to protect your business.
Both an LLC and a trademark are important ways to protect your business, but they serve very different purposes. And typically, one should come before the other.
An LLC, or limited liability company, is a business entity that protects your financial assets and officially establishes your enterprise as a registered business. A registered trademark protects your business’s intellectual property, brand identity, and reputation.
Neither an LLC nor a trademark is required to run a business. However, these legal protections will help you do it more successfully and set it up for future growth.
So, when comparing an LLC vs. a trademark, which one should you get first? This guide explains in depth the benefits an LLC offers, the kind of brand protection a trademark provides, and why business owners should file for an LLC first.
Trademark vs. LLC: Key Points
- Business owners should form an LLC before registering a trademark for optimal brand and asset protection.
- A federal trademark provides protection across the US, while a state trademark only protects your brand in one state.
- Forming an LLC offers business owners personal liability protection, flexible tax status, and pass-through taxation benefits — making it a popular choice for entrepreneurs looking to form an LLC online.
What Is a Trademark?
A trademark is a way to encourage brand loyalty and protect your intellectual property from misuse by competitors.
You regularly come across trademarks in your everyday life. NBC’s peacock logo, Nike’s swoosh symbol, Starbucks’ siren, and the stylized fonts of Coca-Cola are just a few examples of recognizable trademarks that distinguish these brands.
Some examples of what you can trademark include:
- Words and phrases
- Logos
- Design elements (such as fonts or colors)
- Sounds
- Symbols
- Brand names
- Product shapes
- Fictitious characters
- Combinations (for example, a name and a shape)
Once you trademark your intellectual property, it will become legally proprietary to your brand, and other businesses will not be able to use it. If another company attempts to copy or imitate your trademarked assets, you can take them to court to defend your trademark rights.
Federal vs. State Trademark
There are two types of trademarks that you can file for your business: a state trademark or a federal trademark.
| Type of Trademark | Level of Protection | Time to Get Approved | Cost |
|---|---|---|---|
| Federal | Everywhere in the US | Up to 1 year | $250 for TEAS Plus or $350 for TEAS Standard for each class of goods and services registered[1] |
| State | Only within the state | 1-2 weeks, varies by state | Varies from state to state; expect fees between $50-$80 for each class of goods and services registered |
A state trademark only provides legal protection for your intellectual property on a state level. A major downside of a state trademark is that you don’t have exclusive rights throughout the U.S., only within your particular state.
For example, if you trademark your logo and business name in Texas, someone in Alabama can still open a business under the same name and even use your logo. Even though you are the trademark owner in Texas, you don’t own the trademark in Alabama, so it’s fair game.
A federal trademark offers significantly more protection. Instead of only being valid within your state, your intellectual property will have trademark protection everywhere in the US on a federal level.
To get a state trademark, you can file your trademark application with your state’s trademark office. For a federal trademark, you need to apply with the United States Patent and Trademark Office (USPTO).
Do I Need to Trademark My Small Business?
It may sound like getting a trademark is something only big corporations should do. However, a trademark allows entrepreneurs and small business owners to legally protect the brand they are working so hard to build, prevent cybersquatting, and set themselves up for success.
Trademark vs. Copyright
A trademark often gets confused with a copyright. However, the difference between the two is quite simple.
Copyright protects the rights of people who create artistic and intellectual works, such as books, educational materials, and music. Trademarks protect your commercial brand.
What Is an LLC?
LLC stands for limited liability company. Commonly used by entrepreneurs and small businesses, it’s a hybrid business structure that combines aspects of a sole proprietorship and a corporation.
There are four major benefits to incorporating your business as an LLC:
- Personal liability protection
- Flexible tax status
- Pass-through taxation
- Minimal formalities
Personal Liability Protection
One of the main reasons why entrepreneurs and small business owners decide to start an LLC (instead of being a sole proprietor or doing business as a DBA) is because it protects their personal assets.
As an owner of an LLC, you are not personally responsible for debts, liabilities, or litigation cases of your LLC.[2] If your LLC is sued, has to file for bankruptcy, or has any other type of debt or liability, only the LLC assets can be seized, and your personal assets are protected.
Flexible Tax Status
You can determine how you want your LLC to be taxed. Whether you run a single- or multi-member LLC, you can decide to be taxed as a partnership, a sole proprietorship, or an S or C corporation.
Pass-Through Taxation
LLCs also offer a simplified pass-through tax structure, which means you can pay your LLC taxes via your personal tax return. However, if you have a multi-member LLC, you must file a tax return for your business for informational purposes only.
Minimal Formalities
You only need to do a few things to keep your LLC compliant with the law. It can be as simple as filing an annual report and paying applicable state-level taxes for most LLCs. Ultimately, an LLC offers simplicity and protection, making it an excellent choice for entrepreneurs and small businesses.
Want to get started on forming an LLC? We take the complexity out of LLC registration with a straightforward and fast process. Answer a few simple questions about your business and receive your approved documents in the mail shortly after.
Should I Form an LLC or Get a Trademark First?
Generally speaking, the best course of action is to form your LLC before applying for a trademark. There are three fundamental reasons for that.
1. Your Trademark Needs an Owner
If you plan to use your trademark for your business, it makes sense for your LLC to be the owner of your trademark. However, your LLC can’t own anything unless it exists, so the first logical step is to incorporate your LLC, then file for trademark registration.
2. Continual Use Is Required to Maintain Your Trademark
It’s not a good idea to file for a trademark without being able to put it to use. The USPTO establishes that you must be actively using your trademark, or you may lose your rights.[3] Forming your new business before applying for a trademark means you can regularly use your trademark right after it’s approved.
3. Trademarks Don’t Provide Liability Protection
Trademarks only provide brand protection. They do not protect your financial assets the way a legal entity like an LLC does.
A registered trademark means that if a competitor attempts to steal your business’s name or trade name, you can take them to court for trademark infringement. However, without an LLC, your personal assets, such as your bank account and property, are exposed to debts, litigation cases, and liabilities of your business.
Ultimately, when choosing whether to file for an LLC vs. a trademark, forming an LLC before applying for a trademark offers multiple advantages. Establishing your limited liability company should take priority so you can build a solid foundation for your business first.
Incorporating your LLC can be fast and easy, too. Instead of trying to figure out the paperwork yourself or taking on the expense of hiring a lawyer, we can help you apply for your LLC today in as few as 10 minutes with lifetime compliance support.
Differences Between Trademarks and LLCs
Even though LLCs and trademarks both exist to help your business grow, they do it in different ways.
Your LLC is the foundation you build your brand on. It offers liability protection and establishes your business as a legal entity with a specific tax structure, protections, and responsibilities. An LLC is typically the best business structure for you if you’re an entrepreneur or a small business owner because it is flexible yet secure.
A trademark provides brand protection for the business that you’re building. It ensures that your competitors can’t steal your company name, use your logo, or imitate your brand, either in your state or across the US.
You need an LLC and a trademark to build a successful business, but you should file for an LLC first to have a solid legal foundation to build your brand. Thankfully, we have an easy and affordable way to file for your LLC in a matter of minutes.
Filing Fees & Requirements
LLC
To incorporate your LLC, you need a business name, a registered agent, and official documents like your Operating Agreement, Articles of Organization, business licenses and permits, Statement of Information, and tax forms.
The filing fees to incorporate an LLC depend on your state and can vary from $50 to $500.
Trademark
To apply for your trademark, you must go through an application process with the USPTO. It consists of multiple steps, such as determining what type of trademark you want to register, making sure that there is no trademark confusingly similar to yours, and classifying your goods or services and filing basis.
The USPTO uses the Trademark Electronic Application System (TEAS) to complete your application.[4] You have two filing options: TEAS Plus and TEAS Standard. With TEAS Plus, you pay $250 per class of goods or services. With TEAS Standard, the charge is $350.
When submitting your initial application with TEAS Plus, there are more requirements up-front. As a result, the fee is lower. With TEAS Standard, you have to satisfy fewer requirements upfront. However, you will eventually have to meet all applicable requirements and pay a higher filing fee.
Type & Scope of Protection
LLC
Your LLC is a business entity that protects your personal assets. For example, if your business gets sued and you have to go to court, only your LLC’s funds and assets are on the line. Your personal assets, such as your house, bank account, and 401k, are protected. Similarly, your LLC assets can’t be seized.
Establishing an LLC also means that no one in your state can file for an LLC under the same name. For example, if you open David’s Tires car repair shop in Michigan, no one in the state can start an LLC under that name. However, without a federal trademark, someone in Indiana can open a David’s Tires and even use your logo.
Trademark
A trademark protects your intellectual property and brand identity. You can trademark certain recognizable aspects of your brand, such as your logo or slogan, to ensure that your competitors can’t use them for their own business purposes.
Since a state trademark protects your brand assets only in your state, it’s typically better to go through federal registration so your brand identity is protected everywhere in the US.
Federal vs. State Registration
Business owners typically register their LLCs in the state where they conduct their business with the Secretary of State. However, you don’t necessarily have to be based in the state to register your LLC there. We can help you form an LLC in any state, even if you are based outside the US.
A state trademark is registered with your state’s trademark office. If you decide to register a federal trademark, you must fill out an application with the USPTO.
Bibliography
- United States Patent and Trademark Office. “How Much Does It Cost?” Accessed March 6, 2023.
- Minnesota Department of Employment and Economic Development. “Limited Liability Company.” Accessed March 6, 2023.
- United States Patent and Trademark Office. “Keeping Your Registration Alive.” Accessed March 6, 2023.
- United States Patent and Trademark Office. “Trademark initial application form.” Accessed March 6, 2023.
