Differences Between Trademarks & LLCs

Key Differences Between Trademarks and LLCs

Online Legal India LogoBy Online Legal India Published On 20 Oct 2022 Category Trademark

A trademark is a distinguishing characteristic that aids in the identification of an individual's or a company's brand in the market. New characters, logos, words, slogans & phrases, artwork and photographs, and names, including usernames and domain names, are some of the most prevalent & renowned trademarks. Trademarks and service marks are similar to copyright in that their primary role is to protect intellectual property.

An LLC, or limited liability company, on the other hand, is a type of corporate structure in which the firm owners cannot be personally sued. It is similar to a company with fewer administrative duties. An LLC's major traits are adaptability, less personal liability, & pass-through taxes.

Features of LLC or limited liability company
 

  • LLCs are adaptable: All persons and organisations, with the exception of banks and insurance firms, can be registered as LLCs.
     
  • LLCs have lesser personal liability: If your business is in debt, nobody can hold you personally accountable for it, even if you are the sole proprietor if you are an LLC. As a result, your assets, such as private property & personal bank accounts, are secure and legally protected.
     
  • Proprietors of LLCs do not pay taxes directly: LLC owners do not pay taxes directly. The earnings of the corporation might be reported on personal tax returns.
     
  • At the end of the year, an LLC must disclose its assets against liabilities on a balance sheet. Limited liabilities would imply that any litigation would have to take no personal disadvantages of the Directors into account.

What is Trademark?
 

A trademark is an identifier that distinguishes your organisation, service, or product from others. A registered trademark is the intellectual property/intangible asset of your company. It safeguards your investment in building client trust and loyalty.

Registration of a trademark gives you the ability to sue anybody who attempts to imitate the trademark & prohibits others from using an identical trademark to the one you registered.

Differences Between Trademarks and LLCs
 

Although LLCs and trademarks have certain similarities, they are fundamentally distinct, especially in terms of legal protection, registration, prices, and regulations.

Legal Security
 

LLCs & trademarks are both important parts of the corporate world, but they serve different functions. While LLCs are legal corporate organisations that safeguard business owners' personal assets from litigation and bankruptcy, trademarks protect the company's intellectual property.

State Registration vs. Federal Registration
 

There are two forms of trademark registration in the United States: state and federal. A state trademark, like an LLC, requires the owner to file papers with state officials & pay the associated costs. Unlike incorporating or registering an LLC, registering a state trademark does not provide protection outside the limits of the state. Nevertheless, registering a trademark federally with the United States Patent & Trademark Office or USPTO provides strong legal protection for your mark and grants you the exclusive right to use the mark across the United States.

Costs and Requirements for Filing
 

In most states, you may do an LLC registration in less than a week, but a federal trademark can take up to a year to be authorised. Whether your company is in Minnesota or California, the USPTO imposes the same filing cost per trademark. LLCs, on the other hand, must pay state filing costs, which vary by state. Massachusetts, for example, charges $500 to register an LLC, whereas Iowa just $50. LLCs & trademarks must both maintain continuous compliance requirements, albeit trademarks have fewer yearly obligations.

LLC Registration Protects Your Assets
 

In a few ways, registering an LLC with the state helps safeguard you and your firm. One is personal asset protection in the event that your LLC is sued. For example, if creditors sue your LLC, just the LLC's money and assets are normally on the table—your personal 401k, house, and other assets are usually off the table. It also operates the other way: if you are sued personally, the business assets are protected.

That isn't to argue that an LLC won't assist you to protect the brand and name in some ways. When you register your LLC with your state, the business name of the LLC is better protected in that state—but not in any other.

Trademark Registration Protects Your Brand
 

That is why registering a trademark makes sense if you intend to develop your business. A trademark secures your brand and image, preventing any unscrupulous thief from stealing your hard-earned business name.

You will have exclusive rights at both the federal and state levels if you apply for and are awarded a federally registered trademark by the USPTO. A trademark protects others from selling comparable goods and services under your company name in the United States. While an LLC protects you from frivolous litigation, defending your brand from business owners who wish to steal your idea may not be adequate. A registered trademark supported by an LLC will give your company more traction.

When To Take LLC Registration
 

Trademark registration is the protection of intellectual property. The registration of a trademark grants the legal right to use a mark solely in the trademark category. LLC registration aids in the formation of a legal company to carry out commercial activity. A firm may register multiple trademarks.

As per the Companies Act of 2013, once a business or LLC has been established, the Ministry of Corporate Affairs (MCA) will not allow any other company or LLC to register with an identical name. However, others may use the company's name if the trademark is not registered. For example, XYZ Technology LLC cannot be registered if ABC Technology Private Limited is a registered corporation, but the trademark registration is incomplete. However, the phrase 'XYZ Technology' can be used as a brand name for the software. A company or LLC registration protects you from another company or LLC registration with the same or similar name. As a result, the company's name should be trademarked.

Advantages of Trademark
 

It safeguards the brand
 

As previously said, the USPTO will have it in their record after you have registered a trademark. Any other firm that wants to file for an identical trademark will be legally discouraged from encroaching on your trademark territory. This also implies that firms selling similar items cannot use your name, and you can take legal steps against them if they do.

Enhances Value
 

Having a trademark, or numerous trademarks increases the worth of your company. Potential purchasers will feel more confident knowing they are not simply purchasing a firm that anybody can imitate—they are purchasing a registered brand.

Cybersquatting is addressed
 

The Anti-Cybersquatting Consumer Protection Act empowers trademark owners to sue anybody who, in the case of a distinctive mark, traffics in or uses a domain name that is identical or confusingly similar to that mark with the purpose of profiting from it. In layman's terms, this implies that malicious computer geeks will be unable to purchase a domain name that has been or is identical to a registered brand.

Can continue indefinitely
 

A federal trademark can be used indefinitely as long as the required paperwork and fees are completed and the trademark is used. 

Disadvantages of Trademark
 

Long Waiting
 

Applying for and receiving a trademark might take a year or more. If you're impatient, you might not enjoy waiting for the mark to be accepted.

Cost Increases
 

When it comes to registering for your trademark, you must evaluate if the juice is worth the squeeze. While the filing price may not appear to be much, you pay each trademark, and if you are interested in numerous marks, the process may quickly empty your wallet. In addition to the trademark application expenses, you will be charged standard trademark compliance fees after six years and renewal fees after 10 years.

Additional Paperwork
 

You already have a lot on your shoulder as a business owner. Applying for and acquiring a trademark is an additional step that you may not want to take. It is up to you to determine if a trademark is worthwhile.

Conclusion
 

The article explains the requirements for starting a business & the registration process. However, company owners must understand that registering a trademark is another ballgame! Every firm may register a trademark; however, registering the company as a limited liability entity can protect the directors from defamation if litigation is involved.


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