The Difference Between an LLC and a Trademark

Updated: Feb 25

This blog post discusses the difference between a Limited Liability Company ("LLC") and a trademark. Note, an LLC is a type of business entity and what is discussed below applies to all business entities such as corporations, partnerships, and more. We selected LLC as the title and comparison in this post because LLCs are popular among business owners.


Overview:


1. LLC Defined.

2. The Function of an LLC.

3. An LLC's Limit on Brand Protection.

4. Trademark Defined.

5. The Function of a Registered Trademark.

6. How a Registered Trademark Protects Your Brand.


1. What is an LLC


A Limited Liability Company ("LLC") is a type of business entity. It is formed by filing Articles of Organization with the Secretary of State. In simple terms, an LLC is a hypothetical third person who holds all of the risk inherent in operating a business.


2. The Function of an LLC


An LLC functions to limit your personal liability. If you operate a business without a legally formed business entity, then you can be held personally liable for the debts and obligations of your business. Your personal assets such as your home, investments, savings, children's college savings, and more can be used to satisfy the debts and obligations of your business if your business becomes insolvent.


In summary, an LLC simply prevents your personal assets from being used to satisfy the debts of your business if the business is insolvent. A LLC does nothing to protect your business name.


3. An LLC's Limit on Brand Protection


You may be confused. Then why do you need to select a name to form an LLC? Because you are creating this hypothetical third person and, as you already know, every person needs a name. Thus, your LLC needs a name too.


However, the name you select for your LLC is not protected. That's because the purpose of an LLC (it's function) is to form an entity to hold your personal liability and protect your personal assets.


Forming an LLC does provide some limited name protection. Forming an LLC prevents other businesses within your state from using your exact business name, but you do not OWN your business name. Other businesses within your state can use confusingly similar business names and businesses outside of your state can use your exact or similar business name. This is perfectly legal and there is nothing you can do about it!


4. What is a Trademark


A trademark is how you identify your business in the marketplace and includes your:


  • business name;

  • logo;

  • slogan;

  • product and/or service names;

  • course and ebook names;

  • and more.

The name of your LLC is not necessarily a trademark. The name of your LLC becomes a trademark once you use the name to identify your business in the marketplace.


5. The Function of a Registered Trademark


A registered trademark provides you with ownership of your business identity (business name, logo, slogan, etc.). With an LLC you do not own your business name, however, with a registered trademark you own your business name. You can:


  • prevent anyone within your state from using your exact business name;

  • prevent anyone within your state from using a confusingly similar business name;

  • prevent anyone outside your state from using your exact business name;

  • prevent anyone outside your state from using a confusingly similar business name.


A registered trademark provides you with the right of exclusivity - the exclusive right to use your trademark. A registered trademark provides you with power - the power to stop others from using your exact or confusingly similar trademark.


Example:


Business Bodega is a registered trademark. The owner of the Business Bodega trademark can stop others from using "Business Bodega" exactly or anything confusing similar including:


  • Business Grocery Store (grocery store is the English translation of the word bodega);

  • Bodega Business;

  • Biz. Bodega;

  • and other confusingly similar names.


6. How a Registered Trademark Protects Your Business


A registered trademark prevents other businesses from looking and sounding like your business. It prevents brand thieves, copy cats, and customer confusers from stealing your profits and damaging your reputation.


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