Trademark is a well-known tool in business to ensure legal protections of your products or services. It’s an intellectual property that establishes and maintains the uniqueness of a brand for a lifetime of the product or service.
Conversely, LLC stands for Limited Liability Company, which is a popular business structure in the US for its outright stand to protect privacy, ensure limited liability, pass-through taxation, and more.
LLC stands between partnership and corporation structures when it comes to enjoying various operational and legal benefits.
While both trademark and LLC safeguard the rights of businesses, there are some distinct features that make them separate from each other.
This Trademark Versus LLC comparison article will share with you their differences, uses, benefits, and more.
Trademark: An Intellectual Property
In this section, we’ll describe what a trademark essentially is, its types, necessity, and benefits.
What Is a Trademark?
In essence, a trademark signifies the uniqueness of a product in terms of features, including symbol, image, logo, design, size, shape, color, sound, slogan, and so on.
Whatever the feature a trademark emphasizes in a product or service is subject to ownership by that business.
In short, if you’ve designed a logo for your brand, developed a unique size of your product, or created an image with a certain color scheme, ownership of that particular design only remains with your business, no one else.
Since a trademark is considered an intellectual property, it serves a legal protection for the brand and its identity. Trademarks can or can’t be registered.
Types of Trademark
Trademarks can be classified in terms of statutory and basic functionality.
Statute wise, trademarks can be divided into two types:
- Federal Trademark
If you want to get a federal trademark, you have to file it with the United States Patent and Trademark Office (USPTO).
Federal trademarks can provide you a range of benefits, including nationwide right protection, legal immunity during infringements, and most significantly, the ability to use the ® mark in your product.
Other vital benefits a federal trademark offers are:
- eliminating possible infringement by the competitors of your registered trademark
- convenience in getting financially compensated at the court for an infringement
- allowing you to record your trademark registration with the US Customs and Border Protection to seize any counterfeit products at the customs
There are also other benefits of registering a federal trademark for your brand or business. Simply put, a federal trademark gets you the ultimate protection to your product’s identity.
- State Trademark
State trademarks are registered with the state government rather than the federal government. It means your trademark is valid only within the statute of the state you’ve filed the trademark with. That’s why its benefits are limited.
If you want to file a state trademark, you must research that particular state’s distinct rules and regulations for trademark. Each state has its own regulations. So, look up state trademark information before getting one.
Now, let’s find out about the types of trademarks based on their basic functions. These trademarks are:
- Generic Mark
Basically, a generic mark won’t qualify as a legal trademark unless you provide enough information or specific details of that product.
It means, your trademark can’t just promote a generic description of a product, making it impossible for other brands to produce and sell the same product in the market.
For example, if your trademark says, “Cake Maker,” other cake makers in the market won’t be able to trademark their brand for such a generic and unspecified trademark.
For this, you have to provide any unique traits of your product, so it stands out from the rest of the brands in the market.
- Descriptive Mark
Unlike generic marks, a descriptive mark entails one or multiple traits of the product or service. A descriptive mark has the benefit of legal protection under the Trademark Law only if it qualifies.
The condition to qualify for Trademark Law is to have secondary meanings like:
- volumes of sales
- manner of advertising
- manner of mark’s use
- results of consumer survey
Besides, the consumers of the product must identify and recognize the descriptive mark with the brand to qualify the trademark.
- Fanciful Mark
A fanciful mark is supposed to be possessing the most unique traits of designs or symbols, so no competitor can replicate that. For this, getting the legal protection for a fanciful mark is the easiest.
Since fanciful marks aren’t too generic and don’t convey anything meaningful in any language, they’re less likely to create any confusion or dispute among other competitors with similar products or services.
- Suggestive Mark
Suggestive marks are the trademarks that typically avoid denoting the nature of product or service. Instead, they convey some fascinating qualities or features of it.
For instance, the name Twitter wouldn’t reflect as a social media platform. But it shares an idea of the twitting or chirping nature of birds. So, practically, the consumers or target audience have to figure out the innate meaning of the suggestive marks.
- Arbitrary Mark
There are some unique trademarks of which the names might mean something in their original forms. However, they remain unrelatable to the products or services they’re protecting the rights of. These are termed as arbitrary marks.
For instance, if you take “Dove,” it refers to a type of bird. But as a trademark, it denotes the lineup of personal care products.
Why You Need a Trademark
The significance of having a trademark for your product or service is widespread. It’s not just distinguishing your brand from the others but also protecting your business in legal complexities.
The most notable scenarios where trademarks can help you are:
- Legal Protection: Having a trademark allows you to explore existing brands with similar products or services before determining it Hence, it can prevent your brand from being sued by other companies in counterfeit or infringement cases.
- Authoritative Entity: If your product or service has a federal trademark, it shows that you represent a credible business. Thus it allows you to gain more contracts from authoritative clients nationwide.
- Credible Identity: Trademarked brands are more reliable in customers’ minds. Usually, customers will prefer your trademarked products more instead of those with no trademarks or reliable identity.
9 Benefits of Trademark Registration
Benefits of trademark registration are more intangible than quantitative. It assures lifetime protection for your product or service. Moreover, it instills a faith in customers’ minds about the quality of your brand.
Let’s point out nine crucial benefits trademark registration can offer you:
- You Can Use the ® Symbol
As we’ve mentioned earlier, registering your trademark with the USPTO will allow you to use the ® symbol on your logo. This means, your trademark is protected and no third-party can use it unless you authorize it.
It further ensures the credibility of your product and service in the customers’ minds.
- You Can Enjoy Exclusive Rights of Usage
Another benefit you can enjoy with a trademark is its exclusive usability. When you have trademarked your brand or product, it can be applicable to the other products under the same product category.
Furthermore, with this right of usage, you can sue a third-party in case of infringement; meaning, they’re using the same mark, logo, or design you’ve trademarked.
- Customers and Competitors Can Distinguish Products or Service
One of the primary aims of getting trademarked is to distinguish your product or service from the competitors. It’s your unique brand identity.
Since a trademark provides with enough legal backing, you can establish an authority of your brand in the market in contrast to the existing ones. In return, your customers can comprehend your brand’s vision and quality policy better.
- It Establishes Brand Reputation
Like we’ve said above, a trademark pronounces credibility among the customers, it naturally builds reputation for your brand. This reputation remains constant as customers promote it through their loyalty as well as words of mouth.
The increased reputation doesn’t only remain within the customer base. It also draws potential investors to your business or startup, creating opportunities for more funds down the line.
- It Enhances Product and Service Quality
A federal or state trademark tells one thing clearly— the product is good.
It clears the doubt in customers’ minds about the product’s quality, hence, establishing a long-term trust. Gradually, you’ll see your brand image getting popularized organically. The end result— sales growth and market expansion.
- Your Business Is Safe from Infringement
Cases of trademark infringement aren’t rare throughout the world and even in the USA. So, getting equipped with the right tool is optimum. Here, registering your trademark is essential to safeguard your mark from infringement.
If your trademark is registered, it gives you the right to take legal action against the party that counterfeited your brand name, logo, design, or mark.
Once sued or reported to the court, the party will not only stop using the mark anymore but also you may be compensated through the profits earned by them by using your mark in their business.
- You Can Use Trademark for 10 Years
A registered trademark lasts for 10 years according to the United States Patent and Trademark Office. So, it means that you can exclusively use a registered trademark for ten years straight with no third-party interfering with it unauthorized.
The ten years will protect your brand without any further cost involved. Once the validity expires, you have to renew the trademark validity for the next ten years.
- Your Customer Loyalty Will Increase
One of the vital benefits of having a trademark is customer loyalty. A simple but carefully articulated name, logo, or mark can go a long way in terms of building trust in your customer base.
Your customers will know from whom they’re buying and share the same product or service source with others to increase the customer loyalty.
- Your Trademark Becomes an Asset
Did you know that a trademark can offer a monetary value down the line? Since a trademark is an intellectual property of your brand, it entails you with the right to sell it to another entity.
You can further franchise the trademark for a stipulated period to an enterprise and earn a handsome income in return.
When You Need a Trademark
A trademark can be useful from the moment you start to operate with your brand and product. Using the right exclusively from the beginning can save you in many ways.
However, as you need to go through an application process, there are two scenarios to consider.
The USPTO allows the applicant to use the trademark right in future after acquiring it. When you apply for a trademark to the USPTO, you may either select the “use in commerce” or “intent to use” option.
If you intend to use the trademark right away, you should choose the first option. But if you’re planning to get the trademark now and use it in the near future, choose the latter one.
Once applied, the USPTO will take some time to process your application. It has to go through some necessary steps like resolving any raised conflicts, holding a public opposition period, etc. Upon completion, you’ll receive an NOA (Notice of Allowance) as a form of conditional approval.
You may apply for a trademark registration in the middle of your business journey too. It’s because not every business requires trademark protection from the very beginning.
But moving forward, there will be time when competitors might come at your brand name, logo, packaging, design, etc. So, you better take necessary steps toward trademark registration sooner.
How Rocket Wave Can Help them to get Trademark
At Rocket Wave, we can take the responsibility of your trademark registration, including the processes involved in it.
Logo, slogan, name— you name it, and Rocket Wave will serve the purpose you deserve.
You’ll let us know your desire with the trademark, and we’ll do the rest for you.
We’ll do the initial risk assessment, paperwork, application process, and so on.
LLC: A Secure Business Structure
LLC or limited liability company is a well-known business entity type that’s growing in popularity in many states of the USA.
As the name suggests, an LLC lets the owners enjoy limited liability along with other facilities like pass-through taxation, formation simplicity, and so on.
Below, we’ll try to describe what an LLC essentially is, types, benefits, etc.
What Is an LLC?
LLC is one of the established and authorized business structures in the USA apart from corporation, sole proprietorship, partnership, etc.
Although LLC resembles these other business structures in many functions, it’s a distinct entity proves beneficial to many small to medium entrepreneurs.
The primary notion of an LLC is to ensure protection to the personal assets of the owner while providing a tax-friendly business nature. For most entrepreneurs, LLC has become an ultimate choice of business structure.
Formation of an LLC
Formation of an LLC is very simple. You have to go through an application process, including naming your LLC, hiring a registered agent, and submitting various documents to the state like Articles of Organization, Operating Agreement, etc.
Apart from these, you must get an EIN (Employer Identification Number) from the IRS (Internal Revenue Services) for tax purposes.
Cost
The cost of formation and ongoing expenses of an LLC vary from state to state. Furthermore, the annual tax amount may be largely different from one state to another.
For instance, California charges a minimum of $800 for franchise tax per year, whereas Delaware charges $300 annually.
Different Types of LLC (give a overview and link to our articles about different entity comparison)
Depending on the goals and expectations of the small entrepreneurs in different states, the LLC can be divided into eight types. These types mainly focus on the individual needs, capacity, and most importantly, liability protection.
Below are the eight types of the LLC for you:
- Single-Member LLC
Typically, single-member LLC is suitable for those who prefer to run the business single-handedly. Simply, it’s another form of sole proprietorship where the owner can enjoy the same legal and tax benefits.
While running a single-member LLC, your business is going to be subject to the default state laws. Since these laws regulate an LLC’s financial or managerial disputes, you’ll be safe from it due to being a single member or owner of the business.
However, there are still risks of losing your limited liability protection since the court will consider you and your LLC one legal entity. So, whatever the business is liable for, you will be personally held responsible for it at the court.
To prevent this situation, you can work out the Operating Agreement where you can declare yourself a separate entity from your LLC.
The benefits of a single-member LLC include:
- Non-hazardous tax system
- Ability to add new members
- Ability to transfer the ownership to others
- Multi-Member LLC
In contrast to a single-member LLC, a multi-member is simply a business structure with more than one owner or member.
Here, all members or owners must have a commonplace about the business operation. This commitment of the members is redeemed by signing the Operating Agreement.
The operation of a multi-member LLC can be categorized in two types:
- Member-managed LLC: When the members or owners of the LLC run the operation according to the Operating Agreement, it’s known as member-managed LLC.
- Manager-managed LLC: Some LLC members prefer to take a backseat and rely on a hired manager to run the show. Such an outside manager must be highly qualified to take this responsibility.
Besides, his role and responsibility must be documented in the Operating Agreement.
The benefits of a multi-member LLC are as follows:
- a large number of members (typically, unlimited)
- open for both US and non-US citizens to form it
- inclusiveness of Other LLCs, corporations, or individuals
- ability to file tax as S or C corps
- benefit of pass-through taxation
As for taxation, members of a multi-member LLC can pay taxes like partnerships since all company profits and losses are transferred to their personal return.
To do this, they have to complete a Schedule E (Form 1040) while attaching it to the tax return documents.
- Domestic and Foreign LLC
While there’s no fundamental change in this type of LLC, it just differs in terms of forming and operating the LLC within your home state or a state other than your home state.
When you form an LLC in your home state, it’s called a domestic LLC.
Conversely, if you form and run your LLC in a different state, it will be called a foreign LLC in that state. For instance, if you live in Delaware but have formed an LLC in New York, that LLC will be a foreign LLC in New York.
The primary reasons for opening a foreign LLC may include better business environment, larger customer base, lower tax rates, reasonable operating costs, etc.
However, if you happen to form and run an LLC in two different states, the cost will be doubled in terms of taxes, paperworks, operating costs, etc. Moreover, you have to comply with the regulatory requirements of both states.
- Series LLC
Series LLC or SLLC is a concept where an LLC will act as a parental entity for the subordinate LLCs, or otherwise known as cells. These smaller LLCs are known as series LLCs.
Each cell or LLC will have their distinct structure, including members, managers, agents, assets, documentations, etc.
So, whenever a series LLC or cell gets into a legal problem, the court will most likely give a verdict against that LLC only, not against all LLCs.
The benefits of a Series LLC include:
- Single filing fee for the parent LLC only which covers the series LLCs
- Quicker and cheaper set up of series LLCs
- Time efficient on the administrative tasks
- Cost-effective operations
- Single tax filing for the parent LLC
However, despite such benefits, each series LLC has to open separate business bank accounts. They further must maintain separate financial records. Thus the administrative cost may be high.
Besides, even after single tax filing for the parent LLC, each series LLC has to be taxed separately.
- Restricted LLC
An exception type of LLC is the restricted LLC. This entity is not formed for typical business dealings. Instead it will assist you in transferring assets to family members.
Usually, if an owner has multiple properties, he prefers to form a restricted LLC because of the transferring and low tax benefits.
To form a restricted LLC, you have to file the Articles of Organization correctly, i.e.; ticking off the right checkbox in that form.
Although there’s a scope for asset liquidation and tax exemption, the owner has to wait for at least ten years from the date of formation to get that facility.
- L3C Company
Also known as a low-profit LLC, the L3C goes about having a non-profit organization vibe drawing private investment and philanthropic capital. In an L3C, the entrepreneurs care and value both profits and big purposes.
Forming an L3C, you can do social work, operate your business, earn profit, and gain a positive image about your business.
On the other hand, from the investors’ perspective, there remains a risk of losing the money while not getting any tax benefits.
- Anonymous LLC
Some owners prefer keeping their identity discreet while doing business within a state. In this case, an Anonymous LLC can provide the right structure.
An Anonymous LLC allows you to keep the identity of the owners or members, managers, etc., secret. Simply your business ownership will remain off the public record.
The primary reason behind this discretion can be anything from personal to social. Companies or individuals with anonymous LLC prefer to keep their investment hidden mostly out of their image concerns or simply personal choice.
- Professional LLC
The very last type of LLC in the list is the professional LLC or PLLC. Generally, if doctors, architects, accountants, lawyers, physicians, and the like want to form an LLC, a professional LLC is what they’re supposed to get.
Professionals must acquire a state license to render their services. And it’s this license requirement that separates a professional LLC from the regular LLC.
Apart from that, the functions of a PLLC remain the same as LLC. However, in California, professionals aren’t allowed to form an LLC. What they can do is form a professional corporation or a limited liability partnership.
- DAO LLC
Originally proposed back in 2015, DAO LLC, or Decentralized Autonomous Organization LLC is the latest type of LLC in the business world.
The name indicates the essential formation and nature of this business structure. It further implies the unique control system of the business entity.
Basically, the DAO is modeled on the popular decentralized cryptocurrencies. Unlike the traditional LLCs, the DAO LLC runs autonomously. And it does so through some ‘smart contracts,’ essentially with no human interference.
What it means is that there will be no ruling-control based on leading membership. Hence, each member of the DAO LLC will have their say in every decision-making and running things for the business.
A DAO LLC enjoys the limited liability like any other LLCs. A single-member or owner in a DAO LLC won’t be held responsible for any legal cases against the DAO entity itself.
Currently apart from Vermont, Wyoming, and Tennessee no other states recognize legally the DAO LLCs.
When it comes to forming the DAO LLC, two more steps to be taken along with the existing traditional LLC formation steps. Those steps are:
- Establishing DAO rules before forming the entity which will be essentially embedded in the code
- Funding arrangement before the DAO formation
And since most states legally recognize DAO LLCs, more generic approaches like traditional LLCs with DAO-like governance systems or DAOs incorporated in jurisdictions with more favorable regulations might be viable options.
Why You Need an LLC
It can buzz your mind why your business actually needs to be an LLC. Well, LLC isn’t a requirement to start your business.
Instead, it’s a structure to organize your business entity to enjoy various legal and administrative benefits. Simply, LLC ensures certain benefits that other structures won’t do.
Among many reasons, the most crucial one you might consider is the limited liability. It protects your personal assets while your business is in a legal conflict with the court.
For instance, if you had a sole proprietorship business, such liabilities would’ve been directed to you solely. However, having an LLC will just switch that same liability to your LLC entity, not to you personally.
Apart from these, you can have the tax benefits to run the LLC. All business profits or losses in an LLC business are passed down to the members, leaving the business itself exempt from tax.
5 Benefits of LLC
Benefits of operating as an LLC is in the following:
- LLC Gives You a Freedom of Operation
Like a sole proprietorship, you can enjoy the freedom of running the show in your LLC business, especially if it’s a single-member LLC. You’re free from answering to your higher authority or stakeholders about the decisions you would make or actions you would take.
- There Is Less Liability Pressure
Justifying its name, an LLC or limited liability company benefits you by securing your personal assets. In most cases, an LLC will protect your personal bank account and assets from any financial or legal dispute occurring in your business.
Any compensation needed to settle the legal cases at the court will be adjusted against your business assets, not the personal ones.
- Paperwork is Less
Unlike in other business structure formations, paperwork in LLC is minimal. State and compliance requirements are minimum which is why the administrative hassle is low in an LLC.
The straightforward application and approval processes of an LLC makes the life easier for the entrepreneurs.
- You Can Enjoy Pass-Through Taxation
As said earlier, you can have the benefit of pass-through taxation. It’s like the partnership business structure where each member or owner has to pay their tax based on the profits disbursed among them.
The LLC itself doesn’t have to pay any tax at all.
- Ability to Choose Profit Distribution Plan
Whether you form a single-member LLC or with multiple members, you always have the freedom to distribute the profits according to the agreement among you.
You have to report to the IRS (Internal Revenue Services) regarding this distribution based on ownership. Apart from that, you’re allowed to divide the profits as per the agreed distribution structure.
When You Need One
The answer to this question lies in your preference of how you want to maintain the liability of your business. If you prefer a limited liability for your business, the LLC is the way to go.
So, the moment you realize this, you should start taking action on getting your LLC approval by the state.
However, there are people who might suggest you transform your business into an LLC when revenue is over hundred thousand dollars. But a wise decision will be to get on board from the very beginning if you’re thinking about starting a business.
How Rocket Wave Can Help You to Form an LLC
Rocket Wave promises to help you build your little empire in the form of an LLC in the US. We are here to provide you with the necessary support in each required step.
With some comprehensive steps and transparent transaction module, Rocket Wave can get your LLC done as quickly as possible in whichever state you prefer.
To put you at ease about our service, you can have a money-back guarantee from us while we’re pursuing your goal for you.
LLC versus Trademark : Which Comes First
None. Technically, there’s no norm or fundamental requirement to put one ahead of the other; so an LLC or trademark can be gained for your business from the moment you realize their importance.
However, it will be wise to LLC your business first before applying for a trademark. Let us tell you why.
- A trademark must be owned by an entity. An individual or a business. So, if you have a plan to run your business as an LLC, then do it first, so your LLC can apply for a trademark and has its ownership.
- Forming an LLC before applying for a trademark will allow your LLC to put the trademark in use. Remember the “used in commerce” option at USPTO? Exactly for this reason the LLC should precede the trademark.
However, you can trademark your brand even before you’ve launched it officially (refer to “intent to use”), so you can use it down the line of your business. Also, there’s no harm in getting your brand trademarked in the middle of your business.
The same goes for an LLC. Although it’s highly advisable to start from the beginning, if you already have a business, it’s not too late to turn your business into an LLC entity.
Another question can be raised about whether both an LLC and a trademark are required for your business. Yes and No, depending on the type of business structure you want to own.
If you want to protect both your business liability as well as brand identity, then yes, you may go for both an LLC and a trademark. While an LLC can be considered a legal necessity for the business’s existence, a registered trademark should be taken as lifelong armor for your brand.
Case Scenario 1
Michael wanted to open a coffee shop named “Brew & Chat.” Here, he’s confused between filing an LLC for his business and getting the business name trademarked. LLC would give asset protection whereas a trademark would identify the uniqueness of his brand.
But he concludes that LLC should precede trademarking his brand to protect himself from personal liability. Once his business once had the legal entity as Brew & Chat LLC, he went on to trademark his brand “Brew & Chat.”
Hence, both Michael’s limited liability as well as his brand’s unique identity were ensured.
Case Scenario 2
Leo launched a tech startup 2 years ago. He named his startup “Bit Verse.” Like Michael, Leo was also in a dilemma whether to get an LLC or a trademark first for his dream startup.
Getting more confused, he consulted an attorney who advised him to go for the LLC first as it would safeguard his personal assets in the competitive tech industry. Once his venture becomes an LLC, he could opt for the trademark.
Leo obliged and applied for the LLC. Through the necessary steps and procedures, he got his business Bit Verse L.L.C. in place. Then he applied for the trademark for his business logo at the USPTO.
He realized that the trademarked logo would serve as a lifelong benefactor for his tech brand while protecting his business from any possible legal issues in future.
Bottom Line
Lastly, both an LLC or limited liability company or a trademark are vital for your enterprise’s existence, protection, and growth. Obviously, there are technical differences in functions among these two things.
However, both these can help your business move toward the goal. An LLC will protect your assets by limiting your business liability while a trademark will protect your brand identity as an intellectual property.
At the end of the day, you have to determine when to attain each of these two vital tools to benefit your venture.
FAQ
- What’s the difference between a trademark and copyright?
Answer: The core difference between a trademark and copyright is their basic protection nature.
A trademark will protect your business reputation, including a brand’s logo, name, image, design, color, mark, etc. It makes sure that your competitor or any other third party can’t use them without your authorization or permission.
Whereas a copyright should protect the rights of your brand or business too, but it emphasizes more on works like authorship of creative content like novels, music, paintings, cinematography, and the like.
Simply put, for instance, if you have a music company, the name and logo of the company are trademarked. However, the music and albums you would produce here will be under copyright protection.
- Do I Need Both LLC and Trademark for My Business?
Answer: If you’re looking forward to turning your business into an LLC or a limited liability company, do it first before getting a trademark. In terms of protecting your business, an LLC entity will limit your liability, meaning, saving your personal assets from lawsuits and judgements.
On the other hand, a registered trademark will back your business identity, including name, logo, design, etc., for a lifetime.
An LLC can share the taxation among your partners if you set up a multi-member LLC, not needing your LLC to pay the tax. Whereas, you can get financial benefits from your trademark by leasing it, licensing it, or temporarily transferring its ownership to another business or entity.
- How Do I Apply for a Trademark?
Answer: If you’re living in the USA, you have to apply for your trademark registration to the USPTO (United States Patent and Trademark Office). You can simply apply online on the USPTO website.
The USPTO will take necessary time to review your application and resolve any pending issues. Once reviewed and satisfied, they’ll send you an NOA (Notice of Allowance) as a form of conditional approval.
- Can I get a trademark for my LLC business name?
Answer: Absolutely, yes! In fact, it’s highly recommended to get your LLC first and then apply for a trademark for your LLC business name. This way, you’ll be able to apply for the trademark registration as a legal business entity.
So, be careful to choose your LLC business name wisely, maintaining all the LLC naming requirements in mind. Once your LLC is on board, including all the processes, you can apply for the trademark.
- Can my trademark and LLC have the same name?
Answer: Yes. For instance, you have a software company in the form of an LLC, called XYZ LLC. Now you can apply for a trademark for the ‘XYZ’ name.
However, if you launch new products or apps, the same trademark can be used to cover those products, given that you had checked the right boxes of trademark classes during application that would resonate with your launched products.
