Trademark or LLC First? The Order Founders Get Wrong

Contrary to what many Founders believe, trademarks and LLCs are distinct. A trademark is designed to protect intellectual property created by an online brand. On the other hand, an LLC helps a Founder protect personal assets.

With that said, trademarks and LLCs can work together as a team to help Founders avoid ownership disputes and conflicts in brands- especially when a business has just been created. For owners, understanding which of these legal processes must come first is the key to unlocking the benefits of each.

An Overview: What are Trademarks and LLCs?

Trademarks are a type of intellectual property. The key element to a trademark is that they allow consumers to distinguish a brand’s logo, slogan, or other intangible element from those of a competitor. As long as a trademark is distinctive and original, it can be registered with the United States Patent and Trademark Office.

An LLC is a Limited Liability Company. This type of business entity allows for a Founder to combine some of the most favorable elements of a sole proprietorship with those of a corporation. There are limited liability protections offered to a Founder as in a corporation. The tax structure is akin to that of a sole proprietorship. Asset protection under an LLC is substantial. Business debts or litigation exposure are both significantly minimized under an LLC.

What Should a Founder Obtain First – a Trademark or LLC?

In short, a Founder should form an LLC before attempting to register a trademark. To begin with, a trademark must have an owner. Who owns the trademark determines who may use the trademark. Therefore, if an LLC is the most desirable business structure to build your online brand around, then a Founder should consider forming the LLC before applying for a trademark.

Again, the trademark’s legal owner should be the entity that applies for trademark protection. Ideally, an LLC will have been established before initiating the trademark application process. Ensuring an LLC is already formed before the trademark is registered prevents several issues regarding activity. Specifically, for a trademark to remain in place, it must be used in the marketplace. In other words, avoid having a trademark that is not being used due to an issue with forming your business entity.

Lack of Liability Protection Until an LLC is Formed

There is no limited liability protection for Founders when registering a trademark. It is simple enough to imagine a scenario in which a copycat brand sells a product under a logo similar to its own. While it is possible to file a lawsuit against the copycat for trademark infringement, it would not be possible to do so for damage to the Founder’s brand as far as reputation is concerned.

Tapley Law Serves Founders In Business Formation and Trademark Registration

From LLCs to trademarks, Tapley Law has Founders covered. Attorney Tapley has not only represented Founders in a variety of legal matters but has also founded brands and engaged in the marketplace herself. Contact our office today to discuss how to build a brand with all available legal protections.