LLCs are nice, but they don't protect business names
Question: if you own an LLC, you also own the name of that LLC . . . right?
Owning an LLC and owning its name are very different things. Read on to understand the difference between an LLC and a trademark and what it means for your business.
What LLCs can do
LLC stands for “limited liability company”. An LLC is a type of business entity. Other types of entities include sole proprietorships and corporations. The purpose of an LLC is found in its name: “limited liability”. The purpose of the LLC is to limit your personal exposure in case something goes wrong.
Let’s say an individual decides to start a consulting firm. They start off bootstrapping the business, so at first it's just them, their laptop, and their kitchen table. Then, the business starts to grow. They hire a few contractors and start taking larger clients. Eventually, they also need office space. They take out a loan in order to secure office space sufficient to hold their growing team.
But then, they hit a streak of bad luck. They botch a project for a major client who threatens to sue, simultaneously find out that one of their contractors has been secretly poaching clients by agreeing to do the same work at a lower price, and the economy takes a bad turn, causing them to fall behind on their loan payments.
If they never formed an LLC (or some other limited liability business entity) they are personally liable for lawsuits and financial losses affecting their business. If they have formed an LLC (and they have properly maintained it and followed their state laws on doing so) they can expect to be largely shielded from personal liability when things go wrong in their business.
And this is the biggest attraction of an LLC: making sure that if things go wrong in the business, the owner’s personal finances will stay separate and protected.
What LLCs can’t do
LLCs are great for protecting personal assets. But when it comes to protecting trademarks (i.e. the business name, logo, and slogans) that is not something an LLC can do. Owning an LLC is not the same thing as owning its name.
This is confusing because you probably remember registering your LLC. And when you registered, you had to pick a name. Because of this, many business owners mistakenly believe that they own that name. But LLC name registration is less about ownership and more about identification - the state wants to know the name of your LLC so they know where to send the tax bills, for example. Registering the name of an LLC is equivalent to putting your name on an attendance list - it tells the people that you are present, but it doesn’t give you many rights.
Where trademarks come in
When it comes to ownership of intellectual property like business names, logos, and slogans, this is where trademarks come in. A trademark is an ownership right that allows someone to own a brand and to stop other people from copying their brand. The strongest way to protect a trademark is to register it with the United States Patent and Trademark Office (USPTO). The USPTO is the federal agency in charge of deciding who is allowed to own federal patents and trademarks in the United States.
If registering an LLC name is like putting your name on an attendance list and saying “I’m here”, registering a trademark is like getting your name on a deed that says “I own this”.
In other words: it’s the difference between existence and ownership.
Thanks for reading the Bevel Law Blog! While this information is hopefully helpful to you, nothing in this blog is intended to be legal advice. Always consult a lawyer before making any legal decisions based on topics in this blog.
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