How Does Your LLC Affect Your Trademark?

Hello, Geniuses. Today’s episode came because of a Facebook post. I know. There was a post where the poster asks what were some of the benefits of having an LLC? I want to grab the link to episode 121 where we discuss the benefits and the consequences of forming your business as an LLC. And if you haven’t listened to it, go ahead and check that out. 

Now after I posted the link, I should have just kept it moving. I should have just posted it and ran, but I did not. Instead, I scrolled through the comments, and I saw some interesting ones. And I saw this one particular comment, it caught my eye. It was a list, and it said something like the benefits of an LLC. It had seven things on that list, and one of the seven was a trademark. So again, I should have just kept it moving. I should have kicked rocks. I should have just logged off of Facebook. But I didn’t. I didn’t do that at all. Instead, I replied, let me see what I replied. I replied, hey, it’s a good list minus the trademark. You don’t need an LLC to apply for your trademark. And I wanted to make that, you know, statement simply because I have people that come to me and say, hey, I want a trademark, but I don’t have my LLC. I just wanted to make sure that people knew that you don’t have to have your LLC to apply for a federal registered trademark. Of course, the person that made the comment responded and this is why we’re here. So today we’re going to discuss how your LLC actually affects your trademark. All right let’s get into it.  

Welcome back to the Only Genius podcast where we discuss building businesses, growing brands and what else? Only your genius. I’m your host, Attorney LaConya Murray, owner of Off The Mark IP Solutions. Off the Mark is a boutique intellectual property firm representing innovative entrepreneurs aka geniuses who are looking to protect their brand and grow their business with ongoing legal support and business mentorship. We have a good one for you today, so let’s get started. 

Before we get into how your LLC affects your trademarks, I want to take a moment to explain why a trademark is not a benefit of having an LLC. The first thing you need to know is that LLCs and trademarks are two different things. Your LLC is something that you form with the state so that the state recognizes that you have a business that’s requesting that you have your personal assets seen separate from your business assets. It has nothing to do with how you identify to the public, but it’s more of, hey, this is this business that’s being formed in this state, and they want to make sure that if something happens to their business, if they’re liable for any debts in their business, that those debts and that liability will not affect their personal assets. That’s what that LLC is asking.  

On the other hand, your trademark is that brand identifier. It has nothing to do with the debt that your business may be incurring and how they’re going to be paid. It has nothing to do with that. Instead, your trademark is really there to make sure that when consumers are looking for your good or service, they find your good or service. Not some type of copycat that wants to make sure that if they are expecting this brand to perform in a certain way, then it does because they are purchasing it from you. If trademarks protect brand identifiers. And so, it’s important to know that you can have an LLC without having a trademark because a lot of times people will form businesses using their brand name, but they haven’t started selling goods or services yet. They just form their LLC. That LLC has nothing to do with a trademark. And on the flip side of that is you can have a trademark without having an LLC or any other type of business entity. You personally could be the owner of that trademark.  

So, if you don’t need an LLC to register your trademark and having an LLC doesn’t protect your trademark, how can your LLC affect your trademark? I am so glad you asked that question. As a trademark attorney, one of the topics that I find myself constantly explaining to my clients is this concept of company assets and how their intellectual property is in fact a company asset. Company assets are resources of valuable items that a business may have, or they may control that can contribute to the company’s ability to generate revenue and operate effectively.  

Assets can be broadly categorized into two main types. You have your tangible assets, and you have your intangible assets. People recognize tangible assets all the time because they’re things that you can actually touch, right? You can see them; think real estate, land, buildings, if you’re a company, the equipment that you have, so your laptop, your cameras, your lights, all those things are tangible assets, they have a physical form. On the other hand, your intangible assets are things that you cannot see, you cannot touch. These are assets that lack a physical presence, but they still hold a significant value. Examples of intangible assets are intellectual property, your goodwill, the software that you developed, you know, different contracts and agreements that you may have on the customer list. Those are just examples of intangible assets. Unless you’re licensing your intellectual property from a third party, it’s going to belong to the company, which in some cases is formed as a limited liability company or an LLC. How is your intellectual property considered a valuable asset? 

So intellectual property or IP for short, because sometimes I say IP and people are like, what are you talking about? If you hear me saying IP, as intellectual property attorney, I’m referring to intellectual property. So intellectual property is often considered a valuable asset for companies due to the exclusive rights that it provides over intangible creations or innovations. There are three ways, there’s actually more than three ways, but today I’m just going to talk about three ways in which your intellectual property can serve as a valuable asset for your company. The first thing is, the competitive edge. IP can provide a competitive edge in the market. Trademarks, for instance, help distinguish one company’s products and services from those of its competitors. And a strong brand protected by trademarks can build customer loyalty and trust. I mean, this is a prime example. Starbucks, in my opinion, does not make the best coffee. As a matter of fact, there’s not even Starbucks in this cup. I just have this cup and I’ve made chai latte tea at home. But the Starbucks brand is a perfect example of building company loyalty and trust.  

The other way that they can provide value to your company is through licensing and partnerships. Companies can actually license their intellectual property to others because most times when you have ownership of that intellectual property, it gives you the right to exclude other people from using that IP without your consent. Now, if people want to use it, they must come to you for permission and when they do that you can give them permission in the form of a written licensing agreement that details how the IP can be used and how much it’s going to cost and how long they can use it and all the details that go into a licensing agreement and partnerships. This can be a significant source of revenue and these licensing agreements can lead to strategic partnerships.  

And finally for today’s episode the third way that your intellectual property can increase the value of your company is through brand recognition. You have trademarks, you have a trade dress, they all contribute to the development and maintenance of a strong brand. And people being able to recognize your brand is a powerful asset that can influence customer purchasing decisions and build long-term relationships. You can go overseas, and you can see the golden arches and people know that that’s McDonald’s. Just because they’ve built that strong brand. Just think of some of the strong brands that you know matter fact one of the things that I’ve been seeing over the last couple years what brands have built their brand up what companies have built their brand up so well that now they don’t have to have their name on them on it they can just have their logo right so target now they just have their bullseye.  

One of the ways that intellectual property can increase the value of your company and I’m just going to add this fourth one on there is that competitive positioning. Again, when you own the rights to exclude other people from using assets that the market and consumers find valuable, now you create this barrier from allowing your competitors in. And especially as it relates to inventions, right? When you have a patent, you have an invention, and you register and apply for a patent and now you have the right to prevent other people from using that technology for their own benefit. And if they want to use it, they have to come to you first so no one else can use it. And I think a good example of this, and I’ve talked about this before, is the Pringles can. The Pringles can for, you know, years, decades, was protected by a patent. And when you went to the grocery store, the only chips you saw in a can like that were Pringles. Well, lo and behold, the patent expires, and what do you see? You see Lay’s coming out with their own version of that Kingen. But they had to wait all those years to do that. In all those years, Pringles was able to have sole control over that market in that product in that way. It helps you position yourself in a competitive market, depending on whether it’s a patent, a trademark, or even copyrights. We talked about why intellectual property is considered a company asset.  

Now we’re going to talk about how this intellectual property can increase your company’s financial value. The first thing it can do is generate revenue. And we mentioned this previously when we talked about licensing opportunities is when you grant that license to that person, there should be a fee attached to it. And it should be a pretty good fee depending on what they’re asking for. I always tell people that when you register a trademark, it’s not just a sheet of paper. When you do the same thing for the copyright or the patent, it’s not just a sheet of paper that says, hey, you can’t use this. That’s one great benefit. But also, how can you take this to make money? The NFL, I give this example all the time, they’re not in the business of making jerseys. They license their intellectual property so they can make their revenue from that without ever having to take the risk associated with manufacturing things. They get their fee upfront whether or not the product sells because they have licensing agreements. So that’s how you can generate revenue. And that’s how this intellectual property can increase your company’s value.  

The first thing is through revenue generation through licensing agreements. The second one is through brand value. Once your reputation and goodwill is at a high in the market, just having that IP that’s recognized will increase the brand value without ever saying a word. Just, you just see it and people have stock in it. And it’s just because of that recognition and that trust that’s associated with a well-established brand. It can lead to an increase in sales and market presence directly impacting on your financial performance simply because this is here. Sometimes you don’t even have to market. You just have your brand that’s so well-established that when people see it, they automatically want to buy it. They don’t care what it is. Beyonce just went on tour, a world tour, right? And now she’s coming back, and she is doing the film and people are going to do that. I mean they’re going to watch that but it’s just because of that brand recognition. She’s dropped maybe two promos for that, and it doesn’t even matter. She didn’t have to drop any promos. Remember a couple of times she just dropped albums? I don’t think they call them albums anymore. Like I’m going to put records, what do you call them when you’re streaming? I don’t know. Anyway, she would just drop them right without any type of heads up and people would listen, and stream and it would make the numbers. That’s brand recognition and that increases your company’s assets. And that increases your company’s financial value. And the third one that I want to talk about is that your intellectual property can increase your company’s value is when you get ready to sell your company or you get ready to merge with another company, that intellectual property is a key consideration in how much your company is worth. The more brand value you have, the more you can ask for your mergers and acquisitions. The bottom line is this, while LLCs and trademarks are two different animals, you can increase your company’s value by maintaining its intellectual property, such as trademarks, copyrights, and patents.  

Let me know in the comments, are you building your company’s intellectual property portfolio? I want to know what that looks like for you.  

Let’s take this conversation over to the Markedlegal Community. I want you to share this episode with three people and have them meet you there. But you know what to do before you go. Make sure you hit that subscribe button and rate the podcast. Until next week, I want you to keep building your business, growing your brand, and owning your genius.