The difference between registering your business with the state, a URL or website, and a trademark

Launching a startup can sometimes feel like walking through a minefield.

There are so many things to think about and so many costly mistakes waiting to be made.

One of the common mistakes that entrepreneurs make is failing to protect their personal liability and brand when forming their business. This often happens when the entrepreneur is not aware of the coverage and protection a business name, trademark or domain offers to their business.

In this article, we will help you navigate the business formation journey by explaining how you can legally protect your brand and personal assets when forming a business. We will also help you avoid the costly mistakes most entrepreneurs make when registering their business with the state, buying a domain, and filing or a trademark by explaining to you what protection each item offers.

So, let’s get started!

 
 

Registering your business with the state

The first step when forming a business is registering it with the state. Depending on which state you live in and which business entity you are starting, the process and cost vary.  

A big part when registering your business will be deciding on your business structure. Your business structure affects the way you operate, file taxes, and how much your personal assets are at risk if your business gets sued, or fails. Since this has a huge impact on your business, it is important to make a sound decision when choosing a business structure.

Here is a brief overview of some common business entities and their notable features to help you when deciding on the best structure for your business:

Difference between LLC, S-Corp, and C-Corp

Sole proprietorship: A sole proprietorship is the easiest business structure to set up. Very little paperwork is required and is easy to exit since you are the only owner. They are also the default business structure if one fails to specify a business structure when registering their business.

A sole proprietor doesn’t offer personal liability protection. This means if your business is sued or defaults on a debt, your personal assets (house, personal bank accounts, car) are at risk.

Partnership: A partnership is a business entity owned by two or more individuals. There are two types of partnerships: a general partnership and a limited partnership. In a general partnership, each member makes an equal contribution and shares liabilities equally. For limited liability partnerships (LLP) there is one partner who is exposed to personal liability while the other partners (limited partners) enjoy limited liability. Limited liability partnerships also protect all partners in case of debt in the business.  

Corporation: This business structure allows the owner to make the business separate from the owners (the shareholders). It is independent, has its own legal rights, and can sue, be sued, buy, own and sell property. Corporations, therefore, offer the most protection against the owner’s personal assets.

Limited liability corporation (LLC):  An LLC is a hybrid entity that allows owners to limit their personal liability while enjoying the flexibility and tax benefits offered by partnerships. In an LLC, owners are shielded from personal liability for debts of the business.

LLC’s are a good choice for medium to higher-risk businesses, and owners who want their assets protected and who want to pay a lower tax rate than they would if they were to form a corporation.  

Note: Registering your business as an LLC or corporation only protects your personal assets but not the name of your business.

It is important to check you are not duplicating another business' name or brand when registering your business name. The state does a minimal check only to ensure there are no two entries with the same name in their list. So never depend on the state to check on whether your business name or brand sounds or looks similar to that of another business. It is always up to you to do your research to ensure there are no existing brand names with a similar name to yours.

Registering a domain/ URL

A domain name is an internet address. It is equivalent to your website's physical address.

Difference between a website/URL/domain and a trademark

In most cases, a domain name takes the form of two main elements. For example, the domain name Nike.com consists of the website’s name (and name of the company) –Nike and the domain name extension - .com.

Domain name registration is overseen by ICANN (Internet Corporation for Assigned Names and Numbers). ICANN oversees and specifies which domain names are available and also maintains a centralized database with where the domain names point to.

Note: Having a domain name does not mean you have a website or own any rights to any website or brand online. And certainly, it doesn’t mean you are in the clear when it comes to protecting your brand. Other businesses can still sue you or steal your brand by forming a close variation to your name. Therefore, always remember if you own a certain domain, it doesn’t give you rights to that business or brand.

Trademark

Trademark is defined by the USPTO as “a word, symbol or phrase, used to identify a particular manufacturer or seller’s products and distinguish them for the products of another.” A trademark protects a business’s rights to use the mark, word, or phrase to identify its goods and services and prevent others from using it.

The difference between a trademark and a website/URL/domain

Filing for a trademark will allow you to sue and prevent any unauthorized business or person who attempts to use the trademark for products or services similar to yours. The test is always to ascertain whether a certain product can be confused with the original brand or business.

For example, the word ‘Nike’ and ‘Swoosh’ identifies the shoes made by Nike and distinguish them from shoes from other companies (eg. Adidas or Reebok). Any company that attempts to use Nike's logo or slogan would get sued by Nike Company.

Wrapping up: 

Key takeaways

Registering your business name with your state or buying a URL does not offer legal protection for your business or brand. You only get legal protection through registering a trademark. A trademark gives you ownership over the use of a design, word, or phrase – such as your logo, slogan, or name of your business.

Feel free to reach out to us if you have any questions. We will be happy to strategize and talk about it. Otherwise, good luck with your business.







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