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The Zest

Co-Founders Splitting Up: Who Keeps the Brand?

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"We're splitting up the business. Who gets to keep the name?" Usually, the brand belongs to the business that's been using it, not to the founder who thought it up. If you formed an LLC and the LLC has been selling under the name, the LLC owns the brand, and whoever keeps the LLC keeps the brand. But the real answer depends on what's written down, and gaps in the paperwork are where splits get expensive.

Here's how ownership works, and what to settle before anyone walks out the door.

The brand follows the business, not the idea

Federal law defines a trademark as a word, name, symbol or device used to identify and distinguish one seller's goods from everyone else's and to indicate their source. That definition is about the business selling under the name. Coming up with the name doesn't make it yours. Using it as the brand of a business does.

The same idea shows up when a mark changes hands. A registered mark, or one with a pending application, can only be assigned together with the goodwill of the business it's used in. You can't peel the name away from the business and walk off with it as a bare word.

So the first question in any split is a factual one: whose business has been using the name? If it's the LLC, the LLC is the owner, whatever anyone remembers about who said it first in the brainstorm.

Check what the records say

Three records tell you where things actually stand.

The trademark record. If there's a federal application or registration, look at who's named as the owner. If it's the company, good. If one founder filed in their own name while the company was the one using the brand, the record and the reality don't match, and that's a problem to fix before the split, not after.

The copyright in the logo. Copyright starts with whoever created the work. If one of the founders drew the logo, that founder may hold the copyright in the artwork, and a transfer of copyright isn't valid without a signed writing. Who owns your logo walks through the contractor version of this same problem.

The accounts. Domains, social handles, the email list, the online store. These aren't trademarks, but in a split they're often what people fight over, because whoever holds the login has practical control. Write down each one and whose name it's in.

What the operating agreement does

If you formed a Florida LLC, the operating agreement governs the relations among the members and between the members and the company. Where the agreement is silent, Florida's LLC Act fills in the default rules.

Those defaults don't hand a departing member a piece of the brand. When a member dissociates, their right to take part in managing the company ends, and they keep their financial interest only as a transferee. The company's assets, the brand included, stay with the company.

That's a sensible default, but it isn't a plan. A good operating agreement says what happens when a member leaves: how a buyout is priced, who keeps the name, and whether the departing member can start something confusingly close to it. Getting those answers on paper while everyone still gets along is far easier than negotiating them during the split. The contracts that protect your brand covers where those terms usually live.

When there's no paperwork at all

Plenty of co-founders never formed anything. They just started selling together. In Florida, two or more people carrying on a business for profit as co-owners form a partnership, whether or not they meant to. So a business with no entity and no agreement can still be a partnership in the eyes of the law, and the founders end up arguing over what it owns without a document to point to.

The other no-paperwork problem is the IP that never moved. The logo one founder designed before the company existed. The domain registered on someone's personal card. The trademark application filed by whoever got to it first. None of these fix themselves when the founders part ways. Each one needs a signed transfer, or it stays where it is. And forming an LLC later doesn't move anything on its own, because an LLC is not a trademark.

Practical steps before the split

Take an inventory. List every name, logo, tagline, domain, social account, trademark application and registration, and note whose name each one is in.

Decide who keeps the brand. Put it in a written separation or buyout agreement, along with what the other founder can and can't use going forward.

Sign the transfers. If anything sits in a founder's personal name and the company is keeping the brand, get a written assignment of the trademark along with its goodwill, and a signed transfer of the copyright in the logo and any other brand artwork.

Record the trademark assignment with the USPTO. Federal law says an unrecorded assignment is void against a later buyer who paid for the mark without notice of it, unless the assignment was recorded within three months or before that later purchase.

Move the accounts. Change the registrant on the domain, the owner on the social handles and the login on every platform, so the practical control matches the paperwork.

Written agreements won't make a hard split friendly. What they do is make sure that whatever you agree to can be enforced, and that the public record shows who owns the brand.

If you're sorting out who keeps what, you can see how the contract work and packages are priced on the services page, and the FAQs page answers most of what comes up before a first call.

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(No legal advice is given on the discovery call. It's a chance to tell me what you're building and hear how the process works.)

Sources

This article is general information, not legal advice. Reading it does not create an attorney-client relationship.

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