LLC or LP for Protecting Intellectual Property?

A company’s intellectual property can be one of its most valuable assets.  Websites, patents, copyrights and trademarks are very important to protect just as if it were the house you live in.

The key issue is how to protect something that may not be bricks and mortar and that may not have developed its value and further that value may be a prediction.  Intellectual Property carries with it the availability to “license” itself.  This means that a permission to use is granted and a fee is paid.  There are ways, conditions and terms for licensing, but an interesting liability comes from the fact that multiple licenses may exist to unrelated parties.

For instance Joe owns a patent and he has licensed his patent under a parent company to five different parties.  If Joe brings the profits back to the same company that holds the patent and Party #5 sues him for some reason, he could lose the income of Party 1,2,3 and 4.  This does not mean you have to create a company for every licensing agreement, it means that you use the philosophy of Divide and Conquer.

By holding the licensing separate from the patent and by choosing the appropriate corporate entities a creditor can be stopped at the walls of the company.  Generally, this is done with an LLC although sometimes an LP is used.  The Intellectual Property and the license are housed separately and this would keep the assets of each other beyond the reach of creditors.  This should be arranged before any money or funding come into the companies.

The disadvantage of this is that it may cost more in taxation.  This is why you need a qualified expert to helpe you choose your method and your entities.

If you want informaion on how to do this.  Click here to sign up for a free consultation at Global Strategic Advisors. Assess you current situation at no cost to you and speak to a professional advisor,