IP Entrepreneurs: the practical checklist

CITMA magazine in February 2017 published an article under this title with contributions from a panel of  trade mark attorneys who have started out independently. If this has inspired you, here is a more practical checklist (in no particular order). We have covered quite a few of these issues before so its always worth a read of the archives particularly Sally's Moving Series from 2015

Legal Structure

Sole trader or incorporate a company. A company keeps your business life separate from your personal life but if you are going to be regulated don't do anything clever with the shares or you may find yourselves a one man ABS. Creating a company is ridiculously easy but maintaining requires  a little more effort. It may be worthwhile using a company secretarial service who can help with . I use Goodwille.

Accounts

The article emphasised the value of getting a good accountant you can work with long term. Bookeeping is vital from day one and it makes sense to decide whether you will outsource that - maybe to your compnay secretarial service - or do it yourself.  Software is readily available and it helps if your accountant can read your data. After many years using Sage I have converted to the Clearbooks online system that can cope with multicurrency accoutants and is very handy for my EU IPO and EPO deposit accounts.

Bank

Keeping business money separate from personal money is vital so you will need a bank account. Thats not as easy as it was. A bank with a good online banking interface is useful for avoiding excessive costs. I use Barclays. I've tried Lloyds which was quite helpful in providing a debit card which is useful for paying fees on websites. Business credit cards may not be that easy to get hold of on day one.

Funding

You do need some start up funding and not just to live on before you start paying your own salary. Starting softly as a tied consultant to a former employer can minimise the sums required. If you are using your own savings then recording your loans is vital so you can pay yourself back once bills get paid.

Regulation

If you want to benefit from advertising yourself as Chartered you will need to deal with IPREG and that means creating your terms of trade consistently with their requirements and creating some policies and procedures.

Insurance

Even without regulation some professional indemnity insurance is desirable. PAMIA is the goto service for most pure IP attorneys. Other insurers are available. Don't forget to put a limitation of liability into your terms of trade too.

Office

You need somewhere to work especially if you intend to employ other people. A solo practitioner can work at home with a laptop at least to begin with.

Record Keeping

For a trademark or patent attorney having some way of maintaining records is important. I use Marco a system that Filemot licenses to others at very reasonable cost. its based on Microsoft Access. Today folk seem to want web based services like WebTMS and others are available. Please comment if you have your own recommendations.

Clients

This can be an issue. If you are coming out of employment, restrictive covenants will stop you workign for you old clients, but only for a period. Business networks, contacts of all sorts and advertising will find business. If you look at the number of "agents" names appearing in the UK Trademarks Journal that include the word "trademark" you will appreciate just how much business is driven today by GoogleAds. However these are expensive clients to procure, very price sensitive and seldom provide repeat business. Working all possible work referrers is the best method. Let your satisfied clients know that you would love it if they mentioned you to their contacts. If you dont ask for referrals you won't get them. Some say you need a website or use social media.

Payroll

The whole object of workingis to generate income so you need to pay yourself and contribute to your pension (even if you dont want to -its the law). HMRC has a lot of helpful information and tools for new employers including free payroll software to calculate PAYE and NIC.

 

 

Accounting the Cost

KPMG site

One of the major worries when setting up as a solo practitioner is how to deal with the financial side. Even if you are only borrowing from yourself (or perhaps especially then) you need to keep a careful record of all transactions. My strategy was to buy some accounts software and later recruit an accountant to do the end of year accounts and tax work. I asked for recommendations, visited several firms, sent enquiries to others. It was rather hit and miss. Small business is not that attractive. (It might be different if you are in a smaller local community than the heart of London and you can network with local providers). Since then accounts packages have moved into the cloud and pay by month Software as a Service has become a popular option that feeds our just in time culture. I was therefore intrigued when I received a cold call from Big Brand Accountants KPMG promoting their service which combines everything you need in the financial way from book keeping through VAT returns and payroll to the end of year accounts and tax - all bundled into one neat monthly fee and accessible from anywhere (provided the cloud is still in the sky). Prices start at £150 per month (this year but what about next?) and depend on how much of a burden you are predicted to be!

The accounting package at the heart of it is Xero - a brand I had not heard of before. You could try the Xero software for free to see if you like its approach - but it seems to be able to deal with € and $ as well as £.

The benefit of having an accountant on board when you start should be that things get set up properly. It ought to impress prospective clients too that you are well managed and regulated even if small.  That does seem to worry some transferring clients that have been used to the apparent re-assurance of big firm providers.

Xero Direct

I am not being paid to write this and I am not a user but it certainly looks an interesting and innovative approach to the problem. The idea of having an accountant that you can call with a VAT query without risking another bill seems to address exactly the problems that some small CIPA members were having as reported during Congress.

This type of product could also be beneficial to not so solo firms too. If anyone has has experience of cloud based book keeping or dipped a toe in the water please comment. What do you see as the risks and benefits of this approach?

Regulating Client Money

One of the major difficulties I encountered in managing an IP practice as a Solicitor was compliance with the detailed acounts rules. At present those regulated by IPREG have a delightful concise Rule 11.

"Regulated persons shall ensure that their professional finances are managed appropriately."

If you are acting as a litigator it is a little more complex but in either case "money on account for fees or disbursements paid up front" can sit in the Office account. Possibly many patent and trademark agents do not even have a client account. However Financial Matters are one of the areas set to change under the latest proposals and we are beginning to see detail coming in that will make our terms of trade get ever longer and the duties of our Head of Finance ever more elaborate. So we may get:

"In the event that a regulated person receives money from a client, other than by way of payment of fees or disbursements incurred, but including money on account for fees or disbursements paid up front, they should ensure that such money is held on trust for the client in an account which is entirely separate from the regulated person’s or the firm’s professional business accounts.

In the event that money may be held on trust for a client, a registered person’s terms of business should deal with the issue of ownership of interest earned on money held on behalf of a client."



Running Away with Client's Money by Ian Burt et al

It may well be that there is no other way than to require the client account. However money can be recived for a client from the EPO and OHIM as refunds of fees and this necessarily becomes mixed with office money in deposit accounts. Many of us will have different ways of dealing with this and the client will usually be told what they are if and when it arises.   The matter is further complicated by the fact that that money is in Euros and we account in sterling. Nothing so far has appeared in the Code about the vexed question of how to convert unpaid disbursments in foregin currency into sterling. It has been common practice to include a profit cost uplift here. Even if you try to make a genunine pre-estimate of actual cost my rule (Xe rate +5% plus £10) won't be yours and indeed if your charges for currency conversion are higher than £10 nor should it be.

If you are a client where there are substantial disbursments its best to discuss policies in the engagement process. However it is worth remembering that cutting costs in one area often results in them appearing elsewhere so the overall cost is the one that needs to be fair.

Keeping it simple means keeping no client money, but that forces you into valuing disbursments so lets all head of to the Banks looking for client accounts that won't deduct charges. Dont forget to tell your clients that such money accrues no interest due to them.

Of course if IPREG give guidance on all this we are all compelled to operate the same way and that will likley be the Solicitor's way and may be anti-competitive. Remember the Red Book.

A Guest Blog on Why be Solo

Hello Shireen,

You may remember that we met at the last Solo event in London.

My reasons for going 'Solo' are similar yours in that I was looking for flexibility in my working hours (for family reasons) but I also wanted to undertake good quality IP work without commuting to London (I am based in Oxford). (I have written briefly about my experience in an article published in the May issue of the LES Newsexchange.)

Although I was an Equity Partner at a couple of firms, now that I have experienced the freedom of working for myself I think it would be hard to relinquish it!

Having said that, I don't think the benefits of operating a Solo practice are just for the practitioner. I believe that clients can receive better value and support from sole practitioners than they might from larger firms because we can be more flexible in meeting client needs and more adaptable to changing circumstances.

I am a great fan of Solo and, like you, believe that we can all benefit from sharing with one another our knowledge and experiences of running Solo. With that in mind I would be interested to hear what accounts software Solo practitioners are using and whether they would recommend it.

Belinda
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Dr Belinda Isaac
Principal