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.

 

 

Going out of Business : Insurance Issues

Selling a small IP practice is no easy thing. Giving one away is even harder.

When you go out of business you need to consider what happens if someone makes a claim against you. You could disappear so you cannot be found for the claim to be made or you can buy Run Off insurance. This means you will pay a sum of more than twice your usual annual premium to walk away. If however you can persuade an existing business to buy your practice and take on the liabilities you wont need to pay a run off premium but the enlarged entity may be asked to pay a larger premium due to enlarged turnover but it wont kick in immediately and will depend on the increased turnover being achieved and will not be subject to anything other than the usual multiplier.

It therefore makes sense to give your practice away rather than close it. However if you are giving away a practice rather than selling it, prospective purchasers are going to be worried that there are all sorts of hidden liabilities and wont want to touch it. So you had better sell it for a price and agree some warranties about the extent of the liabilities. Now the question is can you get cover for the cost of the cap you place on your liability or keep a reserve from the sale price.

Risky Insurers?

Feather the nest to protect the vulnerable?

The Law Society has decided to warn solicitors that they need to check the financial strength of their insurers. Just because they are on the list of qualifying insurers, it doesn't mean that they have passed any financial stability tests.
They have produced a whole new guide to insurer insolvency which you can find here.

Just as with motor insurance, I anticipate that most solicitors regard insurance as an obligation that must be paid for. The idea of actually claiming on it is usually far from our minds. Indeed that's exactly what the insurers want as they exhort us to put in place risk reducing measures and raise the premiums of those with the temerity to claim.

One thing the Law Society press release is silent on is the benefit of inserting limitations of liability into terms of trade. Instead they publish further guidance on top-up and excess layer cover. I begin to wonder if they get commission from these spiralling insurance sales.

Surely the credibility of the *ratings* industry no longer exists in the realms of ordinary men after all those highly rated junk mortgage securities (Remember Northern Rock anyone?). Even so the SRA require that Insurers must now disclose whether or not they have a financial security rating and the provider of this rating. Here is their handy list. Only one firm, Travelers is prepared to deal direct and they even quote their minimum premium, £1,575 though that was last year.

For all the dire warnings, read the full press release.

Firm Links

Azrights has set up a networking group for small law firms (of fewer than 5 partners). It is called Firm Links.

Its purpose is to afford small law firms an opportunity to discuss matters of mutual interest. It will provide a perfect environment for generating new ideas, exchanging experiences, hearing other people’s views and therefore gaining a different perspective.

The first discussion forum is taking place at a central London location on Tuesday 2nd June, 2009 over breakfast. The cost to attend is £20 plus VAT. So far we have invited solicitors known to us through networking.

There is no limit to the number of solicitors who may be added to the invitation list. The way Firm Links works is that the first 25 solicitors to accept an invitation for a meeting will attend the meeting for that month. So, there is no obligation to attend regularly.

More about Firm Links

Small practices face unique challenges – particularly in the light of the changes brought about by the Legal Services Act and the likely increased costs of regulation. By getting together and discussing business matters with other law firms we aim to find solutions and generate new creative ways of improving our individual businesses.

Apart from picking up useful information, participants will make new contacts with a variety of other lawyers. The meetings will begin with an opportunity for each participant to give a 1-2 minute ‘elevator speech’ to introduce themselves to the group. We advise bringing plenty of business cards to pass around.

Firm Links will usually meet once a month over breakfast, but we may also arrange other events too. (Only one representative of a law firm may attend the same meeting, although more than one solicitor from that firm may be on the invitation list). There is no restriction on the number of lawyers specialising in a given area of law. The only absolute rule for now is that if a firm grows to more than 5 partners it will no longer be eligible to attend Firm Links.

Topic for 2nd June discussion - Professional Indemnity Insurance

The topic for discussion is Insurance following last year’s difficult PI renewal situation. The Gazette reported on 23 April that this year is also going to be a difficult renewal situation. With the current economic downturn, and the increasingly competitive landscape on the horizon, what impact does another adverse insurance season have on small firms? Does the current insurance problem have the potential to force the closure of yet more law firms? What are your thoughts on what the insurers will be looking out for? Have you developed or implemented any changes that might have a beneficial impact on your insurance renewal experience this year? What preparation can we make? Is Lexcel relevant to small firms? Does it help?

The Law Society has also produced a practice note on a dedicated website and is running CPD seminars, as part of its tool kit to help members “more effectively prepare their firms for obtaining or renewing their PII and developing best practice approaches for the long term.”

If you do not want miss out on the first meeting on 2nd June, then please email us here before 28th May. Email the same address if you would like to be added to the invitation list for future meetings.

Attractive Insurance

Several times recently I have been told by a prospective SOLO that their quote for professional indemnity insurance premiums was lower than they expected. Given an attractive quote based on an anticipated turnover, the temptation is to take it and not ask questions about the method of calculation. After all we must be able to trust the insurance world to play fair. Newvertheless it is wise to ask how the premium is computed before you get on the escalator. One way they do it is to apply a rate to the average fee income over the preceding N years. This is great in year 1 as there is no income but then comes year 2 and the premium rises and so on until you have completed N years.

Now for a policy that pays on a claims-made basis -which means if the claim is made during the policy year, you are covered even if it was for work done last year or the year before - this is quite sensible when you think about it. When you first open the doors chances are you won't receive a claim in that first year at all but the risk increases the longer you have been in practice and so does the premium which can be a surprise and an embarrassment if your income is not on such a steep escalator.

Solicitors, of course, must choose from an approved list of providers as required by the SRA but for the unregulated freelance there are alternatives. Professional insurance is available from a wide range of sources. The cover will never be as all-embracing as the gold plated SRA policy terms but may be adequate. In my travels I discovered this interesting page . Comments very welcome. UK and Irish patent attornies have a mutual insurance association PAMIA. They also consider trademark specialists. For them N is 3.