Abstract:
A system and method of facilitating the establishment and operations of a professional services organization governed by rules of professional conduct that prohibit obtaining investments from non-licensed investors. The method compromises establishing a stand-alone, turn-key solution company to provide necessary services to one or more professional service organizations. These services are paid for by the professional service company and classified as expenses, not profit sharing which is prohibited by various jurisdictions&#39; rules of professional conduct or codes of professional responsibility. The turn-key solution company is then able to be owned by shareholders who are not themselves licensed professionals. This results in outside equity investments with predictable cash flow and returns without running afoul of any applicable professional codes or rules. Such capital infusion allows the professional services entity to grow and capture market share in a manner that would be highly difficult or impossible solely through organic or internal funding.

Description:
BACKGROUND OF THE INVENTION 
       [0001]    1. Field of the Invention 
         [0002]    The present invention generally relates to establishing and operating a professional service entity, and more particularly to systems and methods for facilitating the establishment and operations of such entities to provide access to capital while ensuring the professional independence of the members of such entities. 
         [0003]    2. Related Art 
         [0004]    In today&#39;s regulatory environment, it is not possible for professional service (e.g., law, engineering, medical, chiropractic, accounting, architectural and the like) firms or companies to attract outside investors. That is, such professional service companies have traditionally been subject to state and other jurisdictional rules and/or regulations that hamper receiving equity investments from investors. For example, the American Bar Association&#39;s Model Rules of Professional Conduct, Rule 5.4 states in relevant part that “a lawyer or law firm shall not share legal fees with a nonlawyer,” and “A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.” 
         [0005]    These model rules are very influential and have been adopted by almost every jurisdiction (in some form or another) in the United States as either “rules of professional conduct” or “codes of professional responsibility.” For example, the Board of Governors of the State Bar of California and the Supreme Court of California have adopted Rules of Professional Conduct 5.4 which states that “a lawyer or law firm shall not share legal fees with a nonlawyer.” 
         [0006]    The Illinois Rules of Professional Conduct, Rule 5.4(d)(1) states that “a lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if . . . a nonlawyer owns any interest therein.” 
         [0007]    New York Lawyer&#39;s Code of Professional Responsibility, DR 3-102, states “[a] lawyer or law firm shall not share legal fees with a non-lawyer,” and DR 3-103 states “[a] lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law.” 
         [0008]    The Florida Rules of Professional Conduct, Rule 4-5.4(e) states: “A lawyer shall not practice with or in the form of a business entity authorized to practice law for a profit if: (1) a nonlawyer owns any interest therein . . . (2) a nonlawyer is a corporate director or officer thereof . . . or (3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.” 
         [0009]    Similar professional rules and statues have been adopted by various states and jurisdictions and also apply in some shape or fashion to non-law firm professional services (e.g., engineering, medical, chiropractic, accounting, architectural and like services). The stated purpose of these rules is “to protect the lawyer&#39;s professional independence of judgment.” (District of Columbia Rules of Professional Responsibility, Rule 5.4, Comment 1). Comment No. 2 to the District of Columbia Rules of Professional Responsibility, which governs the practice of law in the U.S. capital city, observes: “Traditionally, the canons of legal ethics and disciplinary rules prohibited lawyers from practicing law in a partnership that includes nonlawyers or in any other organization where a nonlawyer is a shareholder, director, or officer.” That is, the aforementioned regulations have been promulgated due to the public policy of needing to keep professional service providers objective in their advice and delivery of their respective services, without being beholden to outside financial pressures from investors who are more concerned with on a return on their investment, than the rendering of unbiased professional advice to clients. 
         [0010]    Given the foregoing regulatory environment, equity investments in law firms by “outsiders” such as angels, venture capital firms, private equity firms, institutional investors, high net worth individuals and other private investors are impossible. Equity investments, however, are the means by which all other non-professional services, start-up companies raise money to enter into business. This capital restraint has prevented professional service firms from obtaining the sometimes massive, equity-funded growth that companies that are not constrained by such investment restrictions can experience. 
         [0011]    In business, to grow a company without the benefits of outside capital requires the company to be “organically grown,” or to grow using “partner money” (i.e., internal funding from the partners who comprise the professional service firm and must all share the same licensure to practice in the regulated, professional field). Either way, organic growth or partner money is oftentimes insufficient to compete in the marketplace. That is, one of the main disadvantages of having to grow through partner money is that a professional service firm is not able to capture massive market share or name recognition. Therefore, such firms grow at slow rates, and rarely are able to capture market share in multiple jurisdictions or professions. 
         [0012]    The above-described problem can be illustrated in another fashion. In today&#39;s corporate environment, momentum and market share are major contributors to the success of a company. For example, certain industries typically have dominant companies that capture incredible market share within a short period of time. Such industries include the internet search engine industry with such players as Google and Yahoo!. Another example includes the overnight courier industry where FedEx was able to roll out operations and set up subsidiary or satellite operations in multiple locations in a manner that allowed its business to function and expand rapidly. It could be argued that FedEx would never have come to be a dominant player if it were constrained by the types of regulations restricting outside investors that constrain professional service firms. Nor could FedEx&#39;s business model function if it were constrained by limited coverage or scope if it had to rely solely on organic growth to fund its operations. Two or three, or even ten pick up locations for FedEx would not allow its business model to function. Outside investors were critical to FedEx&#39;s success to roll out its operations concurrently in multiple markets. 
         [0013]    A solution to the above-described problem oftentimes used by professional service firms is to borrow (i.e., take on debt), which is not as tightly regulated by “rules of professional conduct” or “codes of professional responsibility” as equity investments. However, typical venture capitalists and private investors are looking for returns that are often 100 times their initial investment and only invest in companies that offer that potential. Interest rates that are the market norm for loans (e.g., 2-7%), however, offer nowhere near the return that equity investments offer to investors. This severally limits the amount of debt capital available to be loaned to regulated professional service firms and such debt, when available, is usually lent by a local bank that does not have the tolerance for risk that equity investors can justify through the potential of the blockbuster returns mentioned above. 
         [0014]    Given the foregoing, what is needed is a system and method for facilitating the establishment and operations of a professional service organization such that outside equity investments may be received and used by such organization to finance its operations within the existing (and restrictive) regulatory framework described above. 
       BRIEF DESCRIPTION OF THE INVENTION 
       [0015]    The present invention meets the above-identified needs by providing a system and method for facilitating the establishment and operations of a professional service (e.g., law, engineering, medical, chiropractic, accounting, architectural and the like) firm such that outside equity investments may be received and used by such an organization to finance its operations within the existing (and restrictive) regulatory framework where, for example, “a lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law.” 
         [0016]    The method, in an embodiment, comprises receiving investment capital into a services company from a plurality of investors and the entering into a services agreement between the services company and a professional service firm, wherein the services company provides all the services needed to operate the professional service firm. Then, the services company receives payment from the professional service firm for rendering the services and can then pay the plurality of investors at least a portion of the payment received from the professional services company in the form of a stock dividend or partnership distribution. The methodology takes place wherein the plurality of investors are not necessarily licensed to practice the professional service provided by the professional service firm, and wherein the jurisdiction promulgates at least one regulation prohibiting non-licensed persons from being members in the professional service firm. 
         [0017]    In an embodiment, the present invention is a computer program product capable of receiving information about the amount of investment capital invested into the services company from the plurality of investors. The computer program product would also be capable of determining a payment amount due to the services company for rendering at least one of the plurality of services needed to operate the professional service firm, and determining the distribution amount payable to each of the plurality of investors based in part upon the payment amount due to the services company for rendering at least one of the plurality of services to the professional services firm. 
         [0018]    An advantage of the present invention is that it allows outside equity investors—who may be (most likely) wholly unlicensed or simply unlicensed in the relevant jurisdiction(s)—to invest in regulated professional services firms. 
         [0019]    Another advantage of the present invention is that it allows a newly-started professional service firm to more quickly capture market share, name recognition and momentum on a multiple market basis through economies of scale to compete with larger, more established firms; wherein such economies of scale may be passed on to consumers (i.e., the clients of the professional service firm), further enhancing growth. 
         [0020]    Another advantage of the present invention is that it allows a newly-started professional service firm to avoid the traditional route of debt financing in order to obtain capital to launch, operate and grow the firm. 
         [0021]    Yet another advantage of the present invention is that it allows for predictable and profitable cash flow and substantial returns to investors to entice them into investing in a professional services firm, all while respecting the public policy rationale of objectivity and independence of professionals giving advice to clients and professional responsibility guidelines governing such professionals licenses. 
         [0022]    Yet another advantage of the present invention is that the business arrangement between the turn-key solution provider company and the professional service firm can be duplicated in multiple jurisdictions, allowing the professional firm to expand at a much greater rate than would normally be possible without the capital constraints on operations curtailing such growth. 
         [0023]    Yet another advantage of the present invention is that it promotes good public policy by allowing professional companies to experience economies of a scale, all of which will be passed on to consumers in their utilization of such professional services, and thus ultimately provide more access to such practicing professionals. 
         [0024]    Yet another advantage of the present invention is that it promotes good public policy by allowing professional companies to operate at lower costs and therefore provide professional services to individuals and businesses whose needs are currently not served except by very limited pro bono work (i.e., professional services undertaken voluntarily and without payment), or by public assistance centers such as low-income or indigent law clinics and the like. 
         [0025]    Further features and advantages of the present invention, as well as the structure and operation of various embodiments of the present invention, are described in detail below with reference to the accompanying drawings. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0026]    The features and advantages of the present invention will become more apparent from the detailed description set forth below when taken in conjunction with the drawings in which like reference numbers indicate identical or functionally similar elements. Additionally, the left-most digit of a reference number identifies the drawing in which the reference number first appears. 
           [0027]      FIG. 1  is a block diagram of an exemplary system and method for facilitating the establishment and operations of a professional service firm according to an embodiment of the present invention. 
           [0028]      FIG. 2  is a block diagram of an exemplary computer system useful for implementing the present invention. 
       
    
    
     DETAILED DESCRIPTION 
       [0029]    The present invention is directed to a system and method for facilitating the establishment and operations of a professional service (e.g., law, engineering, medical, chiropractic, accounting, architectural and the like) organization. 
         [0030]    In an embodiment of the present invention, a corporate structure is established enabling regulated law firms or individual lawyers to accept outside equity investments from passive, non-licensed investors (i.e., non-lawyers) in a manner that provides for the investors&#39; capital to go to a corporate entity that provides a plurality of turn-key services to the law firms or individual lawyers that they would otherwise receive from multiple third-party sources; all while: (a) allowing for the investors to receive a return on their investment; and (b) respecting the objectivity and independence of the legal professionals giving advice to their clients and any applicable professional responsibility guidelines governing the professional licenses (i.e., state bar licenses) of the attorney(ies). 
         [0031]    The present invention is now described in more detail herein in terms of the above exemplary legal professional services context. This is for convenience only and is not intended to limit the application of the present invention. In fact, after reading the following description, it will be apparent to those skilled in the relevant art(s) how to implement the following invention in alternative embodiments (e.g., engineering, medical, chiropractic, accounting, architectural and like regulated, professional service firms). 
         [0032]    The terms “entity,” “organization,” “firm,” “company,” “business,” “individual” and/or the plural form of these terms are used interchangeably throughout herein to refer to those person(s) or entity(ies) offering professional (e.g., law, engineering, medical, chiropractic, accounting, architectural, etc.) services and would benefit from the system and method that the present invention provides for facilitating the establishment and operations of such entities. 
         [0033]    Referring to  FIG. 1 , a block diagram illustrating an exemplary system  100  and method for facilitating the establishment and operations of a professional service firm, according to an embodiment of the present invention, is shown. 
         [0034]    System  100  includes a traditional, stand-alone, for-profit entity  102  which, in alternate embodiments, may take the legal form of an S corporation, a C corporation, a limited liability company, a sole proprietorship or any legal entity that may be owned by one or more outside (non-licensed) investors  104 . As will be appreciated by those skilled in the relevant art(s), investors  104 , in alternate embodiments, may include one or more angel investors, venture capital firms, private equity firms, institutional investors, (high net worth) individuals and any other private investors (referred to sometimes herein individually as “shareholder,” and collectively as “shareholders”), seeking scaleable and predictable returns in the form of cash flow (i.e., dividends) and/or capital appreciation from their equity investment into the traditional, stand-alone, for-profit entity  102 . As will be appreciated by those skilled in the relevant art(s) after reading the disclosure herein, shareholders  104  need not be licensed professionals. 
         [0035]    In an embodiment, traditional, for-profit entity  102  is structured as a “turn-key solution” company capable of providing one or more professional service firms (e.g., law firm)  108  with a host of services that professional service firm  108  would otherwise have to pay to independent, third-party vendors. Such services, in alternate embodiments, would include: real estate leasing services; furniture rental; computer and information technology (IT) equipment services; support personnel (e.g., IT, secretary, mailroom and paralegal) staffing; office administration services; recruiting and employment administration; compliance services; performance management; health, dental and other benefits management; training and development services; hardware, software and other intellectual property licensing services; and like business services. 
         [0036]    That is, in one embodiment, turn-key solution company  102  would provide professional service firm  108 , via a contractual relationship (i.e., an outsourcing agreement, a services agreement, etc.), with all the services and staff needed to successfully establish and operate firm  108 —with the exception of the actual licensed professionals (i.e., the attorneys) engaging in the practice of law. In one embodiment, as will be appreciated by those skilled in the relevant art(s) after reading the disclosure herein, firm  108  would have no employees, lease, furniture or any other liabilities, except for the service contract with turn-key solution company  102 . 
         [0037]    As will be appreciated by those skilled in the relevant art(s) after reading the disclosure herein, however, the staff provided by turn-key solution company  102  to professional service firm  108  would be working directly under the control of the licensed professionals. 
         [0038]    In an embodiment where turn-key solution company  102  would provide professional service firm  108 , via a contractual (outsourcing services) relationship, with one or more services, firm  108  would pay turn-key solution company  102  for all such services as a single expense rather than paying a plurality of vendors. 
         [0039]    In alternate embodiments, professional service firm  108  may take the legal form of a limited liability partnership (LLP), a professional limited liability corporation (PLLC), a professional corporation (PC), sole proprietorship or any legal form the jurisdiction in which firm  108  is located allows licensed professionals to offer professional services to the public (i.e., one or more clients  110 ) and in which the members (i.e., partners/owners) of firm  108  must each possesses a professional license to engage in the professional relevant service. 
         [0040]    In an embodiment, a professional firewall  106  is implemented between firm  108  and turn-key solution company  102  such that to insure that firm  108  stays in conformance with the applicable rules of professional conduct or codes of professional responsibility. That is, firewall  106  is a set of (contractual) rules of engagement between firm  108  and turn-key solution company  102  that draws “bright lines” to assure that: (a) company  102  is a stand-alone company where its shareholders  104  may not participate in the profits of firm  108 ; (b) states that the licensed professionals practicing within firm  108  must maintain complete objectivity and have no pressures from outside investors  104 ; (c) the relationship between turn-key solution company  102  and firm  108  is one of vendor-to-vendor; (d) the turn-key services provided by company  102  are market driven and “arms length” to firm  108  at all times; (e) recognize that although there may be a perceived symbiotic relationship between the two entities, such a relationship must not in any way taint the advice given to the clients  110  of firm  108 ; and (f) recognizes that company  102  and investors  104  will not interfere in, nor be privy to, the trusted (e.g., attorney/client, doctor/patient, etc.) communications between client  110  and the professionals who are members of firm  108 . 
         [0041]    As will be appreciated by those skilled in the relevant art(s) after reading the disclosure herein, the capital raised from shareholders  104  by turn-key solutions company  102  will be used to create the infrastructure needed to provide the turn-key services to one or more professional services firms  108 . In turn, as turn-key solutions company  102  provides services for one or more professional services firms  108 , it earns a market-driven, “arms length” service fee which is an expense to firm  108 . Thus, the profit of firm  108  is simply the professional (e.g., per hour or contingency) fees charged to its clients, minus the fees paid to turn-key solution company  102 . Accordingly, the public policy of barring outside investors  104  from investing, and subsequently pressuring and tainting the professional advice given to clients  110  is eliminated by the fact that the profits of firm  108  are not shared, and the vendor-to-vendor relationship is respected. However, this coordinated, mutually-beneficial investment structure  100 , allows outside investors  104  to achieve predicable returns (that could be extremely large) as company  102  expands, while providing the critical services in a turn-key manner that that in the prior art would constrain the growth of firm  108 . 
         [0042]    In sum, as a result of system  100  and the methods of facilitating the establishment and operations of a professional service firms of the present invention, a predictable and profitable cash flow and substantial returns to shareholders  104  is achieved such to entice them into investing in turn-key solution company  102 . Accordingly, the capital restraints experienced by professional service organizations  108  that constrain their ability to bring in outside investors is substantially mitigated and solved, while still respecting the public policy rationale of objectivity of licensed professionals giving advice to clients  110  and the professional responsibility guidelines governing such licensed professionals. 
         [0043]    The present invention (i.e., system  100 , the methods of facilitating the establishment and operations of a professional services firm of the present invention, or any part(s) or function(s) thereof) may be implemented using hardware, software or a combination thereof and may be implemented in one or more computer systems or other processing systems. However, the manipulations performed by the present invention were often referred to in terms, such as adding or comparing, which are commonly associated with mental operations performed by a human operator. No such capability of a human operator is necessary, or desirable in most cases, in any of the operations described herein which form part of the present invention. Rather, the operations are machine operations. Useful machines for performing the operation of the present invention include general purpose digital computers or similar devices. 
         [0044]    In fact, in one embodiment, the invention is directed toward one or more computer systems capable of carrying out the functionality described herein. An example of a computer system  200  is shown in  FIG. 2 . 
         [0045]    The computer system  200  includes one or more processors, such as processor  204 . The processor  204  is connected to a communication infrastructure  206  (e.g., a communications bus, cross-over bar, or network). Various software embodiments are described in terms of this exemplary computer system. After reading this description, it will become apparent to a person skilled in the relevant art(s) how to implement the invention using other computer systems and/or architectures. 
         [0046]    Computer system  200  can include a display interface  202  that forwards graphics, text, and other data from the communication infrastructure  206  (or from a frame buffer not shown) for display on the display unit  230 . 
         [0047]    Computer system  200  also includes a main memory  208 , preferably random access memory (RAM), and may also include a secondary memory  210 . The secondary memory  210  may include, for example, a hard disk drive  212  and/or a removable storage drive  214 , representing a floppy disk drive, a magnetic tape drive, an optical disk drive, etc. The removable storage drive  214  reads from and/or writes to a removable storage unit  218  in a well known manner. Removable storage unit  218  represents a floppy disk, magnetic tape, optical disk, etc. which is read by and written to by removable storage drive  214 . As will be appreciated, the removable storage unit  218  includes a computer usable storage medium having stored therein computer software and/or data. 
         [0048]    In alternative embodiments, secondary memory  210  may include other similar devices for allowing computer programs or other instructions to be loaded into computer system  200 . Such devices may include, for example, a removable storage unit  222  and an interface  220 . Examples of such may include a program cartridge and cartridge interface (such as that found in video game devices), a removable memory chip (such as an erasable programmable read only memory (EPROM), or programmable read only memory (PROM)) and associated socket, and other removable storage units  222  and interfaces  220 , which allow software and data to be transferred from the removable storage unit  222  to computer system  200 . 
         [0049]    Computer system  200  may also include a communications interface  224 . Communications interface  224  allows software and data to be transferred between computer system  200  and external devices. Examples of communications interface  224  may include a modem, a network interface (such as an Ethernet card), a communications port, a Personal Computer Memory Card International Association (PCMCIA) slot and card, etc. Software and data transferred via communications interface  224  are in the form of signals  228  which may be electronic, electromagnetic, optical or other signals capable of being received by communications interface  224 . These signals  228  are provided to communications interface  224  via a communications path (e.g., channel)  226 . This channel  226  carries signals  228  and may be implemented using wire or cable, fiber optics, a telephone line, a cellular link, an radio frequency (RF) link and other communications channels. 
         [0050]    In this document, the terms “computer program medium” and “computer usable medium” are used to generally refer to media such as removable storage drive  214 , a hard disk installed in hard disk drive  212 , and signals  228 . These computer program products provide software to computer system  200 . The invention is directed to such computer program products. 
         [0051]    Computer programs (also referred to as computer control logic) are stored in main memory  208  and/or secondary memory  210 . Computer programs may also be received via communications interface  224 . Such computer programs, when executed, enable the computer system  200  to perform the features of the present invention, as discussed herein. In particular, the computer programs, when executed, enable the processor  204  to perform the features of the present invention. Accordingly, such computer programs represent controllers of the computer system  200 . 
         [0052]    In an embodiment where the invention is implemented using software, the software may be stored in a computer program product and loaded into computer system  200  using removable storage drive  214 , hard drive  212  or communications interface  224 . The control logic (software), when executed by the processor  204 , causes the processor  204  to perform the functions of the invention as described herein. 
         [0053]    In another embodiment, the invention is implemented primarily in hardware using, for example, hardware components such as application specific integrated circuits (ASICs). Implementation of the hardware state machine so as to perform the functions described herein will be apparent to persons skilled in the relevant art(s). 
         [0054]    In yet another embodiment, the invention is implemented using a combination of both hardware and software. 
         [0055]    While various embodiments of the present invention have been described above, it should be understood that they have been presented by way of example, and not limitation. It will be apparent to persons skilled in the relevant art(s) that various changes in form and detail can be made therein without departing from the spirit and scope of the present invention. Thus, the present invention should not be limited by any of the above described exemplary embodiments, but should be defined only in accordance with the following claims and their equivalents. 
         [0056]    In addition, it should be understood that the figures in the attachments, which highlight the structure, methodology, functionality and advantages of the present invention, are presented for example purposes only. The present invention is sufficiently flexible and configurable, such that it may be implemented in ways other than that shown in the accompanying figures. 
         [0057]    Further, the purpose of the foregoing Abstract is to enable the U.S. Patent and Trademark Office and the public generally, and especially the scientists, engineers and practitioners in the relevant art(s) who are not familiar with patent or legal terms or phraseology, to determine quickly from a cursory inspection the nature and essence of this technical disclosure. The Abstract is not intended to be limiting as to the scope of the present invention in any way.