We know that the word “audit” strikes fear in the hearts of business owners and individuals alike, and perhaps understandably so, but a legal audit is a good thing, we promise. Stay with us as we explain why having a business litigation attorney audit your current legal configuration can help you in more ways than 1.
What Is a Legal Audit and Why Have One?
Think of a legal audit for your business like an annual physical with your doctor, as a check-up to identify any potential issues, or risk factors, that could negatively affect the health of your business.
Businesses are all exposed to risks that can be costly, in terms of time, money, resources, and reputation. Those risks will vary from business to business and industry to industry and state to state, but all businesses have certain risks they face and should guard against. There are accounting risks. For example, it is critical for a business to maintain complete, accurate accounting records for the company and to avoid mixing personal assets with those of the business. Failing to keep personal and business assets and accounts separate can create unintended liability for the owners, or principals, of the business. There are compliance risks. By way of example, businesses must be sure to secure and maintain all of the necessary certifications, licenses, and permits. Failing to do so can lead to significant penalties and fines. There are also corporate compliance risks. If the Board of a business does not create and maintain the proper records, the business can be subject to liability by its shareholders and investors. There are certainly other categories of risks that businesses face. Our legal audit looks for those areas of weakness or vulnerability, and we develop a plan, or strategy, to address them in the most efficient manner.
Business owners are experts in their own fields, familiar with all of the rules, norms, and practices of their industries. They are experts at the work they do, but most are not experts at issues like business law, legal structure, contracts, and insurance. Even very conscientious, experienced business owners can overlook serious potential legal issues and risks that could be costly to their businesses, in terms of money, time, and/or opportunity. We know that running a business takes a tremendous amount of time, effort, and energy and that hidden, or even obvious, legal issues can be missed, or ignored, until it is too late to fix them easily. At Rosenbaum & Taylor, P.C., we offer legal audits of businesses to allow the business owners and business leaders we work with to focus on running their businesses, rather than spending time worrying about, or working on, legal issues.
Experience has shown us that for business owners and business leaders, staying on top of everything in the business can be overwhelming. A good legal audit checks the health of your business. An experienced business attorney is in the best position to analyze any risks, vulnerabilities, and potential issues within the company and to work with you to address them. Acting early to address any areas of concern is the best way to protect the business and minimize risk. Finding and resolving risks within the business before they are exposed protects the company from suffering negative consequences, which may threaten the health, profitability, and future of the business.
As experienced business attorneys, we have certainly seen how common it is for businesses to take certain shortcuts at the beginning, especially when it comes to legal structure, contracts, and insurance. We understand why that happens. People are eager to get the business started and generating revenue. Certain legal formalities and risk factors can be overlooked, deferred, or ignored, in the interest of getting the business up and running. Those shortcuts, while perhaps understandable in the very early stages of the life of a business, create weaknesses in the business which need to be uncovered and addressed, to protect the business. We never want to see a business suffer based on decisions made early in its existence.
We have also seen businesses that have been operating for many years, but which are unaware of the risks, vulnerabilities, and weaknesses in their legal structure, their internal agreements and their external contracts, and their insurance protection. As business owners ourselves, we have a passion for helping businesses protect themselves, to minimize future issues that can threaten the health of the businesses, their profitability, and their operations.
All businesses, whether they are solopreneurships, entrepreneurships, small businesses, mid-sized businesses, or larger businesses, can benefit from a legal audit. Legal audits can:
- Improve the profitability of the business by identifying redundancies, inefficiencies, and even possible theft or fraud
- Give investors and lenders more confidence in the company
- Help to avoid liability
- Minimize risks, thereby preventing, or minimizing losses
What Can You Expect During a Legal Audit?
A legal audit does not require lengthy meetings, disruption to the daily activities of the business, or a large investment. It is an efficient, valuable tool to give business owners, stakeholders, and business leaders peace of mind and confidence that the business is properly protected and insulated, as much as possible, from losses, of time and money, related to the business’ legal framework, agreements, contracts, and insurance.
Keep in mind that a legal audit is a confidential process between the attorney and the client’s business. The attorney will not report anything found during the legal audit to any governmental agency, or other authority. Business owners and business leaders can be completely candid with the business attorney because the owners, leaders, and attorneys all have the same goal: helping to protect the business so that it can continue, grow and thrive.
During a legal audit, the experienced business law attorneys from Rosenbaum & Taylor, P.C. can examine issues related to:
- the legal structure the business chose and whether it was the best choice
- the business’ formation documents, including, for example, the bylaws
- agreements between, or among, the owners, members, partners, leadership, and/or, key stakeholders, for example, the partnership agreement and/or the operating agreement
- the structure of the Board and the practices of the Board in terms of documenting its actions and its compliance with the business’ formation documents and the requirements in those documents
- contracts the business uses for its vendors, customers, clients, subcontractors, independent contractors, or for other external business relationships
- contracts the business has with other individuals, companies, partners, joint venturers, contractors or other external entity it works with
- the business’ collection practices, payment terms, cancellation policies, and other issues related to cash flow and profitability
- insurance coverage and the connection between language in the business’ contracts and the insurance coverage it should have
- any pending, threatened, or future litigation against the business, or brought by the business
- employment agreements
- the employee handbook
The above general topics may, or may not, relate to your individual business. There may be additional issues specific to your business, your industry, or concerns you have. At Rosenbaum & Taylor, P.C., our legal audits are flexible and tailored to each client’s needs, concerns and considerations.
Do You Really Need a Legal Audit and Do You Need an Attorney to do it?
If your business has never had a legal audit or has not had a legal audit in some time, it is wise to schedule a legal audit of your business by an experienced business attorney.
Solopreneurs, small businesses, mid-sized businesses, and larger businesses can all benefit from regularly having a business attorney examine, review, and report to the business leaders on any issues that need attention.
You have or should have professionals who are experts in their fields assisting your business. For example, you likely have an accountant or tax professional working with you on your company’s taxes. An experienced business lawyer is the best choice of person to conduct a legal audit of your company. A top business attorney has the experience, knowledge, and skill to offer business owners and business leaders a comprehensive, focused analysis of the legal issues that impact their businesses.
The business law attorneys at Rosenbaum & Taylor, P.C. serve their clients as not only experienced business law attorneys but as trusted business advisors and key business strategists. They take a broad, holistic approach to helping their clients’ businesses form, grow, profit, thrive, and adapt. They offer their advice and expertise and refer their clients to other professionals who can also assist them with meeting their goals.
