Discover the essential insights on legal audits and safeguard your business against unforeseen legal challenges and compliance issues.
Key Takeaways
- Legal audits are critical for identifying potential legal risks and compliance gaps in businesses.
- They encompass various aspects, including business structure, intellectual property, HR practices, and more, tailored to the company’s specific needs.
- Regular legal audits can prevent costly penalties, litigation, and ensure business continuity.
- Hiring a qualified lawyer for a legal audit offers objective analysis and specialized guidance.
The Crucial Role of Legal Audits in Business Compliance and Risk Management
As a business owner, you understand the numerous rules and regulations that ensure a compliant business. However, despite your diligence, important issues may be overlooked. The consequences of missing anything may cost your business in penalties and litigation fees.
Staying on top of everything can be overwhelming. However, a legal audit checks the legal health of your business. A qualified business law attorney behaves as a legal auditor to analyze any risks or gaps in liability that may exist for your company.
Predetermining where these gaps and risks exist before they are exposed protects your company from consequences that may be difficult for your business to recover from.
It’s common for a new business to take shortcuts while getting started. Unless these weaks spots are uncovered and upgraded, a successful business can fall prey to its past mistakes.
Business Attorney Trevor Brewer
What Is a Legal Audit?
A legal audit focuses on a single aspect of your business and analyzes your legal position. A legal audit ensures that no hidden risks exist within your company. The problems a legal audit identifies are those that put your company at risk for penalties and litigation.
While a legal audit performs an in-depth analysis of one area of your company, it is not so intrusive as to interfere with your company’s day-to-day operations.
Possible topics addressed in a legal audit include the following:
- Choice and structure of business entity;
- Acts of the board of directors and supporting documentation;
- Intellectual property protection;
- Methods of marketing and distribution;
- Any pending and future litigation;
- Estate planning;
- Insurance coverage;
- Human resource practices, including hiring and firing;
- Employment agreements;
- Securities law compliance;
- Antitrust and related government regulations;
- Product liability;
- Environmental law; and
- Sales and collection practices.
Not all of these topics may be relevant to your business. A legal audit’s depth and complexity depend on the company’s size. Additionally, the type of business in which the company is engaged, the number of shareholders and employees it has, and whether the business is in a regulated industry also play a large factor in the legal audit’s scope.
Why Should You Get a Legal Audit?
As a growing business, it’s essential to identify potential issues or liability before they become an actuality. The most significant benefit of a legal audit comes from discovering compliance issues before they cost your company in penalties or litigation.
There are myriad risks that you may expose your company to by failing to get a legal audit.
Accounting Risks
Failure to maintain accurate accounting records for the business or mixing personal assets with those of the business increases liability risk for the company. For example, the commingling of personal assets may lead to a piercing of the corporate veil. Piercing the corporate veil eliminates the limited liability protection afforded to business owners and exposes them for personal liability for any litigation that may be pending.
Compliance Risks
Failure to obtain all required permits and licenses for your business leads to fines, penalties, and in some instances, closure of the company. You can also face penalties and liability for failing to comply with various state and federal laws governing things like data security, marketing, and safety standards.
Human Resource Risks
Failure to have employment handbooks, employment agreements, and general employment policies increases civil liability risk from past and present employees.
Corporate Compliance Risks
Failure of the board of directors to keep accurate records and minutes of decisions made in meetings subject the company to liability by shareholders and investors.
Reporting Risks
Failure to accurately report on company performance each quarter leaves the company open to possible default by investors and lenders.
Who Should Get a Legal Audit
Any business, even one that is just starting out, should consider a legal audit. Different businesses are vulnerable to various liabilities. The legal audit serves to identify these potential issues as they apply to your company’s specific circumstances.
Even as a small business, a legal audit can provide the following benefits:
- Giving investors and lenders reason to have confidence in your company;
- Achieving profitability or increase your profit margin by spotting operating inefficiencies and serious fraud issues;
- Simplifying the tax process;
- Avoiding liability; and
- Helping you obtain specific business certifications that require legal audits.
Gaining an annual picture of your business through a legal audit can increase productivity, boost revenue, and reduce unnecessary operating expenses.
How Often Should I Get a Legal Audit
Legal audits may be completed on many topics at one time or may progress in phases. A legal audit is often initiated when new management takes over and a company wants to make sure they start with a clean slate. A costly mistake may also trigger a legal audit.
It’s wise to consider an annual legal audit for your business in the absence of these occurrences. The survival of any business requires preparation, organization, and responsiveness. A legal audit provides these protections for your business.
Why Hire a Lawyer for a Legal Audit
Just as you would hire an accountant to review your books or a tax expert to perform a tax audit, a qualified business lawyer should conduct the legal audit of your business. Additionally, an attorney can provide a clear, objective analysis of your company operations and legal procedures.
The attorneys at BrewerLong assist businesses of all sizes. BrewerLong helps you build your company, grow an established business, or mitigate risks to your company through a legal audit. We provide a clear assessment of your business through multiple discussions.
Our legal team knows that small businesses deserve and require the same legal representation as larger companies and corporations. We work closely with you to help your business achieve its envisioned goals and objectives.
Seeking the counsel of a successful business lawyer for your legal audit could mean the difference between your business’s success and failure. Contact BrewerLong today to discuss the process for a legal audit and how it can benefit your business.
This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied, with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.
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