3 Reasons Why You Should Get a Legal Audit of Your Business This Year
Businesses face a variety of legal requirements and must comply at any given minute. Failure to follow specific laws or procedures can put your business in hot water with taxing authorities, civil rights entities, unions, and more.
While your policies and practices may have been in compliance when they were implemented, legal requirements change over time. It is a good idea to look over your procedures from time to time to determine whether they are up to date with current laws and regulations. The best way to do that is to get a legal audit for your business. Below are just a few reasons that you should schedule your legal audit this year.
1. Failing to maintain books and records could undermine your liability protection.
One of the many reasons that small businesses choose to incorporate is for asset protection. They usually set up their business so that if the company owes a significant debt, that creditor cannot come after the owner personally for that liability.
To maintain that benefit, you have to keep up with regular—often annual—requirements, such as filings with the Secretary of State, keeping financial records updated, and more. A legal audit will be able to examine your practices and determine what you may be missing that could undermine your liability protection.
2. Failing to keep up with permits and licenses could cost your business money.
If you do not maintain the proper licenses and permits to do business, you may be subject to fines and penalties. In some situations, you may not even be able to continue operating your business. Restrictions on operations may be temporary, or affect only part of your company, but they can definitely harm your bottom line.
Operating without a license or permit is also generally frowned upon by the public as well. News media often reports when businesses are subject to fines or penalties. That type of information can hurt your reputation, which may take years to repair.
3. Inaccurate or missing records could put you in default with lenders.
Lending institutions regularly impose specific obligations on businesses when it comes to reporting or maintaining records. Banks want to be sure that their investment is on the right track, and many will build in a means to review your documents on demand. If you do not have those records available, it could land the business in default. A default may allow a financial institution to “call up” your debt, which essentially makes the entire balance due immediately.
You can avoid this type of situation by understanding what obligations you have as it relates to your financing and then making sure that you are consistently meeting those requirements.
A legal audit can spot these problem areas (and more) and correct potential issues long before they cost your company significant time and money. Learn more by contacting our team today!