How to Perform a Legal Audit on Your Business
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Paige Griffith on How to Make Sure Your Small Business is Legally Covered
When you think of the legal side of your business, you may just think of contracts and making sure you don't have to go to court, but there's so much more to it. Attorney Paige Griffith is diving into what a legal audit is, why it's a necessity to do in your business, and the 10 checklist items that you need to look at when you're performing an audit. If you're ready to start making sure your business is legally covered in every way, then this episode is for you!
Check out Paigeās website
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Her Entrepreneur Journey
Paige has a background that a lot of people wouldnāt expect to go together. She has run several businesses throughout her career and if, of course, an attorney, but her journey really started about 8 years ago when she was getting ready to go to law school. She has always had a creative side, but was spending all day in very intense classes. She knew she needed a creative outlet in addition to law school, so she started a side hustle photography business. It blossomed during law school, becoming a 6-figure business very quickly, and she really started loving being her own boss and handing all the marketing and clients of this business.
At the end of law school, Paige decided to take a federal clerkship, which is a highly sought-after position that she had worked very hard for. She loved the job, and worked at it for 2 years, but was allowed to continue her photography business on the side. After 2 years of essentially working two full-time jobs, it was time for her to decide what type of law she wanted to work in. She ultimately decided to forego the traditional route, and instead started her own virtual law firm, The Legal Paige, where she helps small businesses grow their business the legal way and protect themselves. She married her passions of being a creative entrepreneur and her legal background, and has been working at it ever since!
What is a legal audit and why does it matter?
A legal audit is similar to a tax audit, but not as a scary. This is something you can do on your own for your business (or you could have an attorney do it for you). A legal audit is simply an appraisal of your business operations to determine your businessā compliance with the laws and regulations that apply to it. Itās basically a risk assessment. Itās important because you want to make sure youāre covered in all legal aspects, and doing a DIY audit will be easier on you than paying a lawyer to do it.
Not taking care of the legal side of your business is too big of a āwhat if.ā
What do we look for in a legal audit?
Every 6 months (or even every quarter) you should run a quick audit, and there are 10 things to look for:
1. Your contracts: Make sure that your contracts are actually protecting you, and that theyāre two-sided. You and your clients should both have right and responsibilities in the contract. The document should be clear and concise.
2. Business structure: Are you a sole proprietor, LLC, or S-corp? Do you need to change this or is it set up correctly? Make sure youāre legal in your state and county and that you have all the licenses and permits that you need.
3. Taxes: Make sure youāre saving enough for your taxes, and paying quarterly taxes if you need to. Also make sure that youāre talking to an accountant about anything youāre confused about.
4. Labor: Check your independent contractors vs. employees. Check on the contracts for your employees, and make sure that your independent contractors do actually look like contractors in the eyes of the law.
5. Insurance: What does your insurance policy look like and have you had any claims? Are you self-insuring? Do you have enough savings to pay your deductibles?
6. Intellectual property: Make sure you have any trademarks and copyrights that you actually need. Check that any that you have are secure.
7. Website policies: Online legalities are becoming more and more prevalent. If you are generating anything with personal information (newsletters, etc.), you are required to have a privacy policy on your site. You also want to have terms and conditions for your business. This includes copyright coverage, age limits to view the website, and anything else you need to state to protect your business.
8. Unfair business practices: This is a little more involved, but if you have a lot of disposable income that youāre spending on marketing, you need to check this out in your state. You need to make sure youāre complying with consumer protection laws.
9. Personal matters: Most people donāt remember this in their legal audit, but itās important to check. You need to make sure that youāre lining up things like healthcare, wills and trusts, power of attorney, and those things that affect your personal estate.
10. Pending or potential threatening litigation: Have you had any client issues that have come up this year? Put these into a spreadsheet and determine whether those issues could ever turn into any type of sticky situation. If they could, come up with ways you could resolve that issue before anything ever occurs.
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