What Is A Legal Audit?Why Do I Need One?

Definitions “Legal” is defined as

based on or concerned with the law.

“Audit” is defined as a complete and careful examination of the financial & legal records of a business or person or entity

What is a Legal Audit?Legal auditing is usually a litigation

management practice and risk management tool, used by insurance and consumers of legal services (you and your business, for example), to determine if errors, abuses, and inefficiencies exist by carefully examining and identifying legal issues and risks.

Includes a thorough legal examination of all of the books and records of a Business from a legal perspective.

Bottom line>>>A Legal Audit is like a thorough checkup to review your organization's legal health and diagnose any problems that need attention.

NOTE: A legal audit is virtually worthless unless you ask the “hard questions”.

Legal Audit Compliance Checklist-A legal audit should address at least all the following areas (if applicable): Form of Organization Corporations and Governance Federal Tax Law Compliance Other Federal Regulatory

Compliance State and Local Tax Fundraising and Access to

Capital Website and Internet Billing Practices

Intellectual Property Document Retention Policies Communications Human Resources and

Employee Benefits Leases Contracts Financials Lawsuits Legal Barriers

And Don’t Forget:LicensingCLEWorkers

CompensationShareholder

AgreementsOperating

Agreements

Succession Management and Planning Issues.

Affordable Health Care

COBRA FMLAEtc. etc. etc.

WHAT ABOUT ME? PERSONALLY?Estate PlanningWills and TrustsEldercareEducational FundingAdequate InsuranceBuy-Sell Agreements for

Corporate shareholders and Members of LLC’s

Health Insurance Compliance

Qualified PlansNon-Qualified PlansWorkers

CompensationTax PlanningEtc. Etc. Etc.

Benefits of a Legal AuditA successful audit will generate solutions

that improve your business, in addition to searching for non-compliance. The audit will generate best practices recommendations which will allow you to seize opportunity and to prevent liability and costly legal fees for litigation.

Liabilities Legal Audits Help to PreventPersonal liability of owners via “piercing of the

corporate veil” due to noncomplianceDisputes and litigation between ownersEmployee lawsuits against employerUnauthorized acts by directors, managers, officers

and ownersA legal audit of the business by regulatory or

governmental agencies, and the resulting compliance.

Major Benefit:Cost of doing it right is usually a fraction of

the costs of doing it wrong, incurring litigation costs and/or trying to fix serious legal deficiencies, omissions and errors “on the fly.”

OTHER BENEFITS OF LEGAL AUDITSMaximize tax benefitsMinimize taxes and penaltiesMinimize state and municipal tax and

statutory and regulatory fees and penaltiesIncrease the value of the business at time of

sale of assets or interestsAvoid litigation!!!!

When Should A Legal Audit Be Performed?If you haven’t done one>>>>NOW!!At least annually, in the future.Suggestion>>>>Right around tax time when

all your records are easily accessible.

Who should perform a legal audit?Your attorney, in conjunction with your

accountant.If you attorney is not familiar with business,

tax and other business issues, and many are not, find another attorney.

Ask Edward J. Gudeman of Gudeman & Associates, P.C.

ANY QUESTIONS?Presented by Edward J. GudemanGudeman & Associates P.C.1026 W. Eleven Mile Rd.Royal Oak, MI 48067248-546-2800

ejgudeman@gudemanlaw.com