Time for Your Company’s Annual Checkup
By Nina Kaufman, Esq.Year after year, I would go in for my annual physical. Much to my surprise (and my doctor’s), despite my enormous stress levels, my blood pressure was always normal. All of my vitals were good. However, my diet was appalling. Regularly skipping breakfast, grabbing junk food on the fly, scarfing down cookies (anything with chocolate will do) for a mid-afternoon pick-me-up. No surprise, it caught up with me. My cholesterol spikes, my weight ballooned, and my thyroid was totally out of whack.
Similarly, you may run the numbers and everything can look great. Today. But there could be problems looming if you’re vulnerable in the legal areas that can affect your business. Cash flow looks great, until a legal problem stops the cash from flowing.
It reminds me of a construction client of mine who would proudly boast about how he ran his business the old-fashioned way: on a handshake. That’s fine as long as things are … fine. The problem arose when the handshake on a multimillion-dollar deal wasn’t enough. He and his customer had major disagreements over the work at a job site, and without anything in writing, the multimillion-dollar deal turned into a multimillion-dollar lawsuit. And my client’s thriving business fell into bankruptcy.
What kinds of things do you need to be aware of? When looking at “is your business legally healthy?” (also the name of my risk evaluation checklist), any of the following could become a chink in your business armor if not properly documented:
- Business formation and maintenance
- Business partner relationships
- Loans to the company
- Understandings with clients
- Agreements with vendors
- Commercial leases
- Employee policies
- Independent contractor arrangements
- Intellectual property (do you really own it?)
- Debt collection (do you have a shot at getting your money?)
- Insurance (do you really want to pay claims out of your operating cash?)
- Advisors (are they qualified?)
- Disaster recovery plan (do you have one?)
A little attention to these matters now could save you a whole host of problems down the road.
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