SME owners are used to being self sufficient when it comes to the needs of their business. However, relying on self-help regarding the legal requirements of a business can be a risky endeavour.
While escaping the cycle of working ‘in’ the business rather than ‘on’ it is an ongoing challenge for many business owners, waiting for a legal problem to arise before addressing it can leave your business open to issues of non-compliance and legal liability.
Below Yulia Barnes is Founder and Managing Partner of Barnes Law, explores why businesses of every size should be conducting regular legal health checks to both safeguard against potential legal problems and proactively develop strategies to combat them should they arise.
What is a legal check-up?
In its most basic form, a legal check-up functions as an audit of all aspects of your business. Working with a legal professional, they will review your company structures, contracts, taxation and insurance against the legal framework, ensuring there are no gaps or oversights which could result in legal issues down the line.
Essentially, a legal check-up will involve all aspects of the business that could potentially impact your ongoing operations and profitability, as well as the regulatory requirements for your business and the industry it operates within. Doing so not only ensures contracts and official documentation is valid and up to date, but also safeguards your rights and responsibilities as a business owner, minimising any potential risk or liability that could result in costly legal action.
It’s not just about protecting your business, though. Understanding the full extent of the law and regulatory framework of your industry can also help you spot further opportunities for growth and expansion, and keep up with shifting legal obligations as your business priorities change.
Assessing the health of your business
While legal concerns may not be at the forefront of your mind when running the day-to-day operations of your business, it’s vital to understand how they feed directly into the overall health of your company.
While it almost goes without saying that a good legal standing bolsters the reputation of a business, making it easier to attract investors and partners, failure to adhere to legal requirements can have a very real impact. One large-scale study from the Legal Services Board found that in England and Wales alone, 32% of small businesses experienced a legal issue annually, translating into 1.8 million businesses and 15.4 million legal issues every year. Preventable issues such as these directly impact time, money and resources that could be better spent elsewhere in the business.
Similarly, failure to ensure compliance with legislation around health and safety, discrimination and harassment and other key policies, or adequately protect your business through robust employment contracts or third-party agreements can open you up to legal liability.
When does your business need a check-up?
Ideally a legal check-up should be conducted regularly on your business to ensure everything is up to date, identifying any potential problems or liabilities before they become a bigger issue. An annual review is the industry standard, but there may be certain circumstances when additional reviews are required.
If your business is undergoing substantial changes, such as a move in premises or company structure, legal obligations and requirements must be considered, such as contractual obligations and insurance that is fit for purpose.
Similarly, plans to expand operations into new markets require you to comply with all the relevant laws and regulations of those markets, such as ensuring commercial contracts are compliant with UK GDPR and EU GDPR, for example.
Even if your business is not undergoing any dramatic changes, it is still worth bearing in mind that legal requirements change as your business naturally grows. If you have not consulted with a legal professional in a while or sought legal expertise for certain routine legal tasks, it’s possible that you may be opening yourself up to potential liability if your corporate structure and corresponding agreements are not legally robust.
Final thoughts
Too often, business owners enlist the help of legal professionals when a problem has already arisen. This is why regular legal health checks are so important. Instead of waiting for a problem to blindsight you, regular reviews for everything from contracts to compliance can help you identify potential pitfalls and nip them in the bud before they become costly and time-consuming legal issues.
Yulia Barnes is Founder and Managing Partner of Barnes Law.