YEAR-END LEGAL AUDIT (For Corporations and Limited Liability Companies)

I. Business Records Review

A. Entity Record Book: 

a. Check governing documents for the requirement to hold an annual meeting. If necessary, schedule an annual meeting. 

b. Confirm that elections/appointments of directors and officers (for corporations) and managers and officers (for limited liability companies) are up to date. If necessary, prepare resolutions electing/appointing such persons. 

c. Review entity resolutions. Are any resolutions missing? Review equity ownership records. Are they accurate? Were all transfers documented? 

d. Ratify actions of entity that were not formerly authorized by resolution including the following: 

  • Contributions to qualified plans such as profit sharing, 401(k) plans; 
  • Borrowing resolutions (bank and shareholder/member), Promissory Notes for loans to equity owners; 
  • Auto leases, office leases; 
  • Distributions; 
  • Bonuses; and 
  • Changes in equity ownership (including equity options, vesting schedules and stock splits for gifting or recapitalization) 

B. Review Shareholder Agreement or Operating Agreement to determine if any year-end valuations need to be made (value endorsements need to be signed?) 


II. Employment 

A. If you have employment agreements with employees, review all employment agreements to determine that you have adequate protections in place (trade secret, confidentiality, non-competition, non-solicitation). 

B. Review personnel records of employees to determine that all required forms have been completed such as I-9, insurance forms, etc. 

C. Review personnel files to verify that notes of reprimands or warnings have been documented properly. Review and edit job descriptions and exempt status of your employees with legal counsel. 

D. Make sure that all required postings and workplace paperwork is in place (EEO Posters, OSHA 300 log book, minimum wage postings, etc.) 

E. Review employee handbook with legal counsel to determine if any policies require modification or revision. 

F. Are personnel records secure? Maintain health information separately (Health Insurance Portability and Accountability Act a/k/a HIPAA). 

G. Renewal of Employee VISAs. 

H. Workers’ Compensation Review (contact legal counsel or TPA to settle any outstanding claims). 

I. COBRA notices, Ohio “Mini COBRA” and review general employment law compliance (state and federal law). 

J. Review employee benefits and compliance. 


III. General 

A. Review business agreements: Buy/Sell Agreements – determine whether valuation is required. Are any amendments required? 

B. Intellectual property: (a) determine if all intellectual property is protected; (b) determine if any trademarks, copyrights, etc. require or are required to be renewed, or Statement of Use is to be filed in 2008; (c) Trade Secrets protection plan; (d) review of trade names, fictitious or assumed names. 

C. OSHA records and compliance. Ohio Bureau of Workers’ Compensation (will assist). 

D. HIPAA compliance (see 

E. Leases – determine if a renewal notice/notice of exercise of purchase options (or notice of termination if lease contains automatic renewal) is required to be sent to landlord and when – calendar date. 

F. Claims – review any legal claims that you intend to bring, with particular attention to statute of limitations, bankruptcy proof of claim filing date. 

G. Review each State where you do business. Is any annual filing required? If so, when? May affect qualification of entity to do business (or to file a lawsuit) in that State. 

H. Review Bank documents: Covenant compliance, term, refinance, needs for 2008. 

I. General legal compliance review (e.g., permits, licenses, environmental). 


IV. Catastrophe Plan 

A. What is a catastrophe?: Any event that causes loss of facility or records that effectively results in the inability to do business. For example: fire, terrorist act, death, illness or disability of a key employee, or environmental spill. 

B. Records maintenance. 

(i) Backup / copy – how often? Is it adequate? 

(ii) Storage / electronic (off-site storage, server) 

(iii) Where are records maintained or stored? Can you easily obtain records? 

C. Access to Insurance Policies, Agent contact information. 

(i) Business interruption insurance 

(ii) Renter interruption insurance 

(iii) Property and casualty insurance 

(iv) General Commercial Liability insurance 

(v) Product Liability insurance 

(vi) Employee Theft insurance 

(vii) Buy/Sell Life and Disability Insurance (increase if required under Shareholder Agreement/Operating Agreement) 

D. List of inventory and equipment. 

E. Employee records. 

F. Purchase orders / customer (client) contracts. 

G. Customer and vendor list. 

H. Develop Management Succession Plan/Catastrophe Plan. 


V. Estate Plan 

A. Review Wills, Trusts, Powers of Attorney – Is it what you want? 

B. Review life insurance, cost, term, etc. 

C. Gifting / valuation of non-cash gifts. 

D. Business Succession Plan. 

E. Long term care insurance/ disability insurance/ salary continuation plans. 


VI. Computer Hardware, Software and Web site review 

A. Review license agreements, maintenance and support agreements, and website hosting agreements. 

B. Website – review material. Disclaimer of warranty. All information accurate? Securities law compliance. 

C. Who owns domain name? Renewal of Domain Name, reserve under .cc, .net, .biz, etc. 

D. Website Privacy Statement. 

E. Review website for infringement of third party property and review other sites, if your property is being infringed. 

F. Server, hardware compatible with new programs. 

G. Adding e-commerce ability to order or take orders, etc. Review compliance with law. Review advertising: avoid sending SPAM – Violation of Federal and Ohio law.


© Meyers, Roman, Friedberg & Lewis 2008