Legal entity management compliance is challenging for many businesses because of the government-issued rules and regulations they must follow. Today, companies are increasingly feeling the pressure to simplify compliance processes in an effort to reduce risks and avoid costly penalties.
Although some organizations choose to ignore compliance requirements, non-compliance can have significant financial and reputational costs. According to a study by the Ponemon Institute and Globalscape, compliance can save your business money in the short- and long- term. In fact, the cost of non-compliance with legal business requirements is more than double that of simply paying your annual compliance fees. In abiding by the rules, you can steer clear of burdensome fines, unexpected business disruptions, and loss of revenue.
What Is Legal Entity Management?
Legal entity management is a complex governance system that encompasses many facets of an organization. Entity management describes the process an organization uses to manage critical business information and compliance documents. Effective legal entity management can easily become a complex exercise due to the numerous departments, processes, systems and responsibilities involved. This includes the legal, compliance, finance, tax, and sometimes human resources departments.
Altogether, managing entities requires control around an organization’s regulatory compliance, administrative maintenance, fund relationships, investor governance, and record-keeping. In short, legal entity management is the means of synchronizing and centralizing corporate information in order to better manage the evolution of compliance and tax regulations and the fear of the unknown regulatory changes and associated costs for all legal entities within an organization.
Legal Entity Management Compliance + Risks
Compliance
Compliance is a critical factor of entity management, and it’s important that your organization is aware of both local and national rules and regulations so as to comply. Because filing and reporting due dates and requirements vary from state to state, managing the timelines for multiple entities can be challenging. Your business will need to comply with federal, state, and local obligations in order to stay in good legal standing, avoid wasting time and accruing costly penalties, and for peace of mind.
Compliance Risks
Organizations of all types and sizes, whether public or private entities, for-profit or nonprofit, state, or federal are exposed to compliance risks. Compliance risk is an organization’s potential exposure to legal penalties, financial forfeiture, and material loss, resulting from a failure to act in accordance with governing laws and regulations and internal policies.
Non-compliance puts your organization at risk of losing its good standing and forfeiting revenue, among other factors. Common legal entity compliance risks include:
- Lack of data management
- Inadequate operations and processes
- Missing annual report deadlines
How to Avoid Legal Entity Management Compliance Risks
Compliance risk management is an ongoing process that requires organizations to identify, assess, and mitigate potential losses that may arise as a result of noncompliance. For many organizations, having good compliance risk management policies and procedures in place is the key to managing compliance risks.
Because compliance policies and procedures must be revisited regularly in light of new regulations, it can be overwhelming to maintain the framework of your policies. Here are three ways to avoid legal entity management compliance risks:
Implement Technology
An entity management solution like EntityKeeper can eliminate error-prone, time-consuming manual tasks that prevent teams from focusing on other valuable, revenue-generating work. Entity management software gives you the tools to monitor and track important deadlines. Plus, automated alerts and email notifications notify you of upcoming due dates so you never miss a deadline.
Engage a Corporate Services Provider
EntityKeeper provides services including formation, incorporation, mergers, annual report, and registered agent. With a corporate service provider like EntityKeeper, you avoid costly and time-consuming manual tasks. Plus, you ensure that your reports are accurately completed every time. Our corporate services streamline your reporting processes to ensure you never miss a deadline and remain compliant across all of your legal entities.
Make a Plan
In the midst of daily business functions and with varying regulations, it can be easy to overlook a deadline. That’s why it is important to plan ahead, account for all upcoming due dates, and document the process for consistency moving forward. When you have a steady plan for ongoing compliance, you’re more likely to stay on top of things and avoid missing a step.
Get Started with EntityKeeper
Ready to learn more about how EntityKeeper can address your legal entity management challenges and help you comply with federal and state regulations? Get started with EntityKeeper today or request a demo to see the solution in action.
