The Coronavirus Relief Bill

The Coronavirus Relief Bill—The CARES Act

Entrepreneurs and small business owners have been among the hardest hit by this new economic reality. You are the heart and soul of the business community and survival is a must. We are here to be by your side and help you through this perilous time. Navigating all of the risks is not going to be easy, but we are going to stay on top of what is happening and do all we can to help you take the right risks to ensure that you not only survive, but position yourself to thrive once this storm passes!

Gratefully, some financial help appears to be on the way and there are many questions and uncertainty about what it really means. This is what we know now.

CARES ACT. The Senate and House have just passed a roughly $2 trillion coronavirus response bill (the "CARES Act") as a life preserver for the American economy to keep both individuals and businesses from drowning during this crazy time during which much of American life has halted. Now that President Trump has signed the CARES Act, below is what we can expect.

RELIEF FOR SMALL BUSINESS . In addition to the benefits to individuals, $377 billion dollars of the aid package is dedicated to small businesses which is going to be broken up in the following ways.

Paycheck Protection Program (PPP) Loans.

Amounts and Forgiveness. $350 billion of the $377 billion dollars will be used for potentially forgivable small business loans. Borrowers can borrower 2.5 times their monthly payroll expenses, up to $10 million. The amount of loan forgiveness may be modified or reduced if the employer decreases the number of employees as compared to the prior year, or if the employer reduces the pay of any employee by more than 25% as of the last calendar quarter. Employers who re-hire workers previously laid off as a result of the COVID-19 crisis will not be penalized for having a reduced payroll for the beginning of the relevant period.

Repayment Terms. Payments of principal, interest, and fees will be deferred for at least 6 months, but not more than 1 year. Interest rates are capped at 4%.

Limitations on Uses. Any portion of the loan that is used to keep workers on payroll for up to 8 weeks or pay rent, mortgage and existing debt could be forgiven, as long as the workers stay employed through the end of June. However a salary cap of $100,000 applies. These loans cannot be used for leave pay that is already covered under the Families First Coronavirus Response Act.

How Loans Will Be Distributed. These loans will be distributed through approved banks, credit unions and other lenders. It is unclear which lenders those will be and when they will start taking applications, but expect to see the common players in the SBA lending world being involved given the incentives that the government is giving to lenders to process and originate these loans.

Personal Guarantees and Collateral. No personal guarantees or collateral are going to be required for these loans.

ECONOMIC INJURY DISASTER LOANS (EIDLs).

The CARES Act is also expanding the eligibility requirements of small businesses and adding funding to the EIDLs program administered by the SBA. EIDL loans can be up to $2 million, have low interest rates, and long repayments terms.

There are EIDL grants as well. $10 billion of the $377 billion is dedicated for small business grants through the EIDL program of up to $10,000 to cover immediate operating costs. These grants are forgivable.

As long as you are not using the EIDL loan or grant proceeds for the same expenses as PPP loans, there is no restriction on getting both loan types.

You can apply for an EIDL by clicking here to get started.

EXISTING SBA LOAN RELIEF. $17 billion of that $377 billion will be dedicated to providing relief to small businesses that already have SBA loans. These funds will be used to cover 6 months worth of principal and interest payments. So if you have an existing SBA Loan, you may be in luck.

RELIEF FOR SOLO-ENTREPRENEURS AND FREELANCERS. In the past, self-employed people, freelancers, and independent contractors could not apply for unemployment. To account for those individuals, the bill adds a temporary Pandemic Unemployment Assistance program to help people who lose work as a direct result of the public health emergency through the end of this year.

REFUNDABLE TAX CREDITS. Employers are eligible for a 50% refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit will be available to employers whose businesses were disrupted and those that had a decrease in gross receipts of 50% or more when compared to the same quarter last year. This credit can also be claimed for employees who are retained but not currently working due to the crisis for all employee wages for firms with 100 or fewer employees.

CONCLUSION. We are watching these developments closely and want you to be aware of all the opportunities that are available to help you weather this storm. If you have any questions about this, you can reach out to any of our business attorneys. This summary has been compiled and prepared by Josh Freeman, Esq., who can be reached at josh@freemanlovell.com .

Stay healthy and strong! We’re here to help and guide you through!

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Beneficial Ownership Rules

December 28, 2023

Starting January 1, 2024, a new rule took effect requiring all registered legal entities, including limited liability companies and corporations, to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). We wanted to give you a heads up about the rule and give you as much information about what it means to you. What is the rule? The rule, which is called the Beneficial Ownership Information Reporting Requirements (BOI Rule) , comes from the Corporate Transparency Act, which was passed by Congress in 2021. This law created the BOI Rule with FinCEN as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other deceitful ownership structures. Under this new law, FinCEN will permit Federal, State, and local officials to obtain ownership information for authorized activities related to national security, law enforcement, and intelligence. When does the rule take effect? And when do I have to submit a report? The BOI Rule took effect on January 1, 2024 . If your company existed before January 1, 2024, you must file its initial beneficial ownership information report by January 1, 2025 . If your company is formed or registered after January 1, 2024, you must file its initial beneficial ownership information report within 90 days after receiving actual or public notice that its creation or registration is effective. If any beneficial ownership information changes, you will have 90 days from the day of the change to file an updated or corrected report with FinCEN. What if I don’t file a Report? According to FinCEN: “The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.” What do I need to include in the report? The BOI Rule requires that all entities report information about the company, each individual with substantial control over the entity, and each beneficial owner. What information is required to report about the entity? Full legal name of your company and any DBAs names; Complete current street address for your company's principal place of business (P.O. boxes will not be accepted); The jurisdiction of formation or registration; and Tax identification: IRS tax identification number (TIN) and employer identification number (EIN). What information is required to report about the controlling individuals and beneficial owners? The individual's legal name; Individual's date of birth; Individual's residential address; and A unique identifying number from an acceptable identification document (such as an unexpired driver's license, passport, identification document issued by a State or local government or Indian tribe) and the name of the issuing state or jurisdiction. Who is considered to have substantial control of the entity? Examples of an individual that exercises substantial control over the entity are: An individual is a senior officer (President, CEO, CFO, COO, Manager, or other office who performs a similar function); An individual has the authority to appoint or remove certain officers or a majority of directors of the reporting company; An individual is an important decision-maker for the company; or An individual has any other form of substantial control over the company. Who is considered a beneficial owner? A beneficial owner is an individual that owns or controls at least 25% of the entity’s ownership interests. This includes individuals that indirectly own or control 25% of the ownership interest. For example, if Joe is a 50% owner of Parent LLC, which in turn owns 50% of Subsidiary Corp, then Joe beneficially owns 25% of Subsidiary Corp (50% of 50% = 25%). What type of entities will be required to file a report with FinCEN? All domestically formed entities and foreign registered entities in the USA are required to file a report. Types of entities include corporations, limited liability companies, limited partnerships, general partnerships, and any other entity registered with a state Secretary of State or Division of Corporations or other similar office. There are some types of companies that are exempt from the reporting rule, and in general they are companies that already have to report beneficial ownership to another federal agency. The 23 exemptions listed by FinCEN are: Securities reporting issuer, Governmental authority, Bank, Credit union, Depository institution holding company, Money services business, Broker or dealer in securities, Securities exchange or clearing agency, Securities exchange or clearing agency, Other Exchange Act registered entity, Investment company or investment adviser, Venture capital fund adviser, Insurance company, State-licensed insurance producer, Commodity Exchange Act registered entity, Accounting firm, Public utility, Financial market utility, Pooled investment vehicle, Tax-exempt entity, Entity assisting a tax-exempt entity, Large operating company, Subsidiary of certain exempt entities, and Inactive entity. Can you help me with my company’s report? Yes! We are happy to help prepare and file your company’s BOI Rule report with FinCEN before the December 31, 2024 deadline. We offer a flat-fee service that is discounted based on how early you pay and submit your information. Sign up for our BOI Rule report service HERE. We also know that some situations can be complicated, so please feel free to ask us any questions regarding compliance with the beneficial ownership interest reporting requirements for your company by emailing teamjosh@freemanlovell.com .