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20-0413_COVID-19_22

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This video is brought to you by the California Lawyers Association, a non-profit organization of lawyers throughout California. The video is geared for small professional firms, solo practitioners, and their clients who have questions about how COVID-19 impacts their own businesses and what financial assistance is available in this stressful and economically challenging time. Please note that this video is intended to provide general information, and does not constitute legal advice. The information in this video is based on the rules in place as of April 10, 2020. Especially for matters covered here, the rules and procedures change frequently. Be sure to keep yourself updated. Hello, I'm Ben Root. I'm a partner in the Nano Law Group, a nano-sized law firm, specializing in advising entrepreneurs and small business owners regarding investment, early-stage business operations, mergers and acquisitions, and other monetizing events. Before coming to Nano, I spent over twenty years practicing at a very large international law firm, and another five years as CEO of a technology start-up. We have had a number of questions about the area of COVID-19 and what it means for small employers. I am pleased to be able to talk with you about it today. Initially, I would like to start looking at it as an introduction, an overview, just to look at what is in it for me for these various rules. I'm sensitive to the fact that most of the time people approach with anyone who comes in and says "I'm here from the government and I'm here to help you", is immediately suspect, and there may have been some reason for that, but in this particular case, there are loan programs that can be very advantageous for small businesses. I think it is worthwhile having your firm and perhaps your clients take a look at these programs. The programs in the COVID-19 laws, they're two major laws here, we'll talk about, are designed to soften the economic impact of the COVID-19 crisis and the resulting shutdown of business. The first of these laws is the Family First Coronavirus Recovery Act, which is designed to support and keep your business intact as you go forward. It allows you to keep your critical staff, and this will become very important when we talk about loan forgiveness a couple of programs down the road here. It allows you to put in place sick leave and family leave payments. Emergency Paid Sick Leave Act provides for two weeks of paid sick leave, and the Expanded FMLA provides for up to 10 additional weeks at two-thirds pay, for employees and staff. Those things are paid for by the employer and then reimbursed by the government through tax credits, that are principally an IRC code 3111 - there is a typo in the slide there - 3111A and 3221A, and if that's insufficient, there are provisions for refund of tax payments by your tax preparer. The other two major programs for relief, economic relief during the COVID crisis, come from the CARES Act, recently passed and signed by the president. This was to create the funding to support cash flow and build for the future of small businesses. There are two major programs here to look at. The first one is the Payroll Preservation Program loan. It is a loan for which most small firms and practitioners will qualify, as long as they are not independent contractors or sole proprietors. Those later groups will be able to cover with Payroll Preservation Program loans based on their opening up last Friday and we'll talk about both of those things. The source of the money, in the case of the PPP loans, is your bank. Most banks won't deal with you if you don't have an account already established there, and some banks are even at a point where they are not ready to deal with their own customers, but we anticipate that will be resolved as people get a little bit more experienced with it. Most banks have procedures already in place for applying, many of them online, and we'll talk a little bit about more detail about those in this program and a little later in the follow-on programs. The main features here are: this is a short term cash infusion that's designed to allow people to maintain employment and pay basic payroll and other expenses. It's geared to a formula of 2.5 times the amount of the average monthly payroll for the business for 2019. There are some other provisions for businesses that don't fit that mold. The second major part of the CARES Act is the Economic Injury Disaster Loan or EIDL Loan. Unlike the Payroll Preservation Program, this is a loan that is designed to reimburse companies for economic loss suffered because of the COVID-19 crisis. Most small practitioners and small firms will qualify for this. The source is different in this case. The source is the Small Business Administration, the SBA, and checks come directly from the US Treasury. Forms are online at the SBA to fill out for this particular loan. The features here are that the amount is not necessarily set - it's to be determined by the business owner and the SBA, but there is an important feature in the law and in the forms now that allows small employers to request an emergency grant of up to $10,000 dollars, and at least under the rules, those grants are to be available quickly. We'll see how that actually materializes in practice, but that's the theory. Going forward, these programs apply generally to businesses, firms, and now, based on the regulations for April 10th, also to independent contractors and proprietors. The time for application is now, or as quickly as you reasonably can. The businesses have been able to apply since the 3rd of April, independent contractors and solos would be applying after last Friday, but all of these loans are done on a first-come and first-serve basis, and while there is a substantial amount of money set aside in the CARES legislation for this purpose, there is quite a rush to apply for this. So my suggestion is these applications should be done as quickly as possible. We're told that there are approximately a quarter of a million already pending, which has pretty much overwhelmed the system, but they will start to get to these things, so it is important that you get in line on that. The simplest way to do this is to use the SBA forms as a guide. They're both available, both the EIDL and the PPP loan, have the basic forms available, and can be downloaded from the SBA website, or we put some of those up for download on covidloandoc.com, if you have trouble navigating the SBA site, which sometimes can be a little bit confusing. Those forms, once downloaded, will give you a guide. The PPP loan is actually applied for from your bank, so the SBA form will simply give you an idea of what the bank is going to require as you go through. But having reviewed these forms, you'll have a pretty good idea of what information will be required, and what questions will be asked. Because both forms are electronic in nature, they need to be filled out and completed, or the form expires. It's difficult to go back and redo it. My suggestion would be, be prepared to answer all the questions in a single session. It won't take that long once you actually get started. Both the PPP loan and the EIDL loan can be completed in 10-15 minutes, if you have done your homework. The documentation, either you can provide it directly or work with your book keeper or tax preparer, but in general, you want to have your tax returns available, particularly your payroll tax returns. Those would normally be 941s, 942s, in some cases your 944s. And your bookkeeper knows exactly what those are. Additionally, it may be helpful to have your income tax return. That may be a 1065 form. It could be a 1120 form, and you may want to bring out your K1 if you are filing as a 1065 preparer. All these details will be helpful and can be uploaded in the process of applying for a PPP loan. The simple answer here about what is payroll is of course not going to satisfactory for some small businesses, because some of you work through a third party payer, a PEO organization who handles your payroll. That's okay, you won't have your 941s or 942s, but you will have documentation that comes from the PEO to show what your tax payments actually are. My suggestion is you have that document ready and you actually convert it into a PDF, which can be uploaded as part of your loan package. In applying for the payroll loan provision, the formula is clear. It is 2.5 times what the determined amount of the average payroll is. With the EIDL loan you don't need put in an exact amount and document that you put in the requested amount, which you should think about and we'll talk about in a little bit more detail. And then you're contacted by the SBA to work out what the SBA and the company agree as the appropriate loan. So some creativity is possible there and I suggest that by giving it careful thought beforehand, you can probably improve your position. Lastly, and maybe as important than anything else, I would tell you don't fool with the IRS. It is true that the regulations here are almost nonexistent, and the information that is available in some cases is a little vague and a little contradictory, but if you simply follow the spirit of the rules, I think you will see you could move more quickly with the banks and more quickly with the SBA, and because you'll be looking for forgiveness, in many cases, for some portions of these loans down the road, it will be important that your documentation is correct. So do your homework and I think it will improve your results. Finally, I put together a number of references in this slide deck because the time for doing this program doesn't allow me to go into all the details, but I put together here just a quick index. The IRS release is the best I've found that deals with the Family First Corona Virus Relief Act. That is the one that provides for sick leave and the family leave for your employees, and tax credits and tax refunds for you. If you go to the IRS notes, it's fairly comprehensive and actually fairly readable. In terms of applying for Payroll Protection loan, the best source that I have found so far is actually reading the rule that has been released by the SBA, and you'll find an interim final rule in a PDF form that was the position as of April 3rd. There are some questions and FAQS that have been released, both the Treasury Department and the SBA following that, that fill in obvious gaps, but a good place to start is that interim rule. Two other available sites then for getting the PPP loans would be going to the SBA site, which is noted here. It's really the horse's mouth so you might as well get it directly there, or you go to your bank. Chase is our bank. That's where I started with our loans when we applied. You'll want to go to the bank that you use and they will have, in most cases, forms online. Finally, there are four additional videos in addition to this introductory video, that the CLA will be making available to its members, and if you go to the loan programs there, it will get you to the CLA website. And there is quite a wealth of information there you may be interested in. And finally we have put up some of the documents that you may want to download, at the covidloandoc site. Among those various references there should be enough to give you a fairly detailed idea of these several programs, all designed to soften the impact of the Coronavirus 19 pandemic. Thanks for listening today and if you want further information, there will be some additional programs with further details. Please remember that the information that is presented here is not legal advice and it is based on the rules that we have as of April 10th, 2020, and especially for the matters covered here as I mentioned earlier, be sure to update yourselves frequently, as rules and procedures are changing. Thank you for watching this video, and doing your part in navigating through the Corona Virus 19 pandemic.

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Duration: 18 minutes and 9 seconds
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Language: English
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Posted by: arellanob420 on Apr 19, 2020

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