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What Are the Workers’ Compensation Insurance Requirements for North Carolina Employers?

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Workers’ compensation claims have a twofold purpose: to compensate employees who suffer work-related injuries and to protect employers from being sued by their injured employees. For this reason, North Carolina requires most businesses with three or more employees to obtain workers’ compensation insurance. Here, we discuss the general worker’s compensation requirements for North Carolina employers and how COVID-19 might impact employee claims.

General Requirements for Employers

The North Carolina Workers’ Compensation Act (North Carolina General Statutes §97-94) generally requires all businesses in the state (whether they operate as corporations, sole proprietorships, LLCs, or partnerships) with three or more employees to obtain worker’s compensation insurance. Certain exemptions apply, including for businesses that employ:

  • “casual” employees (those whose work is casual and not part of the regular trade or business);
  • domestic servants working in a household;
  • farm laborers when there are fewer than ten full-time, non-seasonal workers;
  • employees of certain railroads; and
  • North Carolina federal government employees.

Who Does NOT Count as an “Employee” for Workers’ Compensation Purposes?

Whether a business employs three or more employees is not as straightforward as it might sound. The following groups of individuals generally do not need to be covered by workers’ compensation insurance:

  • Business owners, such as partners in a partnership, do not necessarily count as employees.
  • Corporate officers may elect to be excluded from coverage (however, they will still be counted as employees when determining whether a business has three or more employees, even if they opt-out of coverage).
  • Finally, with some exceptions, independent contractors generally do not qualify as employees.

How Much Does Workers’ Compensation Coverage Cost Employers?

The cost of workers’ compensation insurance coverage will vary depending on the number of employees a business employs and the type of jobs its employees perform. The North Carolina Rate Bureau is a non-profit organization that sets “class codes” and “base premium rates” for workers’ compensation, which will determine the total cost of workers’ compensation for a business.

These figures vary and reflect how dangerous a job is compared to another type of job (with high-risk jobs carrying higher base rates than lower-risk jobs). Depending on an employee’s class code and base premium rate, the North Carolina Rate Bureau will set a rate for its workers’ compensation premiums, which businesses must follow.

North Carolina workers’ compensation insurers usually offer discounts to employers. These discounts will vary based on the insurer but can include discounts for a drug-free workplace; for businesses that are part of a professional, trade or industry group; and for businesses that implement certain safety or fall prevention programs. 

COVID-19 and Workers’ Compensation in North Carolina

For the foreseeable future, COVID-19 appears to be here to stay, and businesses across the State continue to be affected by it. While most businesses will undoubtedly be impacted by COVID-19 in one way or another, many business owners likely wonder how it will affect their workers’ compensation claims. Most notably: Will employees be able to file workers’ compensation claims for having contracted COVID-19?

Unfortunately, the short answer is that we simply do not know. It is unclear whether these claims will be compensable under North Carolina law. While it appears more likely that they will be denied, to understand why this issue is so complex, it helps to review the laws surrounding workers’ compensation claims.

Coverage for Workers’ Compensation Injuries

Coverage for workers’ compensation injuries is divided as follows:

  • Injuries that occurred because of an accident or specific trauma (e.g., a slip-and-fall at work); and
  • Injuries caused by an “occupational disease.”

Potential COVID-19 claims would likely have to be filed as “occupational disease” claims. The North Carolina statutes define an occupational disease as either one of the specific diseases enumerated in the Act (which does not include COVID-19), or any disease acquired while working at a job that placed the person more at risk for getting the disease than the general public.

Thus, if the general public is equally exposed to the disease outside of the place of employment, the disease is not considered an occupational disease and therefore would not be covered by workers’ compensation.

Establishing Eligibility for a COVID-19 Workers’ Compensation Claim

To be eligible for benefits, an employee must show that he or she contracted COVID-19 from exposure on the job and, because of the job, he or she was at a greater risk than the general public. It might be that some frontline workers, such as healthcare workers, would be able to show that they were at higher risk of exposure to the virus than the general public. Likewise, it is possible that others, such as grocery store clerks, could show the same.

What becomes more challenging to prove, however, is causation, that is, a link between the employee’s job and the resulting COVID-19 infection. Even if it were likely that the employee contracted the virus while on the job, (such as while working at a hospital or treating patients infected with COVID), it would be very hard to prove this, as the disease could have just as easily been contracted outside of work. In other words, proving causation is extremely difficult, if not virtually impossible.

Currently, unless legislation is passed that defines COVID-19 as an occupational disease, it appears likely that an employer will be in the position to deny such claims in North Carolina. However, this is an unfamiliar terrain, and the coming months are likely to bring more clarity.

Workers’ Compensation Claims During Uncertain Times

While the costs associated with a workers’ compensation policy will vary depending on the size and nature of your business, owners of small, medium-sized, or large businesses should be aware of their obligations. At this time, it remains unclear whether COVID-19 claims will be covered under workers’ compensation insurance, but business owners should make sure they are fully in compliance with the laws regardless of what changes may be on the horizon.

Chapter 11 Reorganization in North Carolina

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There are many forms of reorganization and bankruptcy, but not all are available to – or make sense for – small businesses. Due to recent changes in the law, however, a Chapter 11 reorganization, which used to be somewhat challenging to access for many small businesses, has become much more accessible. 

Here, we discuss what a Chapter 11 reorganization is, the benefits of one to a small business, and the beneficial changes in the law that have recently been made. 

What is a Chapter 11 Reorganization, and What are its Potential Benefits?

In short, a Chapter 11 reorganization is a process that enables a business to reorganize and continue to operate despite financial struggles. More specifically, a Chapter 11 filing provides for the following:

  • Automatic Stay Protection: The automatic stay is a bankruptcy law mechanism that forecloses creditors from collecting on the small business debtor’s debts. Litigation is put on hold, lenders cannot proceed with foreclosures, and sales of business assets are also put on hold. 
  • Rejection of Unfavorable Contracts: A small business debtor can reject unfavorable contracts, such as a rental lease, allowing him or her to leave a rental location with above-market rent that is no longer financially feasible. 
  • DIP Loan access: A small business debtor can borrow money through access to a debtor-in-possession, or DIP, loan. These loans allow lenders to obtain super-priority liens, putting them first in line before the small business debtor’s existing lenders (making these loans very appealing to a lender and, therefore, opening up more credit availability to debtors).
  • Asset Sales: Further, a small business debtor can sell its assets (such as equipment, machinery, and other property) free and clear of liens and claims (liens will, however, attach to the proceeds of the sale).
  • Debt Reprieve: Finally, a small business owner facing financial struggles can find relief through a debt reprieve. This means that the business owner can seek to take a break from paying pre-bankruptcy debts. This allows the business to direct money to more urgent needs or to build up a cash reserve. While the debts will need to be paid back eventually, the temporary reprieve can offer breathing room for the business. 

The Small Business Reorganization Act of 2019 

While the benefits above may sound too good to be true, until recently, many small businesses have been unable to take advantage of a Chapter 11 reorganization because of certain restrictions and high expenses involved in a filing. 

The Small Business Reorganization Act (SBRA), which went into effect on February 19, 2020, aimed to address some of the issues preventing small businesses from taking advantage of a Chapter 11 reorganization. The SBRA created a sub-chapter V of the Bankruptcy Code, which has the main objective of allowing small businesses to quickly and inexpensively emerge from bankruptcy with a court-approved plan of reorganization. 

Here are just a few of the many changes the SBRA made:

  • Continued Ownership: allows small business debtors to retain a stake in the reorganized entity, so long as the ultimate reorganization plan is fair and equitable. The debtor’s management may also continue to operate the business. 
  • Plan of Reorganization Confirmation: holds that creditors no longer need to confirm a small business debtor’s plan of reorganization, as long as they meet certain requirements. This means that small businesses will no longer have to negotiate with creditors regarding payments, saving both time and money.
  • Appointment of a Trustee: provides that a trustee is appointed and will act to facilitate the reorganization and assist the small business debtor with following its plan of reorganization. 
  • Streamlined Process:  removes procedural hurdles and many of the costs associated with corporate reorganizations.
  • Delayed Payment of Administrative Expense Claims: provides that the small business debtor is no longer required to pay administrative expense claims on the effective date of the plan. Instead, business owners are permitted to pay these administrative expenses claims throughout the term of the reorganization plan. 

Further Benefits Implemented by the CARES Act 

The SBRA provided for a small business, which it defined as a business with debts in an amount not greater than $2,725,625, to restructure its debts through the more cost-effective Chapter 11 process. However, many small businesses did not qualify because they carried too much debt.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) amended the SBRA to increase the debt limit for debtors filing a Chapter 11 reorganization under subchapter V of the Bankruptcy Code. The debt limit was increased to $7.5 million, allowing for more debtors to take advantage of the streamlined Chapter 11 process. This debt limit will return to its prior limit of $2,725,625 after one year (unless further extended). 

Is a Chapter 11 Reorganization Right for Your Small Business?

A Chapter 11 reorganization is not the solution for every struggling small business. However, because of the recent changes to the Bankruptcy Code made by the SBRA and the further (temporary) changes implemented by the CARES Act, a Chapter 11 reorganization is now a more accessible option for many small businesses who find themselves unable to pay their creditors or afford their bills. 

Contact Our Experienced Business Law Attorneys     

There are many complex issues that you must address in the reorganization  process to ensure that you are taking the proper steps to protect your business. There is no one-size-fits-all solution, so it’s vital to consult an experienced business planning attorney who can advise you on the benefits, potential pitfalls, and challenges involved in this process. 

At Wilson Ratledge, our attorneys regularly advise our clients on processes like business reorganization. A small business ourselves, we are committed to helping business owners thrive in a post-pandemic climate. For questions or assistance, call one of our experienced North Carolina business attorneys at 919-787-7711 or via our contact form below. We look forward to serving you and helping your business find its way back to success in a turbulent market.

Eminent Domain Laws in the State of North Carolina

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Eminent domain is the power of the government to take a person’s private property and convert it into public use under the Fifth Amendment.

North Carolina law permits the right of eminent domain, which is the government’s power to seize or “take” your private property for public use.

The North Carolina Supreme Court has defined “taking” under the power of eminent domain as “entering upon private property for more than a momentary period, and, under warrant or color of legal authority, devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a way as substantially to oust the owner and deprive him of all beneficial enjoyment thereof.”

The Supreme Court also explained that the test of public use is not the advantage or great benefit to the public. Rather, an appropriate “public use must be for the general public, not a use by (or for) particular individuals.

Under eminent domain, the government may only exercise a taking power if it provides the property owner with “just compensation.” But exactly what constitutes “just compensation” may not be the ousted property owner’s idea of what would be a fair, reasonable, and accurate reflection of your property’s value.

Here, we will explain how the eminent domain process works, what courts have deemed “just” compensation, and the importance of understanding your rights as a North Carolina property owner.

How Does Eminent Domain Work?

First and foremost, the government cannot simply pull the rug out from underneath unsuspecting property owners: it must give the property owner appropriate notice of its intent to take the property under eminent domain. Further, the government must provide an offer of just compensation based on the fair market value of the property. The offer will include a summary of value, but the property owner can request a full appraisal instead.

Typically, in North Carolina, the state Department of Transportation (NCDOT) will attempt to negotiate the value of your land. A right of way agent, or “ROW agent” is the DOT’s representative who handles the case. The agent gets the DOT’s property appraisal and is in charge of negotiating with the landowner and his or her attorney. The ROW agent will make an offer to the property owner for the property based on the DOT’s own appraisal.

Like any other person who wants to buy a property, the ROW agent’s objective is to take the property for the least amount of money—regardless of whether that’s truly “just compensation.”

Because it’s their full-time job, the ROW agent has done this many more times than the average property owner has. He or she will know things about the process that the average citizen may never learn. As the “little guy” going up against the government, you need your own advocate with years of eminent domain experience and vast knowledge of this process.

Part of this analysis is to hire an independent appraiser to value your property. With this information, you and your attorney can determine if the State’s offer is fair. If not, you can reject the offer and try to negotiate a better one. Finally, if you reach an impasse, you can fight the DOT’s offer in court.

If there’s no settlement, the government will typically take your property by instituting legal action. The government will file a lawsuit and deposit the amount it believes to be just compensation with the court. The laws of eminent domain permit the landowner to withdraw the deposit without giving up any rights to seek additional compensation (provided your attorney files the appropriate motion with the court).

Of course, it’s best to rely on an experienced North Carolina eminent domain attorney to address the issues surrounding the filing a motion to withdraw the deposit, the deadlines for filing a response, preserving your property rights, engaging possible property valuation experts, and developing a legal strategy to bring about the best possible outcome in your case.

Can I Stop the Government from Taking My Property?

You can fight to stop the eminent domain process if the proposed taking fails to satisfy the requirements of a public purpose. If the test is met, the government can’t be stopped from taking your property, but again, you can try to get the best possible price for your property.

North Carolina courts usually order the property owner and the government seeking to take the property to participate in a mediated settlement conference. In this meeting, a neutral third-party will try to bring about a reasonable and agreeable price of settlement. However, the mediator doesn’t have the power to force either party to settle the dispute.

If there is no agreement, a 12-person jury will decide the amount of money to which you’re entitled from the government for the taking of your property.

Contact Our Experienced Real Property Attorneys     

There are many complex issues that you must address in the eminent domain process to make certain that you get the highest possible price for your property. This isn’t a do-it-yourself matter like filling in the blanks on a standard form, so don’t try to negotiate with the government on your own.

When it comes to protecting your property, understanding the laws surrounding eminent domain procedure is vital. Even more important is having an advocate on your side who can inform you of your rights as a property owner and help you staunchly protect them.

At Wilson Ratledge, our attorneys regularly advise our clients on the condemnation process in our State and work to ensure that they are positioned to gain the compensation to which the law entitles them. For questions or assistance, one of our experienced North Carolina real property attorneys at 919-787-7711 or via our contact form below. We look forward to serving you.

What is the Probate Process, and Can I Avoid It?

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In the conventional wisdom, the probate process does not tend to carry a positive association: it is known for being costly, time-consuming, and stressful. As a result, many people who have experienced the probate process following the death of a loved one want to avoid it in the future and might feel motivated to help other family members avoid it through intentional estate planning.

However, there is quite a bit of confusion that still surrounds the probate process. What exactly does probate mean? How does the process work? Is it generally good for families who want to see their deceased family members’ wishes honored? If not, is it possible to avoid the process? If so, how?

Here, we discuss the probate process, explaining what it is, how it works, and what you can do now to protect your estate – or your loved ones’ estates – in the long term.

What is Probate?

When a person dies, everything he owns, from the cash in his wallet to the money he invested, is considered a part of his estate. Probate is the legal process of settling this estate by paying off the decedent’s debts and distributing his assets.

The probate process is designed to effectively manage estates in cases in which the decedents failed to provide specific directives. It can be lengthy, often taking more than twelve months to complete. From court costs to attorneys’ fees, it can be expensive. And for those who wish to keep their family affairs private, it’s important to know that matters of probate are public record: once an estate is probated, anyone can access information about it, including who inherited the decedent’s property. As such, for many family members mourning a loss, the probate process can make an already emotional and trying event more challenging.

How Does Probate Work?

Upon a person’s death, a personal representative will be designated to manage the estate. This person may have been named in the decedent’s will. If the decedent did not designate anyone, another qualified individual – dictated by State law – will be appointed. The personal representative will submit an application to the court along with a preliminary inventory of the estate, a certified copy of the deceased’s death certificate, and a copy of the will (if applicable). The personal representative will pay a fee to open the estate and must take an oath to carry out certain responsibilities to settle the estate.

During the probate process, the personal representative will fulfill several duties, including the following (among others):

  • Filing an inventory all of the decedent’s assets;
  • Paying any of the estate’s outstanding debts;
  • Providing notice to known creditors;
  • Filing taxes for the decedent;
  • Setting up a bank account to pay for any expenses incurred by the estate, such as debts and funeral costs;
  • Selling assets to cover debts if needed;
  • Distributing assets to known heirs; and
  • Preparing a final accounting to close the estate.

Not all assets are subject to probate. If the decedent named a beneficiary for an asset in a will or by some other instrument, generally, that asset will not pass through probate.

Additionally, North Carolina law specifically designates certain items that do not pass through probate, for instance, life insurance proceeds with a named beneficiary, securities held in transfer-on-death accounts, and jointly-owned property (when the joint owner still lives), among others.

If I Want to Avoid the Probate Process, Can I Set up My Estate Plan to Do So?

Proactively setting up an estate plan to avoid probate can lighten the burden that the process often imposes. Here are a few ways to do so.

Name a beneficiary for your accounts. The most straightforward way to avoid probate is to ensure there is a named beneficiary on all of your – or your loved ones’ – accounts. This should include all retirement accounts, brokerage accounts, bank accounts, and insurance policies, as well as Payable on Death (POD) or Transferable on Death (TOD) accounts. Failure to name a specific beneficiary will result in accounts being probated upon the account holder’s death.

Protect your assets. Naming a beneficiary through a POD or TOD clause will only protect accounts, not personal effects. Living trusts are a tool that can be used to keep any asset out of probate. Bank accounts, real estate, or other personal property like a vehicle can be placed in a living trust. Ownership of the property will be transferred to you as trustee and upon your death, your successor will take control of the trust and distribute the property as dictated by the terms of the trust without going through probate.

Consider a joint tenancy. This option frequently applies to married couples, business partners, or other individuals who share ownership rights in property. Property held in joint tenancy does not pass through probate. Instead, the surviving owner automatically takes full ownership of the shared property.

Designate an heir and keep your assets simple. Estates limited to $20,000 in personal property can be settled through a simplified process that does not require formal probate. Additionally, a surviving spouse stands to inherit all the decedent’s assets and the estate’s value is $30,000 or less, the estate can be settled without probate. If the surviving spouse is the only heir, a simplified probate process known as “summary administration” will apply in place of traditional probate.

Contact Our Experienced Estate Planning Attorneys     

When it comes to securing your assets – or protecting your loved ones’ assets – an estate plan can eliminate much of the burden, cost, and uncertainty that can come from relying on the administrative process. At Wilson Ratledge, our attorneys regularly assist our clients in preparing estate plans that ensure their desires and wishes will be met. For assistance setting up your estate plan, contact one of our experienced North Carolina estate planning attorneys at 919-787-7711 or via our contact form below. We look forward to serving you.

What Is A Special Needs Trust, and How Do I Know if I Need One?

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If a loved one is disabled, elderly, or otherwise unable to manage his finances, what can you do to help? These individuals often turn to state or federal assistance programs to cover their basic living expenses. However, there are often expenses that public benefit programs do not cover. Further, these programs have strict qualification limits. As such, if your loved one comes into money due to a family death or other life event, it could cost him his much-needed public assistance benefits.

Fortunately, the law supplies a remedy in the form of special needs trusts. Here, we will explain what this type of trust is, how it works, and why it is necessary.

What Is A Special Needs Trust?

At its most basic level, a trust is a legal instrument designed for the safekeeping of assets. Assets like cash, investments, or property can be held in a trust until a specific time or condition warrants distribution. A trustee – the person or entity who is designated to manage the trust – must distribute the assets within the trust in a way that is consistent with the beneficiary’s best interests. This includes authorizing any change to or withdrawal from the trust.

A “special needs trust” or SNT is a specific type of trust that provides a supplemental benefit to a disabled or elderly beneficiary without disqualifying the individual from any public assistance benefits.

How Does A SNT Work?

SNTs are used to fund expenses outside the scope of what is covered by government assistance. The goal is to give the beneficiary access to those things that will enhance the beneficiary’s quality of life. An SNT allows the beneficiary to continue to receive public assistance, while also having a source to fund other goods and services that public assistance does not cover.

By holding the assets of a disabled or elderly individual in an SNT, any increase in assets or income will supplement the beneficiary’s circumstances, rather than potentially disqualifying them from the public assistance programs on which they rely. Many of these individuals depend on programs like Medicaid, Social Security Income, and similar resources to cover basic living expenses. SNTs are intended to fund those expenses outside of the basics that are covered through other means. Furniture, vacations, specialized medical procedures, and sporting equipment are just a few things an SNT can fund.

What Warrants the Use of A SNT?

SNTs were created by federal law to protect Medicaid and SSI recipients. Because public assistance programs impose strict limits regarding assets and income, the SNT keeps the assets of public assistance recipients from barring additional benefits.

For example, if a benefits recipient receives a lawsuit settlement, inheritance, or other monetary gift or award, this change in assets could disqualify him from receiving further benefits. The SNT covers the percentage of the person’s financial needs that public assistance payments do not cover. The assets held within the trust do not count, essentially, to qualify (or bar) the person for public assistance.

In other words, you may gather your loved one’s assets into an SNT to “shield” them from governmental scrutiny, thus effectively allowing your loved one to still qualify for public assistance.

Even if the beneficiary does not currently receive government assistance, an SNT can serve as a supplement to benefit an individual who is unable to manage his finances. Should the beneficiary need to pursue public assistance in the future, the SNT can serve as an immediate resource to fund your loved one’s lifestyle and cover his expenses during the often-lengthy application process for most benefit programs.         

Further, parents of children with special needs can benefit from setting up an SNT, which will ensure that their children have the resources to meet their future needs without risking the ability to receive public assistance benefits. In these cases, the SNT provides a means to pay for goods and services not covered by these benefits. If a parent simply left assets to a disabled child through a standard will, such inheritance could disqualify the child from receiving any government benefits.

How Is A SNT Created?

There are three types of SNTs in North Carolina:

A Self-Settled SNT

The self-settled SNT and the pooled SNT are both funded by the beneficiary’s assets. The name is misleading, however, as a self-settled SNT must be established for the beneficiary’s benefit by a parent, grandparent, legal guardian, or a court and not the beneficiary himself.  

A “Pooled” SNT

Unlike the self-settled trust which is only an option for beneficiaries under the age of sixty-five, the pooled SNT does not have any age restriction and it can pool the resources of many parties, including the beneficiary, to fund it. Pooled SNTs must be managed by a nonprofit association. Medicaid must be reimbursed with any remaining funds in the trust for all self-settled trusts, regardless of the source of the funding.

A Third Party SNT

Finally, third-party SNTs are funded by someone other than the beneficiary. A testamentary trust created by a parent for the benefit of a special needs child to take effect upon the parent’s death is one example of a third-party SNT. These trusts do not have an age restriction and there is no requirement to repay any Medicaid expenses upon the death of the beneficiary.

It’s vital that the person or entity who creates the trust – or its legal representative – crafts the language of the trust carefully to ensure it is valid and will withstand scrutiny. Ideally, the SNT will be created before the beneficiary reaches the age of 65.

Contact Our Experienced Estate Planning Attorneys     

At Wilson Ratledge, our attorneys assist clients in preparing and executing documents that help them remain financially secure and sound. We regularly help clients set up special needs trusts to ensure their family members are sufficiently protected. For assistance, contact one of our experienced North Carolina estate planning attorneys today at 919-787-7711 or via our contact form below. We look forward to serving you.

How Small Businesses Can Recover Financially From The COVID-19 Pandemic

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Small business owners throughout North Carolina are facing critical decisions, from evaluating the pros and cons of laying off staff, to shaving overhead costs, to finding creative and affordable marketing solutions to generate new leads. Those who’ve seen a substantial downtick in business, or who’ve lost one or more revenue streams entirely, may find themselves in need of emergency financial support simply to keep the lights on. 

Fortunately, there is (arguably) no better time for business owners and founders in need of help. The U.S. Small Business Administration (SBA) recently granted a request made by Governor Roy Cooper for federal relief for business owners facing coronavirus-related economic hardship. Specifically, the approval allows qualifying small businesses to apply for low-interest disaster relief loans and grants. The federal government is also offering, through the IRS and other agencies, a variety of options for small businesses at risk of financial collapse. 

Here, we will survey a handful of those options and share how your business can benefit from them. 

Automatic Relief On 504 Loans

If your business holds commercial properties and received financing through the SBA’s 504 loan program, you may be eligible for relief. Starting in April, the government is automatically making mortgage payments on behalf of qualifying businesses for the portion of mortgages held by the SBA. This initiative is part of the recently-passed Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Economic Injury Disaster Loans (EIDL) 

The federal government is offering low-interest EIDLs directly through the SBA. These loans are intended to help qualifying businesses replace working capital income. They carry an interest rate of 3.75 with up to a 30-year term and an automatic one-year deferment. Additionally, there is no personal guarantee on amounts up to $200,000. 

Some businesses are also eligible to apply for a grant in an amount of up to $10,000. The grants can help replace lost revenue and do not need to be repaid, even if a loan application is denied.

Payroll Protection Program (PPP) Loans

An existing SBA loan program is adding another $349 billion in forgivable small business loans to help businesses maintain payroll. To qualify, applicants must certify that the pandemic-related economic upheaval necessitates a loan to support the business’ ongoing operations. If you qualify, you can receive a loan up to 2.5 times your company’s average monthly payroll. This includes amounts paid as wages and benefits to employees, including small business owners and those with an annual salary of up to $100,000. 

Loans are forgiven if they are used on qualifying expenses like payroll in the eight weeks after the funds are disbursed. However, the amount of the loan that is forgiven may be reduced if the business doesn’t return payroll to pre-pandemic levels by June 30 or if more than 25 percent of the loan is used for non-payroll expenses like rent or utility payments.

Tax Credits For Payroll

If you do not receive – or don’t qualify for – a PPP loan, you may be eligible for other forms of tax relief. New legislation is allowing a refundable employee tax retention credit worth up to $5,000 per employee. To qualify, your business must either be ordered to partially or fully shut down or have experienced a 50 percent decline in quarterly revenue year over year from 2019.

If your company has fewer than 100 employees, the government will pay half of the wages for your employees who are continuing to perform productive work. You can also seek tax deferment, meaning that half your payroll taxes can be delayed until the end of 2021, with the other half due at the end of 2022.

Tax Assistance From A CPA

The CARES Act includes various other forms of tax relief, like the elimination of penalties for withdrawing from 401k funds. As such, speak with your CPA to ensure you are maximizing the relief available to you and to ensure you receive it at the earliest opportunity. To help your CPA and to expedite the process, keep thorough, organized financial records for your company. Be sure to maintain copies for yourself, your CPA, and your corporate attorney.

Increased Vigilance Against Scams And Phishing Attacks 

The fallout from the coronavirus goes beyond economic injury: hackers and scammers are capitalizing on the increasing vulnerability of businesses. Cyberthreats like phishing scams are skyrocketing as companies move to remote workplaces, and tech vendors who support the virtual marketplace are finding themselves less able to respond as they try to manage an unprecedented demand for their services. 

Small businesses should take all steps necessary to avoid these attacks. When you receive communications from an entity or individual purporting to be a government actor, proceed cautiously: generally, the government will not charge a processing fee to originate a loan or disburse grant money, so an organization or individual seeking a fee is likely not legitimate. With phishing scams on the rise, never release any personal information for yourself or your business without first vetting and verifying the source. 

Additionally, do what you can to secure your sensitive business information, from your bank accounts to your login credentials to your CRM system or other customer databases. If you have questions about how to best accomplish this, contact your attorney or an IT professional for assistance. 

Professional Financial and Tax-Related Help for Your Business

At Wilson Ratledge, our corporate law professionals include tax and business attorneys with more than 60 years of combined experience helping business owners thrive. We understand that each situation demands particularized attention and as such, we can help your business navigate pandemic-related economic distress. From evaluating your options to navigating negotiations with creditors and financial institutions throughout the loan application process, we are here to help you do what you can to recover.

For assistance managing your corporate financial affairs, call us at 919-787-7711 or reach out to our team via our contact form below. We look forward to helping you overcome your financial challenges and to keep your business running.