Should I take EIDL?
Business Planning

Should You Take the Loan Offer from the EIDL?

You may have opened your inbox in the last couple of weeks to discover an email from the Small Business Administration (SBA), finally offering you Economic Injury Disaster Loan (EIDL) money you applied for a couple of months ago.

Many business owners just like you jumped at the opportunity to get money from the EIDL once the CARES Act went into effect. There was such a rush of applications that funding was seriously backed up, and now the loan offers are coming in. 

So, what’s the offer? 

The EIDL is a 30-year loan at 3.75% interest (with non-profits qualifying for 2.75% interest). While some people are getting a smaller range of options ($1,000–15,000, for example), others have gotten options to choose within ranges up to $150,000.

If you’re one of the business owners who received an EIDL loan offer, you might be wondering what to do next. Should you take it? How can you use it? 

This video has a lot of great information for you to consider: https://www.youtube.com/watch?v=Eqw9BAxt9Rg&feature=youtu.be&fbclid=IwAR3jMQKvcUltLrcnKeC6z99XSkttZ12nGlK2qYXc3u6jXYee1KaRMnbCFg0

If you aren’t sure about taking the EIDL, it may be because you aren’t sure how to best use it. If that’s the case, reach out to us and let’s talk. We have resources to support you to use this EIDL money to shore up your business systems.

Most business owners who are ready to create a next level of success need to uplevel the systems that support them, including their legal, insurance, financial and tax (LIFT) systems. That’s where we come in.

We can work with you to evaluate where there are holes in your LIFT foundation that could have left you in a shaky position once COVID hit. Now, with your EIDL resources, you can strengthen your foundation and be ready to thrive, no matter what comes our way. 

If the risks and restrictions about EIDL worry you, remember these resources are here to help you, as are we, so you don’t have to go it alone.  With a low interest rate and 30 years to pay it back, your payment is likely to be under $600 a month. Consider what you can do with the loan over the next year to ensure you are earning at least the payment amount every month over the next 30 years. 

If you decide that you do want the EIDL loan, things will start moving fast. The paperwork comes to you within 48 hours, and once you fill that out, the money could hit your bank account as soon as the next day. That means you’ll be able to immediately use that money to get your business back on its feet, so you can focus on expanding your profits.

If you’d like to talk before you take the loan, give us a call. We’re here to support your wise decision-making process. 

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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Should I file bankruptcy for my business
Business Planning

Is It The Right Time For You To Consider Bankruptcy For Your Business?

Coronavirus has forced many business owners to face the tough decision of whether to persevere and keep their business going, or to close it all down and walk away. If you are asking yourself this question right now, here are some things to consider before going down the bankruptcy road.

First, bankruptcy is a valid option to consider. But, do know that each moment you spend considering bankruptcy is a moment not spent considering how to turn your business around. Use your energy wisely, get the information you need quickly, and then make your decision so you can move forward powerfully.

Before considering bankruptcy, you should talk with a business coach or advisor who can help you reorient your business model to see if additional capital could help you dig out of the hole you’ve found yourself in. We may be able to help you here. It may sound odd to be thinking about more capital when you are already in over your head with debt, but if you have a good business model, you may just need to look at your business differently, restructure and upgrade the way you are looking at your cash flow and budgeting process.

Often what we see is that a business owner may have a great offer and a strong customer base, but may not have learned how to manage their financial resources properly. If that’s you, bankruptcy may not be the best choice. It would just mean that now you’ve got the bankruptcy on your record (a big disadvantage), and you still have to learn how to manage your finances. If that’s your situation, we may be able to help you turn things around without filing for bankruptcy.

There are two major benefits of bankruptcy. One is you get a fresh start, which you can get without bankruptcy. The other is that any debts that are forgiven in bankruptcy do not result in taxable income to you. In contrast, if you negotiate down your debt, the forgiven debt will be considered taxable income.

But that’s only one small consideration when it comes to bankruptcy. The much bigger consideration is your recovery process after the bankruptcy—whether the bankruptcy will appear on your personal credit report (vs. a business-only bankruptcy), and what you can keep and what you will lose in the bankruptcy.

Most of all, it is very important that you seek legal counsel who will first work to understand your business and your personal goals, and then help you determine your best path forward. Making the wrong choice here could mean that you would lose more than you have to. Please reach out if you are considering bankruptcy, and we will help you review your options.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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Making good choices during the hard times
Business Planning

How To Make Better, Faster Decisions During Uncertain Times

When there’s a blow to your business, especially an unprecedented world event like the pandemic we are living through, you might feel paralyzed and unable to make a move. But when problems crop up, you as a business owner can’t afford to freeze. Or fight, or flee, for that matter. Freeze, fight, and flee are the three most common responses to trauma, and they are reactive states that can sneak up on us before we even know what’s happening.

So, step one to making it through every challenge is to start to get to know yourself, and how you respond to trauma—do you freeze, fight or flee? Make a note for yourself, so that you can see it when it happens.

Often there are ways out of a bad situation that can actually put you in a better position than the one you were in before. Sometimes the best you can hope for is to keep the damage to a minimum. Either way, the first thing you need to do when you are faced with challenges and uncertainty is to get your head on straight. 

Here are some suggestions of how to look at your problems in a way that will keep you moving forward rather than frozen with indecision, fighting for your life, or running for the hills.

Find Your Inner Calm

There are a lot of outside voices who claim to be experts, and who claim to know how you should conduct your business. Some of these voices could be helpful, and others could be harmful, but if they’re coming from many directions at once, you’re not going to be able to tell the difference. With every piece of bad news or new demand placed on you, your body reacts. Every demand on your attention, and every rush of adrenaline, is taking away from the energy you could be using to solve the problem that is in front of you.

Bruce Lee said, "There will be calmness, tranquility, when one is free from external objects and is not perturbed.” If you are taking in negative voices and the 24-hour flow of news, notifications, and speculation, you will never have the mental space to consider your options. First and foremost, stop watching the news. Then, get the book The Art of Contemplation by Richard Rudd, read it and breathe. Finally, carve time out for yourself daily to breathe, pause, and remind yourself what really matters. Your inner peace is paramount, and must come before anything else.

There will be residual emotions and thoughts that remain once you’ve switched off your television and digital devices. Acknowledge them, don’t fight them. If you fight them, they’ll just fight you back, but if you just let them be, they’ll lose their power over you.

Once you’ve shut out those outer and inner voices, do something that relaxes you. When all else fails, you have the best relaxation tool built right into your body—breathing. Fill your lungs with oxygen with a nice, deep breath, and you'll clear your mind that much faster.

Get Support You Can Trust

Do not sit alone with your problems. Reach out and ask for help. Not all help is equal though. Reach out to a mentor, advisor, or guide who has possibly been where you are and made it through. If you don’t have anyone like that in your life, reach out to us. We serve as a trusted advisor and guide for many of our clients.

Whatever you do, do not reach out to people who will simply reinforce your freeze, flight, or fight response. Do not reach out to people who have not done what you want to do, or been where you want to go. They will not be able to help you.

You must reach out to objective advisors who can help you with logic, intelligence, foresight, wisdom, and experience.

Break Down Your Problems

Imagine you have a large, heavy bookcase that you need to move from one room to another. How would you get started? If you’re like most of us, you’d start by taking the books down from the shelf. Then you’d consider the size of the door or hallways you’ll need to pass through, and whether it means you’ll have to take the shelf apart as well. Is one person ok to carry it, or do you need to call a buddy? And once it’s in its new location, how will you re-shelve the books?

You have a lot of choices when you tackle this problem. The worst choice, however, is to just try to pick up the whole bookcase, full of books, and start trying to move it into the other room without a second thought. You could throw out your back, break your foot, or get knocked on the head by the Complete Works of Shakespeare.

That’s what you’re doing when you try to solve a big problem on your own before thinking it through.

When you are facing a problem, you need to consider every step that needs to be taken to solve it. That will help you figure out what resources you’ll need to reach your goal, and what small decisions you’ll need to make along the way.

Focus On What You Want, Not What You DON'T Want

Race Car drivers are taught to not let their eyes stray from the track. Looking at the wall around the track can end in a high-speed crash. Whatever picture you have in your head right now is what you’ll move toward.

Vision really does matter. 

Obsessing over your revenue, for example, is limiting your thinking to one short-term goal. Enriching the lives of your customers and employees with your products and company culture is a vision, which your short-term goals support (possibly including the one that you are fixated on). If you keep your eyes on the finish line, you’ll be able to more easily see all of the smaller maneuvers you have to make to get there.

Remember Your Resources

Lastly, remember that you have a network who is there to help and support you. Once you’ve taken some time to quiet your mind and collect your thoughts, you can choose who to listen to. Call on your mentor or mentors. Don’t wait to do this. You need help before you feel comfortable asking for it, so ask sooner rather than later. 

And of course, remember that we are here to be your advisor as well. If you are having trouble determining your path forward in the face of a challenge, we can help you lay out your options and define your goals, so you can make more agile and wise decisions. Don’t put off calling us when you need to. We’re here to help.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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Exit Strategy
Business Planning

An Exit Strategy Enhances Your Business (and Legacy) Building

Exiting your business isn’t a decision to be made lightly. It may have been something you were considering before the COVID-19 pandemic hit, or it could have been something that you’ve had to reckon with because of shelter-in-place orders. Maybe your business had already been struggling, and you’ve had to come to terms with your financial struggles due to long-term closures and loss of revenue. Or perhaps you want to cash out of the investments you’ve made over the years, and reallocate your resources into something else before there are any other unexpected changes in the economy.

Whatever your reason, there is a lot to take into account when considering a business exit, not just when it comes to your money, but when it comes to your personal legacy as well.

Creating an intentional exit plan will help you achieve the best possible outcome for yourself and your family’s finances, your reputation as a businessperson, and the business itself. Having a plan in place, even if you aren’t planning to exit anytime soon, can also help keep the business stable in case of your sudden death or disability. This is especially important now, when COVID is posing such a major threat to health.

Sell to Partners, Employees or Family Members

If you are hoping that someone else will carry forward your company’s mission, you will likely want to sell to someone who understands your business already.  If you have low turnover and devoted employees who know how to drive the ship, handing over the keys to one of them may not cause too much upheaval for the business itself.

The employee could pay you in one lump sum by taking out a personal loan, though this is a riskier and higher-cost option. A more manageable choice for many is an “installment sale,” which means financing the sale of business and having the employee pay you in installments over time. Making an employee or family member a part-owner of the business over time could make it easier for them to complete a buy out when the time comes.

Another option is to set up something called an Employee Stock Ownership Plan (ESOP), which means that every employee owns a share in the company. Anyone who leaves the company cashes out their shares when they go—that includes you.

Set Your Business Up to Be Acquired

To get the best return on the sale of your business, you will need to make it as attractive as possible to an outside company or individual who you think would be interested in buying it. This option may require a lot of work on your part, or else you may end up having to sell far below market value in order to make a quick exit. You will need to conduct market research, tighten your operations, and be able to prove your business’s profitability to any prospective buyer.

To implement any of the plans above, and to plan for an exit that maximizes your gains and preserves your legacy, you will want to consider hiring us to help you take the following steps.

Exit Plan Steps to Keep in Mind

  • Evaluate Your Business Systems: Whether you choose to sell to an outsider or be bought out from within the company, you will want to have your business systems evaluated from the perspective of “saleability” so you can identify what needs to be shored up for the business to be able to continue beyond you.

  • Amend Partnership Agreements If Necessary: If you have partners, hopefully, you discussed exit to begin with, and have plans in place for how to exit, transfer your interests, and split up profits and losses. If not, it’s time to get those agreements updated and documented now. Call us immediately, if it’s time to relook at your partnership agreements.
  • Write Up Provisions for Family Succession: If a family member will be taking over your business, be very clear about what that entails. Who will inherit ownership of the business? Who will inherit the actual duties of running the business? If there are multiple family members, such as siblings, who all may have an interest in the company, but who may not all be treated equally, begin to address those issues now. We can help with that.

  • Get a Business Valuation: Before you consider exit, look at the different valuation methods, and decide which one applies to your business. We can help you with this process.

Even if your business is surviving and maybe even thriving as a result of the changes brought on by the coronavirus pandemic, now is a good time to start thinking about the exit strategy for your business. If you’re not sure how to set yourself up for any of these strategies, just give us a call and we can help you get started.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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PPP Taxes
Business Planning

PPP Loan Forgiveness and Tax Consequences

Now that many business owners are starting to see Paycheck Protection Program (PPP) approvals and funds hit their bank accounts, you may be wondering how to ensure the loan is forgiven and what the tax consequences will be.

We’ve got some of your answers.

First of all, let’s talk taxes. Last week, some business owners were surprised to find out that payments for payroll, and other expenses paid using PPP money, will not be tax deductible. It actually makes sense, because the amount money that the PPP loan forgives is not included as taxable income. This way there is no double tax benefit.

Let me break that down for you a bit more, so it’s totally clear.

PPP is a loan, which is not taxed as income. So let’s say you received it and then had the loan forgiven. If the loan forgiveness was not taxed as income and the expenses you paid with it were deductible against your income, you’d be getting to use the PPP money tax free and not paying tax on income earned. In effect, not getting a deduction is the same as being taxed on income.

Perhaps the IRS ruling reflects a frequently used quote from the now deceased Martin Ginsburg, tax professor at Georgetown University Law Center and husband of Ruth Bader Ginsburg. In his tax classes, he said, “When you're dealing with tax laws, the pigs get fatter and the hogs get slaughtered,” meaning that, when it comes to taxes, maybe we should be grateful for what we get and not get greedy.

However, Congressional Leaders have already publicly disagreed with the IRS ruling, saying that it is not within the spirit and intent of the CARES Act. According to them, the act was meant to allow for deductions by PPP recipients, so we anticipate there will be more clarification coming down the road on this topic.

In the meantime, you certainly want to ensure that your PPP proceeds are forgivable. Presumably they would be, if you are using 75% or more of them on payroll and the remaining 25% or less on other allowable expenses like mortgage interest, rent, and utilities. However, there has not yet been guidance on what you will need to submit to prove loan proceeds were used as required for forgiveness.

If you want to be sure that your loan proceeds are forgivable, keep clear records of how you use the proceeds and plan to file all required tax forms for payroll purposes. Remember that you cannot use these funds to pay independent contractors, only to pay employees under a payroll plan, or pay yourself as the owner of the company.

We understand that these are the records you will need to submit to obtain forgiveness of your PPP proceeds:

If you have employees, you will submit Forms 941 and state quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records.

Evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments for the covered period.

If you are receiving PPP as an owner, your Schedule C will be used to determine the amount of net profit allocated to the owner or the eight-week covered period.

If you need support clarifying any of this, contact us. We’re here to help.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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Open for business
Business Planning

Re-Opening Your Business? Risks and Liabilities to Consider

As we’ve "flattened the curve” of COVID-19 infection here in the United States, some states like Alaska, Georgia, and Minnesota, have started to slowly reopen the doors of non-essential businesses. Some have been eager to do so, others have been very opposed, but still others are on the fence. The exponential growth of the virus throughout the country seems to have slowed or leveled off in some places, but the threat of getting infected is absolutely still present. All the same, people (possibly including you) are worried about their livelihoods, paying their rent, and keeping their businesses alive. 

A global pandemic isn’t something we’ve ever experienced, so it’s hard to know how to move forward safely. As a business owner, you may be wondering what risks you may be taking on, not just health-wise, but legally, by reopening What if one of your employees gets sick, or has a family member who gets sick, and sues your business? Would customers be in danger? And if they became ill, could they hold you and your business liable for it?

If this seems like a minefield of liabilities to you, you’re not alone. Politicians are currently debating how to protect businesses from liability while also protecting employee and customer health, and the Centers for Disease Control and Prevention have sent draft guidance to Washington for the administration to review and reveal to the public. But in the meantime, you might feel like you're flying blind. 

Aside from the public health worries, it’s also a concern that these liability questions might not be answered until it’s too late—and you’re fighting for your business’s survival in court.

Some business owners are choosing not to take the risk at all, and to continue to deliver services virtually, wherever that’s possible. But if you haven’t gotten any financial assistance from an EIDL loan or a PPP loan, and your business is hanging on by a thread, reopening now may seem like your only option to keep from closing for good. If so, it’s important to follow guidelines that do exist.

Basic Safety Responsibilities for Business Owners

The basic rule of workplace safety is that employers are supposed to make reasonable efforts to keep their workers safe. More specifically, the Occupational Safety and Health Administration (OSHA),  says that a workplace should be “free from recognized hazards that are causing or are likely to cause death or serious physical harm” to employees. Right now, OSHA is advising businesses to use standards the Centers for Disease Control and Prevention have set out to guide decision-making in this new world.

You can read the CDC recommendations in more depth here, but we’ll sum them up for you below. If you need guidance figuring out how your business can follow these guidelines, give us a call and we’d be happy to help, too. Following as many of these rules as possible, and being able to prove you’re following them, are the best things you can do right now to protect your business from lawsuits. 

Make a Plan for Cleanliness

Making a plan is good both so you and your employees  know exactly what standards to follow going forward, but also so you have a record of the precautions your business is taking from the start. That way, if you do end up in court, you have evidence that you’re following the CDC’s best practices. If you need a little help, we can help you put your plan together. 

First, figure out what needs to be cleaned. The CDC has put together a document and flowchart helping you to determine how and how often a surface needs to be cleaned and disinfected. They define cleaning as using “soap and water [to remove] germs, dirt, and impurities from surfaces.” Disinfecting refers to actually killing germs on surfaces, and they suggest using an EPA-approved disinfectant or bleach solution to do this.

Make sure you designate who will be doing the work to clean and disinfect and when they’ll be doing it. Hang up a record sheet on the wall to track whether cleaning and disinfecting has occurred and/or set timers to keep you accountable (and to cover your bases). 

Remember to grab all the equipment you’ll need to keep up these habits before you open! And if you do make changes to your cleaning routine, make sure to note these in your written plan.

Decide How to Practice Social Distancing and Safe Behavior

We’ve been getting a lot of tips on how to protect ourselves in the last several weeks, and those habits are more important than ever. Be sure to include them in your plan, along with how frequently they should be carried out. As a reminder, these instructions include:

  • Closing break rooms to encourage social distancing between employees,
  • Wearing face coverings and avoiding touching one’s face,
  • Washing hands frequently for at least 20 seconds at a time,
  • Frequently using a 60% alcohol hand sanitizer when soap and water aren’t available,
  • Staying home at the first sign of illness,
  • And (again), frequent cleaning and disinfecting of surfaces.

Lots of businesses are finding creative ways to maintain safe social distancing, like laying tape down on the floor to demonstrate the space to customers, blocking every other seat in a waiting area, and allowing fewer people into a business at a time. Decide what works best for your business and then stick to your plan. And if you can help employees and/or customers by providing tools like face masks and hand sanitizer, all the better.

Do the Best You Can for Yourself and Others

This is brand new territory for all of us, and with the risk of illness and possible lawsuits, the path looks pretty rocky. But if you do decide to brave it, your best bet to stay safe is to follow public health recommendations and to be able to prove that you’re doing so. That way, you’re not just protecting your business, but doing your part to protect your customers, employees, and everyone that they come into contact with. If you’d like our help to vet your processes, and document your procedures, please do reach out. 

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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