UPDATE ON COVAD 19 VIRUS
TRAVEL BAR EXPANDED:  The federal government has extended the bar to persons entering the United States also to Ireland and the United Kingdom.
FEDERAL LEGISLATIVE ACTION:  The House of Representatives passed a bill Family First Coronavirus Response Act.  Before that becomes law, this must be passed by the Senate, which is expected to act on the Bill quickly.  The Bill authorizes, among many things,  money for research, expands some social welfare benefits, requires all health insurance to provide testing without co-pays.  Addressing its impact on businesses,  it states that employees of companies with fewer than 500 employees and government staffers may take up to 12 weeks of protected family and medical leave, including two weeks at full pay, with any additional weeks taken with no less than two-thirds of the employee's usual pay, to either quarantine or seek preventative care and related to coronavirus.  Small and mid-sized businesses would receive tax credits (to pay for medical and family leave of up to 100% of the wages they pay out.  Employers with fewer than 500 employees are required to provide two weeks of sick leave at full pay for employees who are seeking treatment for the virus. Self-employed individuals would also receive tax credits to receive paid leave. Workers would be eligible for paid sick leave if they have a child whose school or childcare facility is closed due to the coronavirus. These employees are required to receive not less than two-thirds of their regular pay. 
PRECAUTIONS:  In addition to the recommendations in the previous posting, including  cleaning the elevator knobs and front door knobs several times daily and having available at entrances and waiting rooms hand sanitizer that has 60% or more alcohol, one medical client is using DC GOLD which is a medical disinfectant that will not harm the finish on the floors, door knobs etc. Bleach products can mar the finish.
Cleaning surfaces helps, but even “deep cleaning” will not eliminate the risk.  " The second anyone touches a door knob, door, or elevator button, the previous night’s cleaning becomes moot.  COVID 19 is a respiratory virus. It is spread via droplets from coughing, sneezing etc., including those suspended in the air.  It can survive on inanimate objects for short periods, but that is not felt to be the major mode of transmission.  The CDC definition of exposure is 10 minutes of close contact with an infected individual.  The best step is hand cleaning with soap and water for 20 seconds or more.  While that may seem counterintuitive to what I just said about inanimate surfaces, your hands will touch you face, nose, mouth a hundred times a day and that can readily transmit the virus.  Next to washing your hands, stay 6 feet away from those who are sick.  Last, it may be wise to inform employees, customers, clients, patients, vendors, etc. to let you know if they have been exposed to the virus and then work with them via teleconferences, phone and other similar remote means.  They will appreciate your efforts to protect them.
LEGAL ISSUES:  I still am concerned what legal issues may come from this. These can arise from principles of negligence or contract.   The standard for negligence is to take reasonable care, but for some businesses it may he higher than to take reasonable care.  In contracts, the issues may be delaying or excusing performance.  If you have business interruption insurance, read you policy and see if a disruption to your business is covered or excluded.   If that is in doubt, file a claim.   Keep informed, including any legislation action at the state or federal levels.  Use updated government guidelines as the standard of care.  Keep the focus on what will happen when this passes, as it inevitably will.

              I have gotten calls from clients asking what they should do regarding the COVAD 19 virus.  This virus is unprecedented in modern times and has been declared a pandemic (prevalent over a whole country or the world) by the World Health Organization.   It also raises several unresolved legal questions, such as liability for someone contracting the disease and proves it happened at you place of work, inadequate hygienic cleaning of the work site, performance on a contract that is interfered with by the illness.  On the liability, the standard is “use reasonable care” on contracts that is a case-by-care matter that depends on the language in the contract.
                SCOPE OF PROBLEM:  The United States has taken several serious steps, including restrictions on non-US residents entering the United States from the EU, Iran and China and enhanced screen for others and the OPM has given guidelines to agencies.  The District of Columbia of Columbia has declared a medical emergency and requests that people postpone or cancel gatherings of 1,000 people or more.  It should be taken seriously, but do not panic. 
                GOOD NEWS:  The actual infection rate is low for the entire population group and the death rate for those infected is 2%.  This is far below the infection and death rate for the other forms of viruses.   The disease seems to be transmitting by physical conduct or by persons sneezing etc. within six feet of another person.  On the Fairfax County web site there is a good program before the Board of Superviss by health department officials. 

                  Having said that, I recommend these actions by businesses:

1. Tell employees to frequently wash their hands with soap and water throughout the day for at least 20 seconds each time.  Consider posting a sign in the work place advising all employees, including visitors, to follow the same practice.
2. Daily clean the surfaces at the workplace and if you have cleaning services speak to them about stepping up their cleaning.
3. Healthy persons do not need masks and respirators should be reserved for medical personnel.
4. Put into a convenient place in the work place hand sanitizer having at least 60% alcohol.
5. If an employee is suspected of being sick, encourage them to contact their doctor, promptly.  If the COVAD 19 is confirmed, tell them to stay home for 14 days which is an incubation period after signs of infection are shown.
6. If you have contact with someone who tests positive for the virus, treat yourself as having the infection.
7. If possible, tell employees to telecommute from their home if they are self-quarantined.
8. Implement your business’s sick leave policy and tell the employees to use it.  If you do not have a policy or if your current policy is limited, consider expanding it.  There is no federal law that requires sick leave (although a bill was introduced on March 11, 2020) and Maryland and Virginia do not mandate it. The District of Columbia does.  After sick leave is used, the Family Medical Leave Act may, in some circumstances, provide unpaid leave.  Call us if you do not know whether you are covered.  If you have a personal leave policy, if possible, permit employees to use it.
9. Avoid unnecessary travel by employees by common carriers, airplanes, trains, etc. as the virus can be transmitted through touching a surface that was touched by a person with the illness. 
10. If you must cancel a program due to the illness that you are sponsoring, review with us what you may do. In some cases, impossibility of performance, Acts of God and force majeure clauses will permit cancellation without liability.
11. If you are a government contractor and the agency adopts a policy, follow the agency’s on-line site as to the agency’s employees.  Review you contract as to whether you can be paid if you are absent due to the illness or exposure to the illness.
    
12. Speak with your vendors if you expect an interruption in the delivery of what you need to operate[
    
13. Stay healthy!
    

 

 [JM1]

​The 7(a) Program is one of the most popular programs of SBA loan guarantees for small businesses that are unable to obtain loans from banks.  The 7(a) program lets you get loan amounts (up to $5 million) to fund startup costs, buy equipment and more. Here’s what else you can do with 7(a) funds:
    Purchase new land (including construction costs)
    Repair existing capital
    Purchase or expand an existing business
    Refinance existing debt
    Purchase machinery, furniture, fixtures, supplies or materials
However, recently the SBA’s  Office of Inspector General published its management advisory that presents the evaluation results of two 7(a) loans as part of our ongoing High Risk 7(a) Loan Review Program. The management advisory is Report 18-23. The objectives of its evaluation were to determine whether (1) high-dollar/early-defaulted 7(a) loans were originated and closed in accordance with the Small Business Administration’s (SBA’s) rules, regulations, policies, and procedures and (2) material deficiencies existed that warrant recovery of guaranteed payments to lenders.
The review of two high-dollar/early-defaulted 7(a) loans identified that lenders for both loans did not provide sufficient evidence to support that they originated and closed the loans in accordance with SBA’s requirements. Specifically, the lenders did not provide adequate documentation to substantiate reasonable assurance that the borrowers met requirements for repayment ability, size eligibility, and equity injection.
As a result, the lenders’ material noncompliance with SBA requirements while originating and closing the loans resulted in a combined potential loss to SBA of approximately $1.3 million.  The report recommended that SBA require the lenders to bring the two loans into compliance or seek recovery of approximately $1.3 million. That could mean the loan will be called on the borrower.  While this report addresses the responsibility of the lenders to document loans in accordance with SBA requirements, if the bank’s solution is to seek recovery of the loan proceeds, the ultimate consequence will ultimately fall upon the borrower.
 
 
 
John P. McGeehan
VSB #9160
McGeehan Pascale PLC

​The most common type of small business may not be what you think. When people talk about small businesses, the thing that usually comes to mind is an establishment with a couple of employees. However, the most common type of small business, by far, is one with zero paid employees. In government statistics, this kind of business is called a “nonemployer,” and they outnumber employer businesses by four to one.
The Office of Advocacy has just published a fact sheet that answers key questions about nonemployers. “A Look at Nonemployer Businesses” describes how nonemployers fit into the overall economy, where they get startup capital, the industries in which they work, and their ownership demographics. The fact sheet is based on the latest information from the U.S. Census Bureau.
Nonemployer firms are sometimes overlooked because they account for only 3 percent of total U.S. business revenue. However, the latest figures show that four in five businesses are nonemployers. As the economy changes, nonemployer firms are playing an increasingly large role—the number of nonemployers increased 58 percent from 1997 to 2015. 

A new fact sheet by the SBA  Office of Advocacy Research Economist Brian Headd titled, “Why Do Businesses Close,” using U.S. Census Bureau data, states that over the last 25 years, about 7–9 percent of employer firms close every year and a slightly higher share open.
These figures from Census’s Business Dynamics Statistics have been trending down, illustrating a decline in business turnover. According to the Annual Survey of Entrepreneurs, of the businesses with employees that closed in 2015, the top reasons for closing were low sales, the owner(s) retiring, and the owner(s) selling the business. With the next top reasons being opening another firm and illness/injury, it shows that many owners close for personal or health reasons not just business reasons. 
Headd also cited data from the Survey of Business Owners that despite credit being tight; it is having less of an impact on pushing businesses to close. While business credit was a relatively large reason for business closures at the onset of the Great Recession, Headd writes, more recently, it has been a relatively small reason.
​

In 2016, the Federal Deposit Insurance Corporation (FDIC) published regulations, which were authorized by the Bank Secrecy Act, to require all US Financial Institutions to obtain the identity of the beneficial owners of business accounts for a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction. This is not personal accounts.  The procedures are to be implemented by May 11, 2018.  When a business opens a new account or changes an existing account, financial institutions will have a “control person” obtain information and sign a certification on behalf of the business.  The certification lists for all beneficial owners who have 25% or more of the equity interests in the businesses their names, addresses, dates of birth and some identifying number (Social Security, passport, driver’s license, etc.).  The control person (usually an authorized signer) is someone with significant managerial control over the business.   The regulation does not cover accounts opened and later unchanged as of May 10, 2018, single transactions, wire transfers and other exceptions.  A covered financial institution must establish procedures for making and maintaining a record of all information obtained under this procedure.  Therefore, there is no anonymity as to the beneficial owners in regard to the business’s accounts at financial institutions.

This week, the U.S. Department of Labor issued revised administrative regulations regarding eligibility of workers to receive overtime.  This covers all employers subject to the Fair Labor Standards Act or who are working on federal contracts.  The revised regulations will:

* Raise the salary threshold indicating eligibility from $455/week to $913 ($47,476 per year). 
* Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability. 
* Strengthen overtime protections for salaried workers already entitled to overtime. 
* Provide clarity for workers and employers.

The final rule will become effective on December 1, 2016, giving employers more than six months to prepare.  The final rule does not make any changes to the duties test for executive, administrative and professional employees (i.e. “expect employees”) and not all business are “employers” under the Wage and Hour laws.

Employers will have the following decisions:

* Pay all eligible employees who are below the new threshold “time and a half” for overtime
* Limit worker’s hours to 40 hours per week
* Hire more employees to share the time
* Increase workers’ pay to a pay greater than the threshold

Some business organizations may challenge this regulation in court, but overtime laws are complex and when combined with increases by state and local “living wage” laws, the impact can be significant.  You may want to review your policies with us to ensure you are ready to comply with these requirements. ​

We, at MCGEEHAN PASCALE, PLC, have put together, as best we can, a limited liability company designed to carry out the purpose of your business and, most especially, provide limited personal liability for the members from company liabilities. There are recent court cases attempting to “pierce the corporate veil”, which is to disregard the limited liability in an LLC and impose liability for company debts onto the members.  As you move forward, it is up to you to do what you can to maintain your shield.  There also are increasing statutes seeking to hold owners of businesses personally liable for some obligations. The older body of law for corporations is clear on piercing the shield, but there is less law regarding the limited liability shield in an LLC.  The best way to protect yourself against this is:

  1.  Have an operating agreement. If it is not working, amend it.
  2.  Follow the procedures in the operating agreement, including having at least one annual meeting.
  3.  Maintain records (minutes) of important company actions.
  4.  Keep the company’s money in separate accounts from your personal accounts.
  5.  Do not pay personal bills with company money.
  6.  Make the capital contributions that are stated in the operating agreement.
  7.  If you give money to the company, document whether it is a loan, additional paid in capital, repayment of a loan to you by the company, etc.  If you take money from the          company, document whether it is a loan, withdrawal of capital, repayment of a loan from you to the company, etc.
  8.  Be formal in your dealings with those outside the company, that is always use your company name, sign everything using your company title, do not call each other a “partner”. Treat the company as you would a separate person with whom you are dealing.
  9.  Keep your capital in proportion to your company liabilities.
10.  Seek experienced legal advice when you have any doubt as to an action you are contemplating. 

​If you maintain you participation in MCGEEHAN PASCALE, PLC’S PRIORITY BUSINESS CLIENT PROGRAM℠, remember you have access to our No Charge Quick Calls (new topic, no reading, writing or research, less than 10 minutes), reduced hourly fees and experienced attorneys who are familiar with your business. Use this resource.