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Essential versus Nonessential Businesses
Alabama Governor Kay Ivey ordered all nonessential businesses to close by 5 p.m. March 27. Opinions differ on what is essential and what is nonessential so to comply with this emergency order, check the following website for a complete list of essential and nonessential businesses: http://www.aces.edu/go/1214. This information is provided by the Business Council of Alabama.
You can also set up an electronic account to receive information on current events for businesses. https://www.bcatoday.org/
When asked what businesses can remain open, Governor Ivey said, “If it is not on the list, it can remain open.” There is also a list of what the State of Alabama considers “essential businesses.”
This emergency declaration opens the door for businesses to apply for funds just approved by Congress in the CARES Act that will provide businesses with funds to pay their employees. These funds do not have to be paid back if they are used for employee wages.
The 2020 CARES Act
If your business is organized into a corporation, limited liability company, or certain partnership, you, the business owner, may pay yourself a salary. Owners who are organized into a sole proprietorship, who are self-employed, or who are independent contractors should check with their bank to see if they qualify for the loan forgiveness program.
Guidelines for banks insured with FDIC funds will be available March 30. The FDIC-insured banks can lend funds to pay employees. If businesses use the money for this purpose, the loan becomes a grant and the US Treasury pays back the loan.
Small businesses (fewer than 500 employees) can borrow up to $10 million that can be used for payroll, rent or mortgage payments, and some existing debts. These funds can become a grant and loans forgiven if workers stay employed through the end of June. Small businesses can be granted up to $10,000 to cover operating expenses. Your bank may require evidence of the last three months of payroll and other expenses to establish how many funds you may be entitled to. A current balance sheet would be helpful for the application.
Businesses currently under a Small Business Administration Loan can receive a grant for 6 months’ worth of payments.
Small businesses as defined by the act (fewer than 500 employees) can also defer the rest of the year’s matching payroll tax for the employer’s portion of Social Security (6.2 percent) and Medicare (1.45 percent) for a total of 7.65 percent. This frees up funds for operating expenses.
If a business chooses to defer payments, the employee’s portion will still have to be paid and reported. The deferred amount must be paid as follows: one-half of the deferred payments will have to be paid back by the end of 2021 and the remaining balance by the end of 2022.
For a detailed list of benefits and requirements of the CARES Act, check this list from the US Chamber of Commerce at http://www.aces.edu/go/1215.
Business owners should talk to their bankers and accountants and consider consulting an employment attorney for help in making informed business decisions.
These lists do not reflect the entirety of the new legislation but are offered as a guide. For more information, visit http://www.aces.edu/go/1216.
Alabama Extension offers this information for educational purposes only. Please check with your financial and legal advisers before making major financial or legal decisions.