Actually reading the rules you posted, it seems that in the two cases I’m thinking of employer can still take advantage of the situation. Employees in question both make a more than 100K.
Right, I think if you take the loan and keep your business open the only likely bad consequence of not keeping/bringing back your employees would be lack of loan forgiveness. If you take the loan, fire all your employees, default on your mortgage or lease, and blow it on hookers and cocaine, then maybe you’d have a problem.
If you take a loan, you lose the retention credit. If you’re going to fire everyone (and have more than 100 employees), it may not matter, but it could be a significant cost otherwise.
Also, if you get any forgiveness of the loan, you lose the 6.2% SS tax deferral, which may or may not offset some of the benefits of cheap cash.
^^ Not legal advice, but there’s a lot of moving parts.
@zikzak - from the PDF LFS posted it seems like from:
For a sole proprietor or independent contractor: wages, commissions, income, or net
earnings from self-employment, capped at $100,000 on an annualized basis for each
employee
the “income, or net-earnings from self-employment” would qualify us.
But…as far as loan forgiveness goes:
You will owe money when your loan is due if you use
the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities
payments over the 8 weeks after getting the loan.
It doesn’t mention that part as being forgivable - so, even if we get the money - maybe it’s just a loan (which I don’t want).
My banker at Chase, who may be full of crap, says that nobody really knows what the requirements of the program are, and that some banks are gathering information based on their best guess of what will be required.
Extremely premature and un-answerable PPP loan question:
Our average 2019 monthly payroll was higher than our 2020 payroll to begin with (a few higher-salary employees left and were replaced by people with lower salaries). Also we lost an assistant at the end of last year and didn’t replace them. And on top of that, we cut all salaries 25% when all this started. So, if we do get a PPP loan at 2.5x our 2019 payroll, it will be more money (I think) than we would spend on forgivable expenses over 8 weeks by a pretty good margin.
For expenses to be forgivable the rule says we can’t cut people or salaries, but it doesn’t say anything about raises. In theory, do you think we could pay people extra during those eight weeks to cover any potential reductions in the period after that?
Unions that represent flight attendants at several major airlines urged Mr. Mnuchin not to exercise his power to take stock in the airlines last week. They said it would deter executives from taking aid, leading to more job cuts.
The CARES Act offers airlines loans, but also grants to help meet payroll to prevent layoffs. The union’s position is that the loans should come with a requirement that airlines give up equity, but the payroll grants should not.