Bankruptcy Law, Blog, Business, Business Litigation
When Business is Bad, Who do you Pay?
This doesn’t seem like a tough question to most folks. You’ll pay the creditors to keep your doors open and delay paying the ones who may let you slide past due. Well, an important analysis will likely lead to other priorities. Consider first to whom you may be personally liable if the doors close… Taxing authorities and holders of guaranties must be at the top of the list. Then consider whether you, as the business owner, have it in you to guide the company through the dark times. PERSONAL LIABILITY Even if you are set up as a corporation or limited liability company to own your business and protect your assets from company debts, some claims for unpaid taxes create personal liability for those associated with the business. If you are focusing on who to pay to keep the doors open, you will likely not consider the IRS and the Department of Revenue (in most states), who will often be one of the last creditors to show up when you don’t pay on time. But sometimes, liability can pass on to the owners, officers or even an employee entrusted with making decisions on who to pay (yes, even the bookkeeper can be personally liable). Personal liability for unpaid business taxes generally arises from the failure to pay sales or use taxes and federal payroll taxes. In the case of sales/use taxes, that money never belonged to your business. The business collected it for the state and even though it was mixed with other business funds, there…
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Blog, Business, Real Estate
Update: Indiana’s New Witness Requirement on Recorded Documents
Change of an ‘Or’ to ‘And’ Cause Challenges The recent rewording of a law has caused quite a stir in the business and real estate communities. That’s because changes to Indiana Code 32-21-2-3(a), effective July 1, 2020, now require witness signatures on recorded documents. Senate Enrolled Act 340, passed by the Indiana Senate, merely changed an “or” to an “and” but by so doing, it changed this well-established law to require a common law “proof” of a disinterested party to the transaction serving as a witness to the execution of an instrument. This requirement caught many off guard, necessitating re-documenting transactions or hurriedly changing forms. The perceived requirement of having the witness swear that he or she is not a party to the real estate transaction (deed, mortgage, lease, etc.) disclosed by the instrument and does not “benefit” from the transaction adds a layer of complexity to closings. An additional person must now participate in the closing process and swear to an oath. Many financial institutions are reluctant to have their employees give an oath, which rules them out as witnesses. Furthermore, it’s unclear how “benefit” is to be defined in this scenario. Could a year-end bonus based on loan production technically constitute receiving a benefit from this one transaction? While certain financial institutions may not permit their employees to witness signatures, title companies appear to be fine with their employees acting in this role. Rumors have swirled that many of Indiana’s 92 county recorders are ignoring the statute and accepting documents without witness signatures, provided…
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Blog, Business, News
COVID-19 AND CONTRACT BREACH
With the American economy grinding almost to a halt due to the Covid-19 Virus and the accompanying onslaught on National, State and local directives and executive orders restricting, and in some cases, preventing the operation of many businesses, performance of contracts by the affected business owners has become all but impossible for reasons totally beyond their control. These owners have contacts with key employees, contracts to supply goods, real estate leases requiring them to be open for business, contracts to manufacture and supply goods to others, franchise payments, product warranty repair claims in areas where travel is restricted, and the list goes on and on. The business owner asks “Am I liable for not doing something I can’t do, even if I want to do it”. As with so many other things in the law, there is no bright line test to answer the question, its fact sensitive and more than one legal principle needs to be considered if the business owner is to be rescued from liability. The law (and in most cases – Indiana) recognizes several defenses to enforcement of a contract against a party who, through no fault, cannot perform. In summary, these are (i) Force Majeure, (ii) Impossibility of Performance, (iii) Commercial Frustration and (iv) Impracticability of Performance. Of these defenses, only Force Majeure is a defense which must arise from the terms written into the written contract. Force Majeure – Is Covid 19 an Act of God? Indiana has few cases discussing force majeure. A force majeure clause is a “contractual provision allocating the…
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Blog, Business, Government Practice, News
COVID-19: News to stay informed from Indiana Courts
Government and Business organizations have been acting fast and furious in response to COVID-19. This running blog entry identifies operational changes and helpful links. We will update this blog as more changes are made: Indiana’s Shelter in Place Order. Governor Holcomb has issued a shelter in place order that expires at 11:59 p.m. on Monday, April 6. The order applies to all businesses expect essential businesses and services. Essential businesses include but are not limited to grocery stores, pharmacies, gas stations, police stations, fire stations, hospitals, doctor’s offices, health care facilities, garbage pickup, public transit, and public service hotlines. A full list of essential businesses can be found at Essential Businesses The Executive Order can be found at Stay-at-Home Order and a FAQ sheet can be found at FAQ Sheet Employer Paid Sick Leave Act and Emergency FMLA Please see our blog post here Updated Information from the IndyBar can be found here The Indianapolis Chamber of Commerce has established a Rapid Response Hub for small businesses. The Chamber’s Hub can be found here Federal Courts Located in Indiana Northern District of Indiana The Northern District of Indiana has issued two orders, both linked below. A summary of the changes follows: March 17, 2020 Order March 23, 2020 Order All jury trials scheduled up through May 1, 2020 are continued and will be rescheduled Civil proceedings will be converted to telephonic or videoconference proceedings Criminal cases: Plea and sentencing hearings scheduled up through May 1, 2020 are continued and will be reschedule. Initial appearances, arraignments, and…
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Blog, Business, Employment Law, Government Practice
CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT (“CARES ACT”)
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). This historic economic recovery package, commonly referred to as “Phrase Three,” is intended to provide relief to the American economy in response to the coronavirus disease 2019 (“COVID-19”). The CARES Act contains numerous significant provisions impacting individual Americans and businesses of all sizes. ALL BUSINESSES Employee Retention Credit The CARES Act creates a tax credit equal to 50% of the qualified wages paid to employers during the COVID-19 outbreak. Eligible employers are those whose: (1) operations are fully or partially suspended because of a governmental COVID-19 order; and (2) gross receipts declined by more than 50% compared to the same quarter in the previous year. For employers with more than 100 full-time employees, qualified wages are those paid to employees when they are not providing services because of COVID-19. For employers with less than 100 full-time employees, qualified wages are those paid to employees whether the employer is still in operation or ordered to shut-down because of COVID-19. The credit is for the first $10,000 of compensation for each employee, including health benefits. Other Key Provisions The CARES Act permits employers and self-employed individuals to defer payment of the 6.2% social security tax on employee wages. The deferred payments must be paid over the following two years. The CARES Act also permits employers to provide a tax-free student loan repayment benefit to employees. Employers can contribute up to $5,250 annually towards employees’ student loans, and that amount…
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Blog, Business, Employment Law, News
NEW COVID-19 Employer Pay/Leave Regulations
Update April 1, 2020: At the time of our initial post, the federal government had not defined health care providers or emergency responders. In a new FAQ sheet, the Department of Labor has defined both classifications: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions FAQ 56: Who is a “health care provider” who may be excluded by their employer from paid sick leave and/or expanded family and medical leave? For the purposes of employees who may be exempted from paid sick leave or expanded family and medical leave by their employer under the FFCRA, a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions. This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary…
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Bankruptcy Law, Blog, Business
Small Business Reorganization Act (SBRA) of 2019 updates to Chapter 11
The Small Business Reorganization Act (SBRA) of 2019 added a new subchapter V to Chapter 11 of the Bankruptcy Code (11 U.S.C. §§ 1181-1195). It is applicable solely to “Small Business Debtors” who file a bankruptcy petition on or after February 19, 2020. For debtors who qualify, filing under the new subchapter is likely to be Quicker – statutory timelines are compressed. Cheaper – no UST fees, no committees, and shorter process Easier – can confirm without support from impaired classes and cram down certain secured claims. SBRA Qualification Who qualifies as a small business debtor under the statute? There are three requirements: First, 50 percent or more of the Debtor’s debt must have arisen from business or commercial activities (excluding single asset real estate businesses); Second, aggregate debts total $2,725,625 or less (that is, all non-contingent, liquidated, secured and unsecured debts together); Third, small business debtors must opt-in by checking a box on the voluntary petition form. SBRA Administration Administration of SBRA cases differs significantly from a traditional Chapter 11 case, blending concepts from current Chapter 12 and 13 cases. Primarily, in an SBRA case: the US Trustee must appoint a Standing Trustee in every case whose responsibility is to facilitate the small business debtor’s reorganization and oversee plan implementation over three to five years; within 45 days of the petition date, the small business debtor must file a report detailing its efforts to draft and implement a consensual plan of reorganization; within 60 days of the petition date, a mandatory status conference must be…
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Blog, Business
Reinstating an Administratively Dissolved Business
In order to remain in good standing in the State of Indiana, business entities organized for profit (LLCs, LLPs, PCs, Corporations) are required to file a biennial “Business Entity Report,” along with a filing fee. Nonprofit corporations are required to file these reports annually. While it generally only takes around five minutes to file the reports online at inbiz.in.gov, the failure to timely do so may result in the Secretary of State administratively dissolving your business. Although an administratively dissolved business entity continues its existence, it may not carry on any business, except that business necessary to wind up and liquidate its business and affairs. This can have severe consequences. For example, title companies generally will not insure real estate closings if the buyer or seller of the property has been dissolved, and business owners often discover their failure to file their reports only after a closing date has been scheduled. Businesses may also be in danger of losing their corporate name, as the name becomes available for anyone to appropriate after 120 days of dissolution. Luckily, the process for reinstating your business after a dissolution is relatively straightforward. The first step is to receive a “certificate of clearance” from the Indiana Department of Revenue (DOR), certifying that all past due taxes to the State have been paid. This necessitates the filing of a notarized affidavit and updated information about the responsible officers in the business. The DOR also may require additional documentation, such as copies of tax filings for the years the business entity reports…
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Blog, Business, Employment Law
“Announcing” Employee Departures – A Practical, Nitty-Gritty Guide To Minimizing Disclosures About Former Employees
Clients frequently ask me what the “best” way is to announce a particular employee’s departure from their organization, and – as you might expect – that question gets asked more often when the departing employee is leaving under “less than ideal” circumstances. Sometimes it’s because the employee has done something “sensationally” wrong (bad behavior towards coworkers or clients, using the company Internet for things you’d have been happy never to hear about, criminal activity, etc.); sometimes the employee’s transgressions are objectively ho-hum but they’re a long-tenured or popular fixture with colleagues or customers who undoubtedly will be upset by their exit. Whatever the specifics, the same risks and recommendations generally apply. Legal Considerations Indiana has no specific statute or regulation governing how to “announce” an employee’s departure. Indiana does have a “service letter law” that requires employers to provide certain information in writing to the departing employee, but only in response to a qualifying request from that employee. That’s not the sort of “announcement” most employers ask about (though you should be aware of that law and consult counsel if you ever receive anything you think might be a qualifying request from a former employee). Indiana also has a statute that gives a certain amount of immunity (read: “protection”) to employers who provide truthful information in response to requests from other prospective employers, but that too usually doesn’t apply to the situations causing employers to ask questions about “announcements.” Most often, employers want to know what they can/should tell the rest of their workforce and/or customers,…
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Blog, Business, Corporate Law, Employment Law
So…Now What? What Employers Should Know And Be Doing About The New Proposed Overtime/Minimum Salary Rule
If you run a business, there’s a decent chance your inbox has been/will be more crowded than usual this days with alerts about the new Department of Labor (DOL) Overtime/Minimum Wage Rule. And you may also get a slight feeling of déjà vu, because the same thing happened back in the Fall of 2016. That’s when a federal judge blocked the Obama Administration DOL from implementing a rule that would have significantly increased the minimum salary employers have to pay employees who are classified as exempt under the Fair Labor Standards Act (FLSA). Rather than fighting over that version of the rule in court, the DOL went back to the drawing board, and it’s been working on a revised regulation for the last couple years. On March 7, 2019 DOL unveiled its long-awaited proposal for the “Minimum Salary Rule 2.0.” The full DOL proposal exceeds 200 pages, but your friendly neighborhood @HoosierHRLawyer prefers bullet points where possible (actually, one of my mentors taught me to hate bullet points, so here’s some ordered lists instead): What’s The New (Proposed) Rule Say? Well, a lot. But here’s some highlights: If you’re an employer in any of the 50 U.S. States and have “white collar exempt” employees (administrative, executive, or professional), you’ll need to pay them at least $35,308 annually ($679 per week). This is an increase from the current rule, which requires only $23,660 annually ($455 per week). If you don’t pay your exempt workers the minimum salary (consistently each week), you can’t treat them as exempt, and…
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