Law firms across all practice areas are facing unexpected challenges during the coronavirus crisis.
During this pandemic with more than three out of four Americans inside their home, many law firms are seeing reduced amount of calls and new clients.
Fortunately, there is now relief available for law firms.
President Trump signed a historic $2 trillion stimulus packages in hopes of stabilizing the US economy. $350 billion has been earmarked as loans for small businesses with less than 500 employees.
Here is what you need to know about the stimulus package.
Small-business loans through Paycheck Protection Program
To keep as many employees from being laid off, the Paycheck Protection Program will provide loans to small businesses. Eligible law firms can receive up to 2.5 times the average monthly payroll costs (up to $10 million) paid during the year prior.
Small businesses that are eligible:
- Small businesses with fewer than 500 employees (either full-time or part-time)
- A small business that would otherwise meet the SBA’s size standard
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- Additional business classifications, as described here
To be eligible, your business must have been operating prior to February 15th, 2020, and must have had employees who were paid salaries and payroll taxes or paid independent contractors.
Businesses which are eligible to borrow must attest to the following:
- The current economic climate makes the loan necessary to keep their business in operation.
- The loan will be used to maintain payroll, or to make mortgage, lease, or utility payments.
- The borrower does not already have an application pending for another loan for similar purposes and a similar amount, nor have they already received such a loan.
If you take advantage of the Paycheck Protection Program, your loan may be forgiven if you keep your current payroll during and after the Covid-19 crisis.
You can learn more about the small-business loans that are available through the Paycheck Protection Program here.
Employer Payroll Tax Relief
Additionally, the stimulus package also provides payroll tax relief to law firms who employ throughout the coronavirus crisis.
The tax incentive is as follows:
- A 50% refundable payroll tax credit on worker wages, which encourages businesses to retain their employees
- A deferment in employer payroll taxes for Social Security until 2021 and 2022
These benefits will give your law firm much-needed flexibility with cash flow. Aiding your firm to make payroll while your income may have gone to as low as zero.