Business Law

Making the rules while playing the game: Check out the new guidance from the SBA on the Paycheck Protection Program program

The United States Government rode to the economy’s rescue in March when it enacted the Paycheck Protection Program (PPP), established by Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (the “Act”). 

The PPP provided funding for businesses and nearly everyone connected to the economy including Oklahoma small businesses, employees, and independent contractors.  The PPP is administered by the United States Small Business Administration (the “SBA”), meaning the SBA makes up the rules for the PPP loan program. 

In what was certainly a path leading to confusion and difficulty but perhaps a path required by the severity of Coronavirus National Emergency, the SBA made the rules for the PPP during, after, and while it was distributing the funds from the PPP.  That means Oklahoma small businesses and businesses around the United States received PPP loan funds and since then have had to address new rules.

In a bid to try to ease the confusion, yesterday, May 6, 2020, the SBA issue these PAYCHECK PROTECTION PROGRAM LOANS Frequently Asked Questions (FAQs):

Paycheck-Protection-Program-Frequently-Asked-Questions
Posted by Shawn Roberts in Blogposts, Business Law

Why does the Oklahoma Secretary of State show my LLC as terminated or expired?

The Summer Solstice Seen from GOES East from NOAA Satellites

The Oklahoma Secretary of State is the record keeper for Oklahoma limited liability companies. 

You start with the OK SOS to form an Oklahoma limited liability company and the OK SOS tracks your entity through its.  One piece of data you can find when searching for a limited liability company on the OK SOS website is the entity’s status.  Status is usually expressed as either:

Active

Termination

Suspended

As you might guess, you want your company to be active and you need to fix your LLC’s status if it is terminated or suspended. 

Why does an Oklahoma LLC’s status show terminated or suspended? 
Here is what the Oklahoma Secretary of State says:

It means the LLC or LP is not in good standing with the State of Oklahoma due to a late Annual Certificate. Annual Certificates are due on the formation date of the entity each year, and a 60 days grace period is given to file them. After 60 days if there has been no Annual Certificate filed, the entity becomes inactive and not in good standing.

https://www.sos.ok.gov/business/faq.aspx

How do you get your LLC back in good standing?
I provide the steps to back to good standing with the Oklahoma Secretary of State in this Blog Post.

Posted by Shawn Roberts in Blogposts, Oklahoma limited liability company

What are the consequences when an Oklahoma corporation is suspended by the Oklahoma Secretary of State?


In a previous Blog Post, I talked about why a corporation ends up being suspended by the Oklahoma Secretary of State.  This Post discusses some of the consequences for a suspended corporation.

The Oklahoma Tax Code provides for multiple penalties if a corporation’s charter is suspended:

  • The directors and officers become liable for any and all debts of the corporation incurred or created with their knowledge, approval, and consent as if the directors and officers were partners;
  • Any contract entered into by the corporation during the suspension is voidable;
  • A court cannot grant to the corporation any legal relief in a lawsuit until the corporation is “reinstated” (meaning back in good standing); and
  • The corporation loses its right to sue or defend in any court of this state, except in a suit for forfeiture of its charter.
    MONCRIEFF-YEATES v. KANE 

 

The upshot of these penalties is that you may lose the protection from the Wall of Separation I mentioned in this Blog Post. Needless to say, if you do business through a suspended corporation, you lose a lot of the protection the corporation normally provides and subject yourself to substantial but unnecessary legal risk.

Posted by Shawn Roberts in Blogposts, Business Law

Why did the Oklahoma Secretary of State suspend my corporation?

View along Adelaide Street from George Street with the buildings decorated for the Royal Visit, 1954 https://www.flickr.com/photos/statelibraryqueensland/

The Oklahoma Secretary of State is the record keeper for among other things Oklahoma corporations and Oklahoma limited liability companies.  To form a corporation, you submit paperwork to the Oklahoma Secretary of State.  To form and maintain a limited liability company, you also submit paperwork to the Oklahoma Secretary of State.  So, as you might expect, the Oklahoma Secretary of State keeps records about whether a corporation is in good standing, suspended, or terminated.

Reasons an Oklahoma corporation is suspended
You may have searched the Oklahoma Secretary of State’s records and found a corporation you own and discovered that the corporation was “suspended.” The suspension is usually connected to the Oklahoma Tax Commission.  Corporations are usually suspended because either the owners have failed to file an annual Oklahoma Franchise Tax Return and/or failed to pay the franchise tax. Sometimes corporations are suspended for failure to file an Oklahoma corporation income tax return:

–> Failure to file Oklahoma Income Tax Return
According to the Oklahoma Tax Commission, any corporation doing business within or deriving income from sources within Oklahoma is required to file an Oklahoma Corporation Income Tax Return, whether or not a tax is due.

–> Failure to file a franchise tax return
The Oklahoma Tax Commission says:
Oklahoma Franchise Tax is due and payable July 1 of each year unless a Franchise Election Form (Form 200-F) has been filed. The report and tax are delinquent if it not paid on or before September 15. 

How is a corporation’s charter suspended?
If a corporation fails to pay the required franchise tax, the Oklahoma Tax Commission enters an order suspending the corporation’s charter and then send the order to the Oklahoma Secretary of State directing that the corporation be suspended.

Posted by Shawn Roberts in Blogposts, Business Law

How does forming an Oklahoma corporation help protect you from liability?

STS-114 Thermal Protection System from NASA on The Commons

I advise people to form an entity, such as a corporation, to provide protection for them from the liability their business can create.  You can read more about individual liability and why you need to protect yourself from individual liability in this Blog Post.

The protection from individual liability for the people who own the company is one of the essential benefits of having a corporation. 

Example
Think in terms of a landscaping business that accidentally hits a gas line leading to people being injured and the property being destroyed.  The landscaping business is going to be responsible for huge damages.  But, if the landscaping business was working through a corporation, there is a good chance that the liability will stop with the corporation and not bleed into the corporation’s owners’ assets.  If the owners were operating the business without a corporation or Oklahoma limited liability company, as sole proprietors, the owners’ assets would be at risk of being taken to pay the damages from the accident (liability insurance coverage might limit the owners’ risk in this scenario). 

The Wall of Separation
I refer to this protection as the “wall of separation.” The corporation (or in many cases the Oklahoma LLC) is the “wall” between the individuals who own the company and the liability created by the company.  On one side of the wall rest the owners’ assets and on the other side of the wall sit all the unknown liabilities that come from operating a business. 

When is the wall’s protection lost?
One way the wall breaks is when a corporation’s charter is suspended.  

 

Posted by Shawn Roberts in Blogposts, Business Law

Questions and Answers for Oklahoma employees and employers: The Families First Coronavirus Response Act

Below is a table I put together for Oklahoma employers and Oklahoma employees answering some basic questions about the Families First Coronavirus Response Act.  A more detailed discussion of the Act is located here.

What is the Families First Coronavirus Response Act?

The Families First Coronavirus Response Act ( the “Act”) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. 

Which government agency enforces the Act?

The Department of Labor. Through its Wage & Hour Division, will administer and enforce the Act. 

When does the Act start, and how long does the Act last?

The FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.

To which businesses does the Act apply? 

Under the Act, “covered employers” are certain public (Government) employers and private employers who employ fewer than 500 people.

What does the Act require employers to do?

 

Provide employees with paid leave along these lines:

  • Leave at Regular Pay Rate.
    Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Leave at 2/3rds of employee’s regular pay rate.
    Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine, or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition.

How long is the Act effective?

The Act becomes effective April 1, 2020, and runs through December 31, 2020.

What employees are covered by the Act?

(a) All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19, or (b) Employees employed for at least 30 days are eligible for up to an additional ten weeks of paid family leave to care for a child under certain circumstances related to COVID-19.

What reasons qualify an employee for leave under the Act?

Employees qualify for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because of:

  1. Quarantine.  The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. Self-Quarantine. A health care provider has advised the employee to self-quarantine related to COVID-19
  3. Experiencing Symptoms. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis
  4. Caring for Person.  The employee is caring for an individual subject to an order described above or a person who self-quarantined as described above;
  5. Caring for Child. The employee is caring for a child whose school or care place is closed (or no child care is unavailable) for reasons related to COVID-19; or
  6. Similar Condition.  The employee is experiencing any other substantially-similar condition specified by the Government

How much leave does an employee get?

For reasons 1-4 and 6 above – a full-time employee is eligible for up to 80 hours of leave, and part-time employee is eligible for the number of hours of leave the employee works on average over two weeks.  

How much leave does an employee who is caring for a child receive?

For reason five above, a full-time employee is eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid expanded family & medical leave) at 40 hours a week. A part-time employee is eligible for leave for the number of hours that the employee is typically scheduled to work over that period.

How does an employer calculate pay?

  • Reasons 1, 2, or 3 above: Employees taking leave are entitled to pay at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day, and $5,110 in the aggregate (over 2-weeks).
  • Reasons 4 or 6: Employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day, and $2,000 in the aggregate (over 2-weeks).
  • Reason 5: Employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day, and $12,000 in the aggregate (over 12-weeks). 

What if complying with the Act’s paid leave requirements would crush my small business and maybe put me out of business?

There is a small business exemption: To choose the small business exemption, you must document (in writing) why you believe your Oklahoma small business meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations (How about that?!? You are required to comply with regulations that do not exist yet!).

Do I have to post Notice about the Act at my business?

Yes.  The USDOL has provided mandatory posters regarding employee rights under the Families First Coronavirus Response Ac.  All private-sector employers with fewer than 500 employees are required to place the poster in a conspicuous area, which will generally be alongside your other federally mandated employee notices, you can find the post here. Additionally, you can find answers to questions about posting the Notice here.

 

The US Department of Labor also has some excellent resources on the Act, including a Q&A, a Fact Sheet for Employers, and a Fact Sheet for Employees.

Posted by Shawn Roberts in Blogposts, Business Law

Oklahoma Coronavirus Emergency: Governor Stitt further clarifies the elusive meaning of being an “essential” business

As I mentioned earlier, yesterday, as the number of Covid-19 cases in Oklahoma continues to grow in the Coronavirus emergency (164 confirmed positive COVID-19 cases as of now), on March 24, 2020, Oklahoma Governor Kevin Stitt issued his Fourth Amended Executive Order 2020-07.  

Section 20. of the Amended Executive Order provides that all business that are not essential must close by 11:59 PM at March 25, 2020.

Then late this afternoon, Governor Stitt further clarified what it means to be an “essential” business through another Order which you can find below:

 

1921
Posted by Shawn Roberts in Business Law

Coronavirus Oklahoma: Is your business considered essential under Governor Stitt’s Safer-at-Home Order?

As the number of Covid-19 cases in Oklahoma continues to grow in the Coronavirus emergency, on March 24, 2020, Oklahoma Governor Kevin Stitt issued his Fourth Amended Executive Order 2020-07 increasing the restrictions to try to slow the spread of the coronavirus and Covid-19.  You can find a copy of Governor Stitt’s Order here.

Paragraph 20 of Governor Stitt’s Order provides:

Effective at 11 :59 p.m. on March 25, 2020, all businesses not identified as being
within a critical infrastructure sector as defined by the U.S. Department of
Homeland Security and located in a county experiencing community spread of
COVID-19, as identified by OSDH on its website, shall close. Additional
sectors may be designated as critical by Executive Order or Memorandum.
Nothing in this provision shall prevent restaurants and bars from providing
pick-up, curbside, and delivery. This shall be effective until April 16, 2020.

So, all Oklahoma businesses in counties with at least one Covid-19 case that are within a critical infrastructure sector must close for 21 days by March 25, 2020, at 11:59 PM.  What businesses are covered by this Order?  Consider Kevin Stitt’s tweet below:

and, Governor Stitt signed an Executive Memorandum clarifying what businesses are essential:

 

1920
Posted by Shawn Roberts in Blogposts, Business Law

Oklahoma “Force Majeure”: A term with which you need to become familiar

KONICA MINOLTA DIGITAL CAMERA

Despite the fancy French name, Force Majeure is not a French pastry or some act that adults perform with each other in adult settings. Force Majeure is a term that you will hear with ever-increasing frequency as the global coronavirus pandemic continues. 

What is Force Majeure? How is Oklahoma Force Majeure treated? Read on to find out.

Continue reading →

Posted by Shawn Roberts in Blogposts, Business Law

What is Oklahoma individual liability and why does it matter?

Diplomatic Security Service from Flickr User BSAC_Mock Dignitary Protection

We are talking about Oklahoma asset protection. That is, protecting your assets from being taken by a creditor or another party that has a judgment against you, individually.

Fortifying your assets
One way to fortify yourself and protect your assets is to do business through an Oklahoma entity. When I say entity, I am generally talking about an Oklahoma limited liability company or an Oklahoma corporation.

You form the entity, and then you use the entity to conduct business. For example, I have clients who own rental properties and they have created at least one LLC to own the rental property.

Explanation of the Mechanics
Here is how the protection works: 

For a rental property, the entity enters into a lease with a tenant. If for some reason, the property generates liability for the owner and the tenant or another party trying to recover against the owner, the creditor has to start by recovering against the entity rather than against the person who formed the entity.

The Wall of Separation
That means there is a wall of separation between what you own individually, for example, if your home and your cars, and what your business owns, which is the rental property. While there are some circumstances where a creditor could reach your individual assets, it is much more difficult when the creditor has to pierce through an entity that is out front.  For more information about piercing through the corporate veil in Oklahoma, consider – 5 Steps to prevent your Oklahoma corporate veil from being pierced

If, in my rental home example above, the owner owns the property in his or her own name and lease is the property in his or her own name then the owner is going to be liable if there is liability created which means the owner is putting all of its assets at risk. There’s no reason to have this happen using an entity to do business and if you need help getting that entity set up or getting started please reach out to me.  

 

Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma limited liability company