If your business is a partnership and you received the PPP here is something to ponder on!
The PPP free-cash program to assist businesses during the COVID-19 pandemic is gaining traction and clarity. If you operate your business as a partnership, you have several recent developments that make the free-cash program more to your benefit.
1. Partner’s Self-Employment Income Creates Cash and Forgiveness
Just as sole proprietors failed originally to ask for their PPP cash assistance, so did many partners.
Three things to note here:
2. Paid and Capped
Line 9 of the SBA official forgiveness application reads as below:
Line 9: Enter any amounts paid to owners (owner-employees, a self-employed individual, or general partners). This amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.
Note the word “paid.”
In general, payments to partners don’t occur in a pattern that would equal the amount needed during the eight-week covered period.
To protect the partnership’s forgiveness amount, make sure that payments to partners during the eight-week covered period equal the 8/52 of the partners’ deemed 2019 payroll. We have not seen a requirement on the “paid” part, but that word is there. So protect yourself.
3. Qualifying Non-Payroll Expenses
When explaining that the partnership had to file for the PPP loan and forgiveness, the SBA stated:
Rent, mortgage interest, utilities, and other debt service are generally incurred at the partnership level, not partner level, so it is most natural to provide the funds for these expenses to the partnership, not individual partners.
If your partnership has not applied for its PPP money, do it now. The SBA has plenty of money available for PPP loans at the moment, but you have to think it won’t last long.
5. Easier Forgiveness on the Way
On Thursday, May 28, the U.S. House of Representatives approved the Paycheck Protection Program Flexibility Act of 2020 by a vote of 417-1. This bill or something similar will be enacted in June to make it easier for all PPP borrowers to qualify for PPP loan forgiveness.
Here are some highlights from this bill:
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.