Bongiovi Law Firm https://bongiovilaw.com Thu, 18 Jun 2020 18:20:58 +0000 en-US hourly 1 https://wordpress.org/?v=5.4.2 https://bongiovilaw.com/wp-content/uploads/2018/04/cropped-favicon-32x32.png Bongiovi Law Firm https://bongiovilaw.com 32 32 COVID-19 Employer Resources https://bongiovilaw.com/2020/06/covid-19-employer-resources/ Thu, 18 Jun 2020 18:15:48 +0000 https://bongiovilaw.com/?p=5720 The rules are changing so quickly it’s nearly impossible to stay on top of the guidance that’s coming out.  Below we have assembled some resources for our employers who are trying to determine what to do with their employees, contractors, positive COVID-19 tests, etc.  With anything, it’s crucial that all decisions are well-documented so that […]

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The rules are changing so quickly it’s nearly impossible to stay on top of the guidance that’s coming out.  Below we have assembled some resources for our employers who are trying to determine what to do with their employees, contractors, positive COVID-19 tests, etc.  With anything, it’s crucial that all decisions are well-documented so that you can “show your work” related to decisions you make.  We are all doing the best we can with the information we have at the time, so hang in there:

Bloomberg Law

CDC – Businesses and Workplaces

Nevada Labor Commissioner

EEOC – COVID Guidance plus What to do with a COVID-positive employee

California Lawyers’ Association Guidance for Employers Concerning Positive Employee COVID Test

 

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Live Notes from 4/7 SBA Webinar on PPP and EIDL https://bongiovilaw.com/2020/04/live-notes-from-4-7-sba-webinar-on-ppp-and-eidl/ Tue, 07 Apr 2020 21:56:41 +0000 https://bongiovilaw.com/?p=5679 Please forgive the unpolished nature of what follows, but I was furiously taking notes during a webinar with Joseph Amato, Director of the Nevada District of the SBA. Some things have changed since our last articles which we will go back and update. I’ve bolded particular items that are probably of interest to many of […]

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Please forgive the unpolished nature of what follows, but I was furiously taking notes during a webinar with Joseph Amato, Director of the Nevada District of the SBA. Some things have changed since our last articles which we will go back and update. I’ve bolded particular items that are probably of interest to many of our clients.

Good luck and stay safe.

  • PPP is federally guaranteed loan to employers who MAINTAIN their payroll through the pandemic crisis.
  • If number of employees is maintained for 8 weeks following the closing of the loan, and funding is used for payroll expenses, can be forgiven.
  • Permits some of the funding to be used for rent and mortgage, up to the limit of the loan.
  • Updates to CFR INCLUDES federal taxes, so if you ran reports prior to 4/6/2020, RUN THEM AGAIN SO THEY ARE ACCURATE
  • If you end up with a loan (if you don’t use the funds for payroll), the terms are as follows:
    • 1% interest rate
    • 2 year term
    • Loan is 250% of average monthly payroll, with a max of $10m
    • Payments are deferred for 6 months but interest continues to accrue
    • No collateral or personal guarantees
  • Business Forms Needed by Borrower (updates still coming)
    • SBA Form 2483 (PPP Application of 2 pages)
    • Payroll documentation to support the average monthly payroll with 2019 as base year
    • Forms for lender
    • Filed electronically
  • Who’s Eligible?
    • Small business with fewer than 500 employees
    • 501(c)6s are still ineligible at this moment; 501(c)3s are eligible provided they have fewer than 500 employees
    • Sole proprietors and independent contractors
    • Anyone who’s self-employed
    • YOU CAN ONLY FILE ONE PPP PER BUSINESS OPERATION YOU HAVE
      • The only multiple location eligible are hotels and food service operators
    • If you’re a franchise the normal affiliation rules do not apply
  • As or 4/3 PPP applications are accepted for all BUT sole proprietors and independent contractors who can submit 4/10
  • Who’s INELIGIBLE?
    • Anyone engaged in illegal activity (cannabis, this means you)
    • Household employers of nannies, staff, etc.
    • Anyone who’s defaulted on a federal loan in the last 7 years.
    • If more than 33% of your revenue comes from gaming
  • What do Lenders Need?
    • Good faith certification that:
      • The loan is necessary to support ongoing operations; and
      • You will use the proceeds to retain workers and maintain payroll or make mortgage (interest, not principal payments), lease, and utility payments
    • Borrower from Feb 15, 2020 through Dec 31, 2020 does not have a loan application duplicative of the purpose
  • If you applied for an EIDL and are completing PPP, you do not have to say you have an EIDL loan bc the EIDL approvals might come after PPP.
    • If you are approved for both, you may choose or roll one into another depending on the purpose for which you are applying.
  • If you’re an independent contractor you can apply with payroll records or 1099MISC form
  • Determining the loan amount
    • Aggregate gross payroll costs or employees for the last 12 months, based on 2019
    • Subtract any compensation paid to an employee in excess of $100k and/or amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year
    • 5 steps to determine loan amount
      • Take average monthly payroll costs and multiply by 2.5
      • Add the outstanding amount of an EIDL loan made between 1/31/2020 and 4/3/2020 less the amount of any “advance” under an EIDL COVID-19 loan bc the advance does not have to be repaid
  • Determining Payroll
    • Gross salary, wages, commissions, plus tips or equivalent,
    • Vacation, parental, family, medical, or sick leave
    • Severance for dismissal or separation
    • Health care benefits including insurance premiums
    • Retirement benefits
    • State and local taxes
    • Basically leave your gross payroll intact and add health insurance and retirement if they aren’t bundled with your payroll
  • Excluded Payroll Costs – use 2019 for the base year!
    • Compensation in excess of $100k prorated for the period 2/15-6/30/2020
    • Payroll taxes
    • Any employee whose principal place of business is outside the US
    • Qualified sick leave wage under Families First Coronavirus Response Act (Sections 7001 or 7003)
    • DO NOT COUNT INDEPENDENT CONTRACTORS; they will be able to apply on their own
  • Use of Proceeds
    • Payroll costs, continuation of health care
    • Mortgage INTEREST payments, not principal payments
    • Rent utilities
    • Interest payments on debt obligations incurred before 2/15/2020
  • If you received an EIDL loan between 1/1/2020 and 4/3/2020 you MAY apply for an PPP loan!  NEW INFORMATION
    • If your EIDL loan was NOT used for payroll costs, you can apply for a PPP loan
    • Any advance on the EIDL will be deducted from the loan forgiveness of the PPP loan
  • 75% rule
    • At least 75% of the PPP loan proceeds must be used for payroll costs. KEEP YOUR RECORDS as to how you’re using the PPP funds so you can qualify for forgiveness!
  • Loan Forgiveness
    • The amount of forgiveness CAN be up to the full principal amount of the loan and any accrued interest, PROVIDED that you spend at least 75% of the funds on payroll expenses.  Remember, the goal is to keep people employed or put them back to work.
    • Average loan size as of right now is $175,000
    • NO MORE THAN 25% OF THE LOAN FORGIVENESS AMOUNT MAY BE ATTRIBUTABLE TO NON-PAYROLL COSTS.
  • What banks are participating?
  • Timing of application approval and disbursement of funds?
    • Depends on lenders and SBA’s ability to process. They’re trying to make application-closing to happen within 7-14 days
    • A LOT depends on the accuracy and reliability of the information you supply to your lender! Help them help you!
  • Startups! Are you eligible?
    • If you didn’t exist before 2/15/2020, you are not eligible
    • If you did, then you can apply even if you only had one month of business
  • Wrapping an EIDL into PPP
    • If you have applied for both, but not approved, you don’t have to disclose your EIDL on the PPP application
    • If your EIDL loan is <25% of what you receive under PPP, you can wrap it in so it might be fully forgiven.

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EIDL or PPP – Which is right for you? https://bongiovilaw.com/2020/04/eidl-or-ppp-which-is-right-for-you/ Thu, 02 Apr 2020 18:41:25 +0000 https://bongiovilaw.com/?p=5668 Edited based on information received during a 4/7/2020 webinar with Joe Amato, SBA’s Nevada District Office Director.  Notes from that are here. In an effort to get as close to the horse’s mouth, so to speak, we are sharing the information Gina received on a conference call with the SBA’s Nevada District Office Director, Joe […]

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Edited based on information received during a 4/7/2020 webinar with Joe Amato, SBA’s Nevada District Office Director.  Notes from that are here.
In an effort to get as close to the horse’s mouth, so to speak, we are sharing the information Gina received on a conference call with the SBA’s Nevada District Office Director, Joe Amato yesterday, April 1.
We are going to do our best to clarify based on the questions that Mr. Amato answered during the call about the two SBA programs – the EIDL (Economic Injury Disaster Loan) and the PPP (Paycheck Protection Act).
THE RESTRICTION FORCING YOU TO CHOOSE EITHER THE EIDL OR THE PPP HAS BEEN LIFTED AND NOW WE CAN APPLY FOR BOTH! 
See below and stay safe!

EIDL – Economic Injury Disaster Loan

This is a LOAN, not a grant that you apply for directly through the SBA (link is above). It is intended to help businesses continue to pay their expenses during this time, whether they’ve been ordered to close or not.  The funds you get through an EIDL loan can be used for any business expenses – utilities, insurance, etc.
It has a 30-year amortization.  If you’ve applied, you’ll notice the SBA does not ask you how much money you need.  It has an algorithm which is based on your gross revenue, COGS, and number of employees.
If you are approved, payments are deferred for 12 months.
The original application took between 4 and 10 hours to complete; this week the SBA released a new streamlined version of the application which takes 10-15 minutes.  If you apply now, you’ll also have an opportunity to request an advance of $10,000 against the principal you’re eventually approved for.  This is STILL PART OF THE LOAN.  If you are approved, the Treasury is supposed to send the money to your account within 72 hours of application.  Amato said he started to see checks go out on Monday.
Keep in mind 2 MILLION applications were received in just two days – Monday and Tuesday of this week.
As of this week, nonprofit 501(c)3 organizations are eligible, but 501(c)6 organizations that engage in lobbying activities are not.

PPP – Paycheck Protection Program

NOTE: You go through your bank to apply for this program, NOT directly through the SBA.  So, if you are planning to apply, get on the horn with your banker and let them know you want to apply AND find out what information the bank will require.  Because the bank is taking a risk on you without a guarantee that the full amount will be forgiven, each bank will have its own requirements.  In fact, I’ve seen requirements from three different Nevada banks and they’re all different.
The application period is supposed to open tomorrow (April 3) but it’s unclear what the application will look like or what information is required.  I’ve seen requirements from three different Nevada based banks and they are all different.  Because the bank is taking a risk on you that may not be forgiven, expect to pull together some financials and reports from your payroll provider.

The most recent version of the application I can find is here.

PPP may NOT be for you if: you’ve laid everyone off and have no revenue, you’ve been shut down, you don’t have anything for employees to do.

PPP may be for you if you are employing all your people right now or have an opportunity to bring back your employees.
This program was part of the CARES Act, signed into law by President Trump last Friday.  The funds you receive through the PPP are potentially a forgivable grant.  I say “potentially” because the funds have to be used to keep people employed or to put employees back to work.
You’ll supply your banker with your average monthly payroll expenses, to include health benefits, retirement benefits, etc, plus the number of employees you have right now and how many you had this time last year.
You may qualify for 2.5 times your average monthly payroll.  No guarantee or collateral is required.
Keep in mind that you have to maintain your employment levels for 8 weeks prior to the closing of the loan, when the bank can petition the SBA for full reimbursement of the money, at which time your loan is forgiven and is NOT A TAXABLE EVENT.
If, instead, you reduce your number of employees during that time, the original loan amount tied to the remaining employees will be forgiven.  The rest will be a loan at .5% interest with 6 month payment deferral, and repayment must be made within 2 years.
Similarly, you can use up to 25% of the money you get for non-payroll related expenses (rent, utilities, etc.) and even that 25% may qualify for forgiveness.
Here again, 501(c)3s are eligible but not 501(c)6s.

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Small Business Response to COVID-19 https://bongiovilaw.com/2020/03/small-business-response-to-covid-19/ Mon, 30 Mar 2020 14:35:09 +0000 https://bongiovilaw.com/?p=5620 Updated 4/9/2020 Nevada Banks – Taking Non-Client Applications or Not? Latest updates on funding as of 4/7/2020 5:16pm: From SBA Webinar OPTIONS FOR FUNDING – Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) US Treasury Guidance on PPP Vegas Chamber Webinars – MAIN PAGE Vegas Chamber Presents: A Federal Update on CARES Act […]

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Updated 4/9/2020

Nevada Banks – Taking Non-Client Applications or Not?

Latest updates on funding as of 4/7/2020 5:16pm: From SBA Webinar

OPTIONS FOR FUNDING – Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP)

US Treasury Guidance on PPP

Vegas Chamber Webinars – MAIN PAGE

Vegas Chamber Presents: A Federal Update on CARES Act from the U.S. Chamber of Commerce

Vegas Chamber Presents: Webinar with the DETR Regarding Unemployment Benefits

Vegas Chamber Presents: Webinar with State Labor Commissioner Shannon Chambers Regarding COVID-19 Regulations

3/25/2020 – Force Majeure: We’re fielding lots of calls from people looking to invoke a force majeure clause (that may or may not even exist in their contract) in light of the pandemic and non-essential businesses being unable to deliver contracted-for services.  We couldn’t have said it better than our colleagues at Brownstein Hyatt Farber Schreck.

We are also uploading documents and releases we receive that we can’t find anywhere else online to our COVID-19 Google Drive.

Update 3/18/2020 8:30am: Despite fully intending to continue patronizing our small businesses, the Nevada Governor has issued a shutdown of all “non-essential” businesses and cautioned against any gatherings of more than 10 people.  Major sporting events are cancelled, there are no shows at The Smith Center, and every business I know has gone virtual to the extent they can.  As Gwen Stefani so eloquently put it, this shit is bananas. B-A-N-A-N-A-S.

We will continue to update this article with resources we’ve found for fellow small businesses and circulate via social media.

3/16/2020:  Even if you believe the Coronavirus has been wildly overblown as a result of the 24-hour news cycle and the spread of misinformation via social media, the public’s reaction is what it is and small businesses especially are feeling the gut-punch.  From event cancellations in the tradeshow and hospitality industry, to people refusing to go to Chinatown because, apparently, they believe consuming Asian cuisine somehow makes you more susceptible to illness, our clients are hurting.  Badly.

We personally are continuing to go out, eat at restaurants, patronize small businesses, and stay informed.  Here are some resources we’ve pulled together, vetted for credibility, and from as close to the horse’s mouth as we could find.  Wash your hands. Don’t touch your face. And remember we’re all in this together.

 

FUNDING OPTIONS:

Summary of CARES Options

From: Vannozzi, Michael <Michael.Vannozzi@mail.house.gov>
Sent: Friday, March 27, 2020 6:36 AM
Subject: FW: Small Business Guide to the CARES Act

Hello all – here’s a handy guide that the Small Business committee put together on the CARES Act (the stimulus bill we’ll pass this morning). Please feel free to share far and wide, and if our office can be of assistance to you or any of your members, please don’t hesitate to reach out!

Sincerely,

Mike Vannozzi
District Director
Rep. Susie Lee (NV-03)

 

Vegas Chamber’s Webinar on Accessing Emergency Capital – 3/27/2020

CARES Act aka Payroll Protection Act (must contact your own bank) – Breakdown by US Chamber of Commerce

Small Business Administration Disaster Relief Funding

These loans will be made directly by the SBA and won’t include a bank.
Small Businesses can get up to $2MM in loans with maturities up to 30 years
These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact
Interest rates will be 3.75%
The online application and all forms are available in the Disaster Loan Application Portal https://disasterloan.sba.gov/ela/
For program questions or assistance in completing the application online, businesses can contact SBA Customer Service Center at 1-800-659-2955 or the Nevada District Office at 702-388-6611.

Nevada Contact for SBA:

Joseph P. Amato
District Director
Nevada District Office
(540) 840-8033
Joseph.amato@sba.gov

FEDERAL INFORMATION:

Employment:

Families First Coronavirus Response Act: Questions and Answers

Families First Coronavirus Response Act: Employer Paid Leave Rights

COVID-19 and the Fair Labor Standards Act Questions and Answers

COVID-19 and the Family and Medical Leave Act Questions and Answers

Posters:

Employee Rights under Families First Coronavirus Response Act

FAQs on the above poster

IRS Coronavirus Tax Relief

Public Health:

CDC – Centers for Disease Control and Prevention – Identifying Symptoms

CDC Guidance on Mass Gatherings and Large Community Events

Guidance from the US Department of Labor

OSHA Guidance

World Health Organization

 

US Chamber of Commerce

National Small Business Association

 

New legislation that, without intervention from the DOL, will require all businesses with fewer than 500 employees to offer two weeks of paid sick leave and FMLA leave.

NEVADA INFORMATION:

Business Information:

Local Southern Nevada Government Agency Response

Nevada Department of Public Safety Press Release (includes list of essential and non-essential businesses)

Nevada Department of Business and Industry Press Release

Nevada Department of Business and Industry Fact Sheets

Nevada Governor’s Office Press Releases

Executive Order prohibiting residential and commercial evictions for the duration of the state of emergency. 

Nevada Association of Employers – Responding to the Coronavirus

Vegas Chamber

Reno-Sparks Chamber of Commerce

City of Henderson Updates

Coronavirus Social-Distancing Forces Painful Choices on Small Businesses

The Impact Of Coronavirus: Advice For Funded Small Businesses And Those Seeking Funding

Public Health:

Nevada Health Response

Nevada Department of Health and Human Services

Southern Nevada Health District

Washoe County Health District

 

Nevada Legislature – Find My Legislator

Don’t forget to check with your own banker for resources they may have access to during this time.

Finally, from a CPA who’s been around the bend: make sure you retain all business records. “Around 18 months from now at both the State and Federal level they are going to go crazy with enforcement to try and pay for everything. There will be more IRS audits, more regulatory review and fines, and they will be mean and nasty. So tell your clients to be sure and safeguard their records for 2019, 2020 etc. In times of crises people tend to forget the compliance issues, if your business location closes do not throw away your bank records and receipts etc.”

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Commercial Lease Obligations During The Coronavirus Insanity https://bongiovilaw.com/2020/03/commercial-lease-obligations-during-the-coronavirus-insanity/ Sat, 28 Mar 2020 01:28:15 +0000 https://bongiovilaw.com/?p=5658 ***4/3/2020 UPDATE*** As you may be aware, Governor Sisolak declared Emergency Directive 008 (the “Directive”) earlier this week. The Directive essentially puts a stay (prohibition) on all commercial and residential evictions and foreclosures while the state of emergency (issued March 12, 2020) remains in effect. Basically, this means your landlords cannot evict you from your space for defaulting […]

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***4/3/2020 UPDATE***

As you may be aware, Governor Sisolak declared Emergency Directive 008 (the “Directive”) earlier this week. The Directive essentially puts a stay (prohibition) on all commercial and residential evictions and foreclosures while the state of emergency (issued March 12, 2020) remains in effect. Basically, this means your landlords cannot evict you from your space for defaulting on your leases, including not paying rent, during the time the Directive is in place. While I do believe the intent of the Directive is benevolent as it aims to keep businesses in their commercial spaces and individuals in their homes during this time, the language of the Directive creates concerns for businesses (and individuals) once it is lifted. For example, the Directive in no way relieves either party from any of its contractual obligations under a lease (or applicable agreement), including the payment of rent. The only suggested remedy under the Directive, once it is terminated, is the “encouragement” of the parties to negotiate payment plans or other agreements to cure defaults or missed payments that may have occurred during the time the Directive was in place. Encouragement is a far cry from a requirement, which may end up being a very real problem if landlords simply demand all amounts in arrears be paid immediately upon the termination of the Directive. If tenants cannot pay, landlords would then theoretically have the right to evict their tenants. That is not to say that will infallibly be the case, but it is certainly a concern.

As a result, we think it is a good idea to: 1) check with your insurance providers to see if you maintain business interruption coverage, and, if so, make a claim ASAP; and 2) reach out to your landlords now to see what alternative arrangements may be made in relation to the payment of rent during all of this craziness. It is our understanding that portions of the new stimulus packages afford at least some relief to landlords and lenders which they may be able to pass onto their tenants.

*Previous Post*

Over the past two weeks, we’ve received an influx of calls from folks asking whether force majeure clauses in their commercial leases permit them to suspend rental payments to their landlords because of the coronavirus insanity.

The short answer is, it depends, but probably not.

Generally speaking, force majeure clauses relieve parties to an agreement from performing their obligations where an event beyond their control occurs which would make performance impracticable, illegal, or impossible. You may see these provisions referred to as “Acts of God,” “Excuse for Non-Performance,” or something to that effect. The issue here is that most commercial lease agreements specifically exclude the payment of rent by a tenant from the relief available under the force majeure provisions. For example, if your lease has a force majeure provision, it may include something similar to:

“With the exception of the obligation of Tenant to pay Rent and all other amounts that may be due from time to time under this Lease…”

“…provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder.”

“…except that the foregoing shall in no way affect or apply to (i) Tenant’s obligation to pay Rent or any other sums or amounts hereunder…”

“The provisions of this Section shall not be applicable at all to excuse or permit delay of the time for Tenant (a) to pay Rent or other money…”

Ok, ok, you get the point. If your lease contains similar language, it means that your obligations to pay rent, and other amounts due, are not abated or suspended during the force majeure event. So, in a nutshell, although the ramifications of the Coronavirus are almost certainly an event that would excuse performance otherwise, your lease agreement may require that you still pay rent. Please refer to your specific lease agreement to check what your force majeure clause, if any, says about rental obligations.

You may be scratching your head thinking, why is this the case? It seems super unfair! Well, look at the situation from the landlord’s perspective. They are also a business, and a lot of times, a small business like yours. They are ultimately responsible for the expenses related to the space you occupy, including mortgage payments to their lenders, insurance, utilities, taxes, etc. For that reason, it has been our experience that landlords aren’t too keen on removing this type of language, but as a practical matter, force majeure events are fairly rare and infrequent. That said, when negotiating leases, it usually didn’t make much sense to try to remove the rental exclusions from such provisions. That was, of course, before the whole damn world was shut down and locked up! Unfortunately, this whole situation is unexpected and unprecedented, which is creating a pretty vicious cycle for small businesses. Moving forward, looking toward lease renewal or when executing a new lease agreement, it may be worth scrutinizing the force majeure provisions a little more.

Now, before you break out the pitchforks and torches here, please understand that the vast majority of our real estate clients are tenants. However, it is important to realize that this pandemic is affecting everyone in the business community, including landlords. That said, whether or not your lease has a force majeure provision, and if so, it includes similar language to that above, I would suggest reaching out to your landlord to see what creative alternative arrangements may be made. Your landlord may be nice enough to contact their banker or lender to see if they can obtain any relief from their obligations so they can offer relief to you.

As always, if you have any specific questions regarding your lease agreement, please feel free to reach out to us. Hang in there, everybody! We’ll get through this hot mess!

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Nevada Essential and Non-Essential Businesses https://bongiovilaw.com/2020/03/nevada-essential-and-non-essential-businesses/ Mon, 23 Mar 2020 16:33:40 +0000 https://bongiovilaw.com/?p=5643 We are fielding a LOT of calls from businesses that are on the fringe of “essential” and are asking if they can continue to operate. The short answer is that, in most cases, it’s not abundantly clear. First, let’s go to the source – the definition of essential business NOT from the local news, or […]

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We are fielding a LOT of calls from businesses that are on the fringe of “essential” and are asking if they

can continue to operate.

The short answer is that, in most cases, it’s not abundantly clear.

First, let’s go to the source – the definition of essential business NOT from the local news, or some dude on Twitter.  Here is the link to the Department of Public Safety Emergency Regulation which would add to Nevada Administrative Code Chapter 414.  That’s the LAW, and the source, so start here.

If you fall squarely within the list of essential businesses, which include things like healthcare operations, infrastructure operations, and grocery stores, then you may continue to operate.

Even businesses that are clearly essential must modify their operations.  Restaurants may no longer host guests for dining in, but may offer curbside pickup or delivery.

Some businesses fall clearly OUTSIDE those categories and, on Friday, law enforcement was ordered to take steps to shut these businesses down.  Operating a non-essential business during this time can result in suspension or cancellation of your license, financial penalties, and even criminal penalties against the individual owners.

The real trouble is that many businesses aren’t sure whether they’re considered essential.  “Home maintenance and repair” was included in the original list of essential businesses, but the new legal language has clarified that only “plumbers, electricians, exterminators, home security, and other service providers who provide services necessary to maintain the safety, sanitation, and essential operations of residences or businesses…”

Look. Listen. (Any SSDGM fans?)  Use your noggin.  This virus appears to be spreading quickly and even if you’re skeptical about the severity of it, when people believe it’s severe and are overloading hospital beds as a result, THAT’S when we have to stop minimizing its impact.

So, be polite. Stay home. Cough into your elbow. Wash your hands. And above all, be kind to one another.  We’ve never seen something impact the ENTIRE WORLD so remember that your neighbor is struggling too.

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What Happens After Closing – A Seller’s Perspective https://bongiovilaw.com/2020/02/what-happens-after-closing-a-sellers-perspective/ Thu, 20 Feb 2020 13:18:29 +0000 https://bongiovilaw.com/?p=5613 We’ve previously discussed what to expect when selling your business, but what happens after the sale closes?  After all the craziness that characterizes almost every deal finally ends?  One of our clients generously shared some thoughts, which we will post below. Anonymously, of course. How long did you operate your business? 16 years. Did you start […]

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We’ve previously discussed what to expect when selling your business, but what happens after the sale closes?  After all the craziness that characterizes almost every deal finally ends?  One of our clients generously shared some thoughts, which we will post below. Anonymously, of course.

How long did you operate your business? 16 years.

Did you start it from scratch or buy it from someone? Started from scratch.

What was your approximate sale price – <$1m, $1m-$5m, $5m-10m, >$10m?  $1-5M

How long has it been since you closed on the sale of your business? 3 years.

How long has it been since the deal was completely done, in other words neither you nor your buyer had any obligations toward each other? One month ago today I received my last payment.

Where did your buyer come from? From California via a broker in my industry.

Did you consider your buyer a friend of yours? No.

What made the decision to sell? Stress and the death of a close family member.

Were you initially excited about selling the business? Yes and no – yes, to help eliminate the stress and spend more time with my children; no, because the company was my baby.

What was the best part about the process prior to the closing? Negotiating pricing and terms.

What was the worst part about the process prior to closing? Keeping it secret to staff and clients; preparing all the necessary documentation while simultaneously operating a business.

What was something that surprised you about the process prior to closing? Thoroughness of information shared – never realized the breadth and depth of information that would need to be gathered. Plan on the process to take more time than you expect unless you have prepared carefully in advance.

How did you feel immediately after closing, relieved, uneasy, excited, sad, accomplished? I felt accomplished and sad.

What was it like to go to work for your buyer? It was a very tough experience – we had very different management styles.

What was the best and worst part about becoming an employee of your own company? I was fine being an employee (was looking forward to a stress relief) – I was very unhappy with the management style and what that did do “my company”. Most of my employees whom had been with me for many years ended up quitting or were removed within a year.

What were you surprised by in the first 6 months after selling your business? That a company would buy another company and then disregard everything that made them a leader in the local market of their industry.

Whether it relates to the sale of the business or the employment? Sale of business was smooth – I had a competent broker, thorough accountant and excellent legal representation. Employment was miserable – they expected, actually demanded, a very different management style and their cultural was harsh on the existing employees of my company.

If you had it to do differently, what would you change? The company that bought my company :). No seriously, I now understand the importance of vetting the company that is buying. Ask to interviews owners of other companies they have bought before. Talk to the buyer’s employees and clients, and truly understand the company’s culture and values. Ask more questions and then ask some more.

What was something that you feel you nailed (did right)? I feel we did a good job of negotiating the deal. Counsel arranged the employment agreement and the Master Sales Agreement (MSA) into separate documents so that one did not affect the other,  In the end, I received all my payments, but that was because my attorney made sure the deal was ironclad. Advice: never be satisfied with first offer; always show confidence; don’t get so excited that you forget about negotiating the details – in the end those details really count! Know your worth going into negotiations, and then REMEMBER your worth. Always know, there are other buyers out there – especially in this economic market. You are in the driver’s seat – 2020 is going to be a great year to sell – buyers are on the hunt.

If you could remember back to a year after closing, what were you surprised by? A year after the sale, I was shocked by the difference in the company: few original employees left; processes changed (some for the better due to economies of scale); loss of some long-term clients; values and culture shifted, and many loyalties eroded.

What are you surprised by today? Nothing after I understood who the buyer really was. The company has lost all original employees and many long-term clients.

What advice would you have for other business owners interested in selling? Remember your mission and carefully, very carefully, examine the buyer. They will look at every aspect of your company, so make sure you do the same! If you have a negative gut feeling – closely investigate the situation. Make sure your values align and your customer base is similar, and equally as important, truly understand their management style.

Get good counsel! Someone who has experience and will battle for you. This is an intimate experience, so get someone you trust and who will be by your side (Gina Bongiovi is the very best!). Make sure your accountant  understands mergers & acquisitions too, as they will be helping you gather all the financial reports needed, and there are many. Use a broker – even though they seem expensive at the time, they know how to establish your company’s worth, and then fight for it (they are motivated for you to sell for more because that is what their commission is based on).

If you could talk to buyers, in light of your experience, what would you tell them? If you are buying a company because of their success, then value how and why it came to be. Please clearly explain your plans to the selling owner so they understand your vision, management style and how you will restructure their company. Lastly, clearly discuss the role you want the owner to play in the new company.

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New Laws Impacting Nevada Employers https://bongiovilaw.com/2020/01/new-laws-impacting-nevada-employers/ Thu, 09 Jan 2020 05:32:43 +0000 https://bongiovilaw.com/?p=5594 It’s that time again. New year (or decade) = new laws! While new laws and amendments to existing ones are nothing unusual, this article aims to highlight some of the important changes in Nevada and federal laws that may directly impact Nevada employers. While certainly not an exhaustive list, here are some of the hot […]

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It’s that time again. New year (or decade) = new laws! While new laws and amendments to existing ones are nothing unusual, this article aims to highlight some of the important changes in Nevada and federal laws that may directly impact Nevada employers. While certainly not an exhaustive list, here are some of the hot button issues that went into effect the beginning of this year. Be sure to take heed as some of these come with pretty steep penalties if you don’t.

VAPING IS SO HOT RIGHT NOW.

The Nevada Clean Indoor Air Act (NRS 202.2483202.2497, the “NCIAA”), originally established in 2006, previously prohibited smoking tobacco products in indoor places of employment. As of January 1, 2020, the words “tobacco products” have been removed from the statute (NRS 202.2483) and smoking in any form is now prohibited from a slew of indoor places of employment. The result here is that the NCIAA now prohibits, in addition to tobacco products, the use or smoking of vaporizers, e-cigarettes, and similar products, regardless of what substance is being used in them. While there are many other factors to consider under the NCIAA, the purpose here is to draw employers’ attention to the amendment prohibiting smoking of any kind, not just tobacco products. Essentially, employees and/or customers who want to “vape” should do so in the same places designated or allowed for other smokers.

OVERTIME, BABY.

This one may be a biggie for a lot of employers. On September 24, 2019, the U.S. Department of Labor (“DOL”) made its final ruling on the salary threshold for white-collar exempt status employees under the Fair Labor Standards Act (“FLSA”). If you recall, there was quite the hoopla in 2016 related to the proposed increase of such salary levels for exempt employees to $47,476 per year. The good news is that effort was unsuccessful. The bad news, for employers, is that as of January 1, 2020, the previous exempt salary rate of $455 per week, or $23,660 per year, has been increased to $684 per week, or $35,568 per year. While not double, as proposed in 2016, the rate increase is still fairly significant. In a nutshell, all of your employees must be paid at least $684 per week to consider them exempt. This change also raises the requirement of “highly compensated employees” to $107,432 per year (previously enforced at $100,000 per year). The new rule allows employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.

Noteworthy Exceptions:

  • In addition to the new minimum salary requirement, an employee’s position must also comply with and meet the tests set forth under the FLSA pertaining to Executive, Administrative, Professional, Computer, Outside Sales, and/or Highly Compensated employees to qualify for exempt status. Job titles alone do not determine the exemption.
  • “Blue-collar” employees as defined by the DOL, are never considered exempt regardless of how highly they may be paid.

THE TOKE TEST.

Some prospective employees may be rejoicing over this next change. Effective January 1, 2020, NRS 613.132 makes it unlawful for employers to fail or refuse to hire a person because of a screening test which indicates the presence of marijuana. However, there are several exceptions in this statute, one of which is arguably somewhat of a catchall IMHO.

The new law does not apply to employees that are applying for positions:

As Firefighters;

As Emergency Medical Technicians;

That require employees to operate motor vehicles and for which federal or state law require employees to submit to screening for marijuana; or

That, in the determination of the employer, could adversely affect the safety of others. This is likely a concession made for employers as the statute offers no guidance on what constitutes “adversely affecting the safety of others” and appears simply to leave that to the employers’ discretion.

Similarly, the provisions of this new law do not apply:

To the extent that they are inconsistent or otherwise in conflict with the provisions of an employment contract or collective bargaining agreement;

To the extent that they are inconsistent or otherwise in conflict with the provisions of federal law; or

To a position of employment funded by a federal grant.

NRS 613.132(3) also provides employees who are required to submit to a screening test within the first 30 days of employment, the right to rebut the initial (assumingly positive) screening test results with the results of a subsequent screening test taken at the employee’s own expense. Where the employee has chosen to exercise such rebuttal rights, the employer must accept and give appropriate consideration to the results of such subsequent screening test. Importantly, this provision is not limited to just marijuana as the statute goes on to define “screening test” as a test of a person’s blood, urine, hair or saliva to detect the general presence of a controlled substance or any other drug. NRS613.132(5). However, the statute is silent on what “appropriate consideration” actually is or may be. Is such consideration left to the employer’s discretion? Hm…

While I understand that it is impractical and impossible to define or provide guidance on every word or phrase in a statute, the failure here could easily result in a S*%! Storm of claims related to an employer’s failure to hire for a position that could “adversely affect the safety of others” and where employers fail to give “appropriate consideration” to subsequent screening test results. Just sayin’.

I DIDN’T COME HERE TO WORK TODAY.

NRS 608.0197 went into effect – wait for it – January 1, 2020. There are lot of words in the statute but the gist of it is that employers with 50 or more employees are required to provide those employees with mandatory paid leave. The paid leave must accrue at a minimum rate of 0.01923 hours for each hour of work performed. That’s about 40 hours per year for a full-time employee (who works 40 hours per week). Employers may impose a delay in usage until the employee’s 90th day of employment, but accrual starts upon hire. Employers may also cap use of leave at 40 hours per year and require a minimum of four-hour increments for use. These requirements set forth the minimum and employers can certainly choose to provide their employees with more if the wish. Keep in mind that the required paid leave under this statute does not apply to temporary, seasonal, or on-call employees.

MO MONEY, MO MONEY, MO MONEY.

We’ve got a little different time frame on this one. Nevada’s minimum wage increase (NRS 608.250) went into effect July 1, 2019 (what’s up now, January 1, 2020?!), but the first annual increase doesn’t actually occur until July 1, 2020. It boils down to essentially an annual increase of $0.75 per hour for the next 5 years for each tier of minimum wage. What does that mean? Well, Nevada is a two-tiered minimum wage system and there is a $1 per hour difference from one tier to the other. For employers who make qualified health benefits available to their employees, the current rate of $7.25 per hour applies. For those employers who do not offer those benefits to its employees, the current rate of $8.25 per hour applies. Here’s how the annual scheduled increases will shake out based on the two tiers:

DateBenefits OfferedNo Benefits Offered
July 1, 2019$7.25$8.25
July 1, 2020$8.00$9.00
July 1, 2021$8.75$9.75
July 1, 2022$9.50$10.50
July 1, 2023$10.25$11.25
July 1, 2024$11.00$12.00

Again, this is by no means an exhaustive list (we’d be here forever) of the changes in the laws impacting employers, but we hope this quick and dirty article helped make at least some sense of the word salads that are these particular new laws. As always, please feel free to reach out to us here at Bongiovi Law Firm for further information, questions, or concerns regarding your transactional business needs. Thanks for stopping by!

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What to Expect When Selling Your Business https://bongiovilaw.com/2020/01/what-to-expect-when-selling-your-business/ Mon, 06 Jan 2020 20:26:53 +0000 https://bongiovilaw.com/?p=5580 First off, selling your business will always – ALWAYS – take longer than you think it will or should.  We have never seen a business sale, whether it’s five figures or seven figures, close in less than 45 days.  Even 45 days is pretty ambitious. Think about it – you have a buyer, a seller, […]

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First off, selling your business will always – ALWAYS – take longer than you think it will or should.  We have never seen a business sale, whether it’s five figures or seven figures, close in less than 45 days.  Even 45 days is pretty ambitious. Think about it – you have a buyer, a seller, the buyer’s attorney, your attorney, two CPAs, maybe a banker, a broker, and a partridge in a pear tree.  Each of those people has his or her own schedule, other clients, and time constraints. Though it’s probably the biggest thing in your world, it’s rarely, if ever, the only thing any one of them is working on.

Second, you’re going to have to grow some thick skin because someone on the buyer’s side will call your baby ugly.  Your business is never as attractive or valuable, even to someone interested in buying it, than it is to you.  You’re the one who birthed it, reared it, nurtured it, and raised it into the attractive acquisition target it is.  Yet, your buyer will find all the flaws and all the blemishes you’ve come to love, tolerate, or ignore over the years.

There are several formal stages of a deal and lots that happens in between.  In most deals, the flow goes like this – Letter of Intent, Due Diligence, Purchase and Sale Agreement, and Closing.

Let’s already back up a step.  If you’ve listed your business for sale with a broker, you’ll first sign a listing agreement.  If you’ve ever sold a home, the agreements are similar – you can’t simultaneously list it with someone else, and the broker will take a sizable portion (usually 10%) of your sale proceeds as their fee.  Brokers will usually only accept a listing if they can represent both the buyer and the seller, which means they can’t (or shouldn’t) advocate for one side over the other.  That’s why it’s so important to use your own advisors to watch out for your interests.

Whether you’ve listed your business with a broker or are approached out of the blue, the first step is usually taken by the buyer – the Letter of Intent (LOI).  The LOI is a short document, usually about two pages, wherein the buyer says “hey, I’m interested in buying your business but need to know more.  So, if you accept these terms, for the next __# of days, you need to let me behind the curtain and share information you’d otherwise consider confidential and not sell to anyone else. Here are some general terms of the PSA we’ll eventually sign, but we won’t finalize them until after we uncover all the skeletons in your closet.”  LOIs are typically nonbinding except for obligations of the prospective buyer to keep the information you share confidential, the length of time for due diligence, and a requirement that you take the business off the market while the buyer decides whether to proceed.  The fact that the LOI is nonbinding is notable insofar as the purchase price, if one is even stated in the LOI, is NOT a final offer.  In fact, once the LOI is signed, the prospective buyer’s goal is to put downward pressure on the purchase price based on the blemishes and warts uncovered during due diligence.

Once the LOI is signed, two things can happen.  Either a Purchase and Sale Agreement (PSA) is negotiated and signed, or due diligence begins and the PSA is negotiated while due diligence proceeds.  If the buyer needs financing to make the purchase, or if an escrow company is involved, the lender and escrow officer will almost always require a signed PSA.  In this case, with the PSA signed before due diligence, it will (should) contain a bunch of contingencies that enable the buyer to back out if they discover something that kills the deal for them, or if something makes it impossible for them to proceed, like being denied financing.  This process is a little like online dating.  Your public profile looks good.  Someone swipes right.  Unlike online dating, you go exclusive right off the bat.  Then, on the fifth date since you deactivated your profile, the buyer decides the fact you get those white crusties in the corners of your mouth is a dealbreaker.

As the seller, you want to make your business as (actually) attractive as possible.  It’s like staging a house for sale – there should be no dirty dishes in the sink or oil slicks in the garage and the whole thing should smell like freshly baked cookies.  Make sure your books are clean, your tax returns are accurate, you have reliable recurring revenue, and there isn’t anything that could bite the buyer in the future.  Whether the buyer is at risk depends in large part on whether the deal is a stock purchase or asset purchase, but that distinction is covered in a different article.

The PSA is where the rubber meets the road with the deal.  Many sellers rely far too heavily on what’s in the LOI, forgetting that it’s nonbinding.  The PSA truly represents the details of the contract.  There are countless pitfalls with a PSA on both sides.  Many of them surround representations and warranties – where each party makes statements the other relies on to decide whether to go through with the deal.  As you might expect, the seller makes most of the representations because the buyer bears most of the risk.  The seller will often represent and warrant that there is no outstanding litigation or claim against the company.  But what happens if an employee files a wage claim right before closing?  The buyer may warrant that it is an entity in good standing.  What happens if that isn’t true?  Arguably, an entity that doesn’t exist can’t enter into an agreement, so the seller could be hung out to dry after taking the business off the market.

Here are a few cautionary tales to illustrate:

  1. Buyer is borrowing the money to buy the business.  A signed PSA must accompany the buyer’s loan application.  The PSA requires the seller to take the business off the market for three months, or up to six if the bank takes longer to process the application.  Seller doesn’t ask for an earnest money deposit, can’t entertain other offers, and has to turn away several other prospective buyers. After the buyer extends the off-market period for the full six months, he is ultimately denied the loan.  Meanwhile, the seller has kept the business on ice for six months, has been mentally checked out of running it, hasn’t done much to continue building the business under the assumption he’d be selling it, and now those other prospective buyers have moved on.
  2. Seller is ready to retire and wants to sell his business.  He has no recurring revenue or hard assets to sell; just a customer list.  What’s that worth to a buyer?  Without the guy who has the relationships, there is no guarantee the customers will stick around with a new company.  The buyer solves this issue by requiring the seller to stay on to help the buyer retain those clients.  Of course, the seller could have continued working with the clients without having sold the business and become someone else’s employee.  Speaking of…
  3. Sellers almost always underestimate the profound shift from running their own business to working for someone else.  It’s a bit like selling your house to someone else yet still renting a room.  You spent weeks picking the perfect shade of mint green for the bathroom that they just painted a garish yellow, and why did they feel the need to dig up the landscaping you worked tirelessly five weekends in a row to install with your own two hands?  As the seller, you provide value in helping the buyer maintain what they paid for, but you have to keep your mouth shut about how they continue raising your baby.

I could go on for days about other things to think about as a seller – noncompetes, earnouts, holdbacks, contingencies – suffice it to say it’s important to understand all the aspects of selling your business and make sure you arm yourself with advisors who can protect your interests.

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Nevada Department of Taxation Registration https://bongiovilaw.com/2019/10/nevada-department-of-taxation-registration/ Tue, 29 Oct 2019 12:21:43 +0000 https://bongiovilaw.com/?p=5455 We run into many business owners who believe that the state business license, issued by the Nevada Secretary of State (NVSOS), is all they need to properly transact business in our state.  Not so. First, what does it mean to “transact business?”  The law is written such that you should assume you are, in fact, […]

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We run into many business owners who believe that the state business license, issued by the Nevada Secretary of State (NVSOS), is all they need to properly transact business in our state.  Not so.

First, what does it mean to “transact business?”  The law is written such that you should assume you are, in fact, transacting business unless you fall under an exemption.  Exemptions include handling litigation; holding board meetings; maintaining bank accounts; making sales through independent contractors; fulfilling orders accepted out of state; owning, without more, real or personal property; engaging in isolated transactions that are completed within 30 days and are not part of a series of similar transactions; producing a motion picture, or transacting business in interstate commerce.  This list is not exhaustive, so consult your attorney.  (See NRS 80.015)

If you don’t fall under an exemption above, you need a state and local business license in every jurisdiction in which you transact business.  That means if you offer your goods or services in more than one local municipality (like a food truck or mobile detailer), you need a business license from each of those jurisdictions.  In Southern Nevada, we have several jurisdictions – Clark County, and the cities of Las Vegas, Henderson, North Las Vegas, Boulder City, and Mesquite.  How do you determine which jurisdiction?  Luckily, Clark County maintains the Southern Nevada Regional Business License Launch Page. Enter your business address in the search bar and the jurisdiction will pop up.

“But the title of this article is the Nevada Department of Taxation…”  The prerequisite to obtaining your local license(s) is registering with the Nevada Department of Taxation (NVTax) for either a sales/use tax or a consumer use tax permit.

If you are selling tangible goods, then you need a sales tax permit.  Tangible goods are those that can be felt, measured, weighed, seen, touched, or are otherwise perceptible to the senses.  If you aren’t selling tangible goods, you must still register for a consumer use tax permit which requires you to track any purchase you make of items that are consumed in your business (from printer paper to paper clips) on which you did NOT pay sales tax, and remit the sales tax you would have paid to the state.  The purpose was to level the playing field between out of state vendors who didn’t have to charge sales tax and in-state vendors who did. This was a bigger issue back when Amazon and other online retailers weren’t charging sales tax.  More FAQs here.

Your sales tax permit fee is $15.00 for each business location; a consumer use tax permit has no fee.  Your sales tax permit must be conspicuously displayed at each location.

In addition to the permit fee, sales tax permits may require security deposits, based on the estimated average tax due.  The frequency of your tax return filing depends on sales.  The default is monthly filing , but if you have less than $10,000/month in sales, you may file quarterly.  If you have less than $1,500 in sales in the prior year, you can request to file annually.

Quarterly filers must post a security deposit of 2x the estimated average tax due; monthly filers 3x and annual filers 4x.  If your estimated tax is less than $1,000, no deposit is required.  You may apply for a waiver from the security deposit after a three year perfect payment record.  If your tax due exceeds $10,000, you must pay by electronic transfer.

How do you register?  You can head over to SilverFlume to register.  You can even complete some local business licensing on SilverFlume.  If you’re already registered with NVTax, you can visit tax.nv.gov to file and pay online.

What is subject to sales tax?  Delivery charges when they are charged as part of the sale of tangible personal property. If such postage or shipping charges are stated separately, then they are not subject to sales tax. If you lease tangible personal property, then sales tax is due. What about books or videos delivered electronically?  Those are not subject to sales or use tax, unless they’re transmitted by a disk (remember those?) or in another tangible form.  More on what is and isn’t subject to sales tax here and in NRS 372.

Speaking of online retailers, Nevada became part of the Streamlined Sales Tax system which was established after the US Supreme Court ruled that states can’t require a seller without a physical presence in the state to collect sales tax on sales into that state.  However, the tax must still be paid, so the Streamlined Sales Tax system was established to make it easier to comply.

What if you’re a nonprofit? Your tax-exempt letter from the IRS doesn’t automatically exempt you from registration or payment with NVTax.  Your organization must have a religious, charitable, or educational purpose (animal rescues didn’t qualify as of my last attempt because they don’t support ‘persons’ as defined in NRS 371.3261 – insert sad face here).  You must apply and be approved for an exemption from sales tax.  Download the form here.

Fun fact: You can’t advertise that you’ll pay the sales tax (NRS 372.115), but you can say that “sales tax is included in the price.”

What about resale certificates?  There’s really no magic to resale certificates and you can create your own using this template.  That certificate allows you to purchase goods for resale from someone above you in the supply chain without paying sales tax because you’re representing that you’ll pay it when you eventually sell it to your end customer.

It’s important to make sure you’re properly licensed to do business, or risk paying fines and penalties for failure to do so.  This becomes especially risky because competitors can tattle on you. Anonymously.

Another pitfall to avoid – if you’re buying a business, make sure to request a “Certificate of Amount Due” from NVTax so you aren’t on the hook for taxes owed by the seller.

Please note: Rules and regulations regarding Nevada tax change frequently.  As an example, just this year (2019) the legislature did away with the requirement that all entities file a Commerce Tax return, even if no tax is owed.  Now, only those who owe the tax must file.  That’s the bad news.  The good news is the Nevada Department of Taxation regularly holds seminars to educate taxpayers and they are easily accessible with any questions you might have at 866-962-3707. Their Taxpayer Information Packet is also very helpful.

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