business insurance

What Types of Insurance Will My South Carolina Business Need?

All of your hard work and investment in your South Carolina business could get lost in an instant if you do not have the right insurance coverage. The kinds of insurance you should carry will depend on several different factors, like your industry and the risks your business faces.

South Carolina business attorneys can talk to you and help you create a risk management plan that includes business insurance. Here are some types of insurance that South Carolina businesses can need:

Business Owner’s Policy (BOP) Coverage

A Business Owner’s Policy (BOP) is a single policy that provides business liability and business property insurance all in one. Liability can cover your company if someone gets hurt on your premises, by one of your products, or from another covered cause. The business property coverage protects you in the event of theft, a fire, or other types of property damage or loss. 

The language in your policy will determine the amount of coverage, the types of benefits, and the covered perils. The policy will also control matters like the limitations and exclusions, or non-covered items or situations.

Business Income Insurance

Companies all over America experience a sudden loss of business income as a result of the COVID-19 pandemic. We learned that no business is entirely immune to regional, national, or global crises. Companies whose products were still in demand had to deal with production, supply, and distribution challenges that many had never faced before.

Business income insurance can provide a safety net for your company. As long as the cause of the loss of business income is covered by the policy, this coverage can replace income, up to the limits of the insurance. This type of insurance can make the difference between a temporary pause in business operations and going out of business forever.

Workers’ Compensation Insurance

If you regularly employ at least four full-time or part-time workers, South Carolina law requires you to carry workers’ compensation coverage. The benefits that this insurance can pay include medical care, lost wages, and disability to employees who get hurt or develop an illness because of their line of work.

Some employers are exempt from maintaining workers’ compensation insurance. You do not have to carry this type of coverage if:

  • The total paid to your employees during the previous year was less than $3,000, no matter how many people worked for you during that year.
  • Your business is a railroad or railway express company.
  • Your employees are agricultural workers.

These are but a few examples of companies that are exempt from the requirement of carrying workers’ compensation insurance.

Data Breach Insurance

Every size and type of business is vulnerable to hackers. You can buy coverage that can help with the cost of liability, legal fees, identity theft protection services, and even public relations expenses. Some cyber liability and data breach insurers can help you navigate through the mitigation process when you experience data loss, theft, or a breach

You might need additional types of insurance, like motor vehicle liability coverage, depending on the covered perils of your existing policies. A South Carolina business attorney can help you evaluate your business insurance needs.

business incorporations

Where Should You Incorporate Your Business?

You should incorporate your company in a state where you do business and where the advantages of incorporating in that state outweigh any disadvantages. If you have a start-up venture, you will likely find South Carolina to be friendly toward businesses. A South Carolina business attorney can provide guidance on where you should incorporate your business.

Why Many Corporations Register in South Carolina

You are in business to make a profit. Even non-profits have to make enough money to keep the lights on and pay their other bills. In a state with high income and property taxes on corporations, you will have less of your hard-earned profits to take home.

South Carolina does not levy taxes on corporations for your inventory. Also, our state has no wholesale tax, unitary tax on your profits in other states or countries, or property tax on corporations. There is no local income tax on these business entities. South Carolina has a business-friendly corporate income tax code.

Benefits for S Corporations and LLCs in South Carolina

Corporate status is not the best structure for every business. If you own an S corporation, South Carolina offers these incentives:

  • You can change the ownership of the S corporation without having to stop the operations of the business by buying, selling, or gifting the stock.
  • If one of the stockholders dies, the S corporation can continue operations because these business entities have a “life” that is independent of its stockholders.

On the other hand, limited liability corporations (LLCs) can enjoy these bonuses in our state:

  • You will not have to take or maintain formal papers like minutes or resolutions, so running your business is less onerous. Corporations still have to follow those formalities, but not LLCs.
  • Your local area in South Carolina might offer property tax abatement, textile revitalization credits, or other tax exemptions.
  • Our state’s many programs for the favorable tax treatment of LLCs include such options as tax credits for corporate headquarters, research and development, investments, jobs, and other incentives.

Depending on your company’s industry, you might be eligible for additional incentive programs when you incorporate your business in South Carolina. 

A Low Cost of Doing Business

Sometimes, one of the best ways to boost your bottom line is to decrease your expenses. Many areas within our state have cost of living numbers that are below the national average, so you and your workers will be able to live better than you could elsewhere, and the expenses to run your business will be lower than in many other places.

Real estate costs less in our state than in many other locations, with corresponding lower property lease expenses. Buying or leasing the physical facilities for your corporation is one of the highest ongoing bills most owners face. Reducing this expense can make the difference between success or failure, particularly in the early years when launching a start-up company. 

A South Carolina business attorney can advise you on the laws that apply to your industry, draft your incorporation documents, and serve your company with ongoing guidance as the laws change. Contact our office today

FMLA

4 Things Every Employer Should Know About FMLA

All South Carolina employers who have at least 50 employees for at least 20 weeks this year or last year have to follow the federal Family Leave and Medical Leave Act (FMLA). Due to the COVID-19 pandemic, some employers are eligible for financial assistance from the federal government if they pay wages to employees for extra sick, medical, or family leave.

The COVID-related legislation is temporary, lengthy, and complex. A South Carolina business attorney can explain your obligations under the standard federal FMLA and the laws that expand the FMLA for COVID-related absences from work. Here are four things every employer should know about FMLA:

Pre-COVID FMLA Provisions

These are the general provisions of the federal FMLA as it stood before the COVID-19 pandemic. When the temporary COVID-related legislation expires, these regulations will control.

  • An employee of a qualified employer must work for the company for at least one year at a location that has at least 50 employees within a 75-mile radius and log at least 1,250 hours of work time within the previous year to be eligible for FMLA benefits.
  • FMLA benefits apply to several different situations, such as a worker who just gave birth or adopted a child, is recovering from a significant illness, is a caregiver for a family member with a severe medical condition, or certain military-related issues.
  • Qualifying military-related situations can provide up to 26 weeks of leave in a 12-month period, but there are restrictions.
  • Qualifying non-military-related situations can provide up to 12 weeks of leave in a 12-month period.
  • FMLA standard leave is unpaid. 
  • The worker can maintain the employer-provided health insurance during leave but will have to pay their usual contribution for the coverage. 
  • Usually, the worker has the right to return to the same position or a similar one when returning from leave.

This is merely an overview of the standard FMLA as it existed before the COVID-19 pandemic. There are many restrictions, limitations, and exceptions within the legislation.

No South Carolina Law That Provides Additional Benefits 

The Family and Medical Leave Act (FMLA) provides some leave benefits for employees in specific situations. Some states have their own legislation that expands those benefits beyond federal law, but South Carolina does not have such legislation. 

Which Employers Qualify Under the FFCRA

The Families First Coronavirus Response Act (FFCRA) applies to employers with fewer than 500 employees who paid “qualified sick leave wages” and/or “qualified family leave wages under the Emergency Paid Sick Leave Act (EPSLA) and/or Emergency Family and Medical Leave Act (Expanded FMLA.  These companies can receive funding to help cover the cost of the expanded sick, family, and medical leave for COVID-19 related absences from work. The absence could be due to any of these situations:

  • The employee was unable to work or telework because the employee was sick with or quarantined due to COVID-19.
  • The employee was a caregiver for a family member with COVID-19 or for a child whose school or childcare location was closed, or the regular caregiver was unavailable due to the pandemic.

The American Rescue Plan Act of 2021 (ARP) offers small and midsize employers and some governmental entities refundable tax credits for employers who pay sick leave or family and medical leave for COVID-related illness, caregiving of a family member, or for an employee to receive the COVID-19 vaccine and recover from those vaccinations.

No South Carolina Law That Provides Additional Benefits 

The Family and Medical Leave Act (FMLA) provides some leave benefits for employees in specific situations. Some states have their own legislation that expands those benefits beyond federal law, but South Carolina does not have such legislation. 

How COVID-19 Changed the FMLA Temporarily

The federal government increased the required amount of paid sick leave as well as family and medical leave in the Families First Coronavirus Response Act (FFCRA). That expanded coverage applies to COVID-related leave taken between April 1, 2020, and December 31, 2020. The FFCRA offers tax credits for up to two weeks (up to 80 hours) of qualified sick leave pay and up to ten weeks of qualified family leave pay.

The FFCRA has two parts:

  • The Emergency Paid Sick Leave Act (EPSLA) – that covers up to 80 hours of paid sick time when a worker cannot work due to COVID-19, and
  • The Emergency Family and Medical Leave Act (Expanded FMLA) – that increases the amount of paid leave for family and medical leave.

Some self-employed individuals can receive benefits under the FFCRA.

If you paid sick, family, or medical leave benefits to employees related to COVID-19 between January 1, 2021, and September 30, 2021, you might be eligible for a tax credit under the American Rescue Plan Act of 2021 (ARP). The IRS has online guidance for small and mid-sized businesses that find themselves in this situation. 

Unless the federal government passes additional legislation, the expanded paid leave coverage will expire after September 30, 2021, and employers will return to the previous FMLA terms. A South Carolina business attorney can provide guidance and answer your questions about the FMLA.

business owner hiring client's employee

Is It Okay to Hire Your Client’s Employee?

It can be challenging to find the right candidate for a job. There could be a very small pool of qualified individuals in the area with the requirements and experience to handle the job. Some companies are tempted to hire employees who might be working for their clients or customers.

Before you hire one of your client’s best employees away from the company, you might want to discuss the matter with a South Carolina business attorney. Depending on the type of business you operate, hiring a client’s employee might cause several legal problems for your company. 

Benefits of Hiring a Client’s Employee

There could be some benefits of hiring your client’s employee. For example, the person is already familiar with the industry. They will require less training, which could result in quicker productivity. Because the person was on the other side of the business relationship, they could bring a unique insight into customer needs and desires that could improve your products and services. 

A client’s employee may already know the people on your team, which could ease the transition process. They also are familiar with your product or service. A client’s employee may even know or have relationships with other clients, which could benefit your company. 

Potential Issues When Hiring a Client’s Employees

Of course, there could be potential problems when hiring a client’s employee. In addition to the ethical dilemma of taking a client’s employee, there could be conflicts of interest that need to be explored. If you are not careful, you could find yourself a co-defendant in a lawsuit against the employee. 

The employee may have signed one or more employment contracts that could pose several legal problems. For example, they may have signed a noncompete agreement that could prevent them from taking a job with your company. Other employment contracts and agreements could prevent an individual from performing all tasks required for the job.

There is also the question about how your client or customer might react. The ethical choice would be to discuss the matter with your client before hiring the employee. If the employee approached you inquiring about a potential position with your company, they may be ready to leave your client and will do so when they find another job. If that is the case, your client may not view you hiring the employee as harshly as if you approached the employee about a job with your company. 

Whether you talk to your client beforehand or let the client find out after you hire their employee, the result could be disastrous. You could lose the client’s business. If the client is one of your best and most profitable clients, the potential loss for your company may outweigh any potential benefits of hiring the person.

Contact Our South Carolina Business Attorney for All Your Business Matters

Our South Carolina business attorney handles all types of business law matters, including issues related to employment law. If you have questions, contact our law firm today to speak with one of our attorneys. Prompt legal advice is the best way to head of a more significant legal issue. 

business dispute mediation

Resolving South Carolina Business Disputes Out Of Court

Although it can be tempting to say, “See you in court,” when you have a business dispute, it is often to your advantage to try to reach an agreement with the other side rather than filing a lawsuit. Being involved in a disagreement with a client, customer, vendor, or competitor can feel a bit like trying to pick your way through a minefield. 

A South Carolina litigation dispute attorney can help you navigate the process of dealing with these situations and advise you on settlement strategies. Here are some suggestions on resolving South Carolina business disputes out of court:

Tips on Settling Business Disputes Without Going to Court

When you try to avoid going to court to have a judge decide the matter, there are a few things you should keep in mind.

  • Create a paper trail throughout the negotiation process. Email is an easy way to do this. You do not want to have the other side back out of an agreement or try to force you to accept different terms than you agreed to in the negotiations. Telephone calls are only useful if you back them up in writing, like emailing the other side and asking them to confirm the terms of the agreement that you specify in the email. Doing all of the deal-making in writing is a better approach.
  • Have an attorney draft a formal document that contains all the terms of the agreement. South Carolina law requires specific items to be in a contract for the paper to be enforceable. If an attorney drafts the agreement, you should not have to worry about whether a judge will rule in your favor if the other side breaches the terms of the document.
  • Consider having a lawyer negotiate on your behalf, particularly if you think that the other side is working with a lawyer on the matter. Although no one knows your business as well as you do, you might not know the law as well as an attorney. When the other side is getting legal advice, you should do the same. The other side might try to get away with less-than-honorable tactics if you do not have a lawyer looking out for you.

Depending on your situation, you might need to take additional measures to protect your interests.

Reasons to Try to Settle Business Disputes Out of Court

You can save yourself money and reach a quicker resolution if you can reach an agreement instead of going to court. Here are some additional factors that might persuade you to try to resolve the matter amicably:

  • Preserve the business relationship. If the party on the other side is a long-term client or you want the relationship to continue after the dispute is over, an out-of-court resolution can do less damage to the situation than adversarial litigation.
  • Keep business disputes out of the public eye. When you file papers with the court, they become public record. Most business people would prefer to keep the story out of the media when things do not go smoothly. 
  • The risk of a counterclaim. Sometimes, the person who gets sued has a valid counterclaim that ends up costing the person who filed the lawsuit more money than they sought in the case.

A South Carolina business attorney can advocate for you in business disputes and try to reach an amicable resolution of the differences. When a conflict does not settle, the lawyer can file a lawsuit to go after the justice you deserve. Contact our office today.

business succession

Have You Developed a Succession Plan for Your Business?

Regardless of the type of business you own or your business’s size, you can benefit from a succession plan. Succession planning allows you to ensure that your business continues if you cannot operate the business or you exit the business suddenly. However, business succession planning also gives you the chance to address issues that may have been overlooked that could impact your day-to-day operations now and in the future.

Business succession planning does not need to be a complicated, time-consuming process. It is not just for large corporations. Business succession planning can help smaller companies that might need to develop better organizational structure and effective job design. Our South Carolina business attorney helps companies of all sizes develop a business succession plan that meets their goals and needs.

Goals of Business Succession Planning 

The goal of business succession planning is to identify individuals who can be trained to take over key positions when the leaders in those positions leave the company. It ensures continuity and the availability of employees who have the knowledge and necessary skills to run the company. 

Business succession planning is the act of investing in employees or individuals so that they are ready to take over crucial responsibilities required for the successful operation of the business. However, before you can identify critical positions within the company that are essential to the company’s continuity of operations, there are a few things that you need to evaluate. 

For example, what needs to occur to keep the business operating on a day-to-day basis? Identify the essential and non-essential processes and operations. After identifying the essential processes and operations, analyze how the loss of employees in various positions would impact operations. How easy would it be to replace employees in each of those positions? 

Could another employee step into that role seamlessly to ensure continuity of operations? If not, there must be a plan for training replacements for those roles to ensure there is always someone ready to step into that role to ensure a sudden loss or unexpected situation does not impact the business operations. 

For small business owners, the owner’s role is generally one of the company’s most vital roles. The owner needs to identify someone to train to step into the role if the owner suddenly dies or becomes incapacitated. Planning also ensures that the owner has someone in place when the owner decides to retire or exit the company. The person or persons trained to take over the company may be family members or employees who are invested in the company. 

Benefits of Business Succession Planning

In addition to ensuring that there is a pool of individuals who are prepared to assume key roles of leadership and management within the company, business succession planning also provides other benefits for the company. 

You can preserve your brand identity because you do not need to hire new people who might not be familiar with your company’s brand, mission, and vision. You also reduce the expenses of searching for a successor. The process of hiring new employees can be time-consuming and costly. Business succession planning identifies employees within the company who can learn new skill sets to grow into leadership roles.

Business succession planning also eliminates the need to choose replacements for leaders and managers without much thought. You have time to evaluate potential successors and train them instead of being forced to pick someone on a whim because of a crisis.

Contact a South Carolina Business Attorney for More Information 

If you do not have a business succession plan, we can help. Companies of all sizes benefit from a business succession plan. However, small business owners need a plan to ensure that the company they worked hard to build does not crumble and fail when they exit the business. Our South Carolina business attorney can help you develop a succession plan for your business that meets your goals and needs. Contact our office today.

woman looking over a contract

Nonperformance, Breach of Contract, and Covid-19

COVID-19 has fractured business and commercial enterprises on a global scale. Economic uncertainty abounds, and businesses are scrambling to make adjustments and remain solvent. 

Under the weight of new and ever-shifting COVID-19 restrictions, many businesses are vulnerable to lapses in performance and contractual obligations. South Carolina business attorneys are likewise adjusting to advise clients about their exposure and risks regarding non-performance, breach of contract, and COVID 19. 

Is COVID-19 an Excuse for Non-performance?

While COVID-19 has wreaked social and economic havoc on a global scale, it is not necessarily a get-out-of-jail-free card for non-performance and breach of contract. While contract terms and common law may provide some defense against performance breaches, a more specific examination of individual contracts is necessary to determine if defenses exist. 

Analyzing Contracts in Response to COVID-19 Breaches

A few of the ways to analyze contract breaches concerning COVID-19 are the following:

Contractual Rights and Obligations

Any business impacted by COVID-19 should carefully examine their contracts to determine the parties’ rights and obligations. Both parties may bear fault, and each party should shore up their position and ensure compliance to the greatest extent before assigning blame against the other party. 

When analyzing contracts in the face of non-performance or breach of contract, parties should take note:

  • Does the contract contain a force majeure provision?
  • Does the contract or force majeure provision detail the types of catastrophic events that may interrupt operations and obligations? 
  • Is there a required notification process whereby other parties must be informed when such an event and an interruption of performance occurs?
  • Are common-law doctrines applicable?

Finally, it is critical to ascertain the extent to which COVID-19 be directly linked to the company’s non-performance or breach of contract?

Force Majeure

Many commercial contracts contain a provision to excuse or suspend performance in the face of an uncontrollable, extraordinary event. This provision is known as Force Majeure or, more commonly, the “Act of God” provision. 

Force Majeure is not in itself a defense against breach of contract. It is, instead, a provision to allow temporary relief from performance under uncontrollable and significant events:

  • acts of war
  • terrorism
  • natural disasters
  • epidemics

Again, while one may argue that the global coronavirus pandemic fits as a force majeure, contractual force majeure provisions generally allow temporary relief, not permanence breach, of contractual obligations. In the absence of a force majeure defense, the common law Frustration of Purpose Doctrine and the Doctrine of Impossibility may still provide some protection. 

Common-Law Defenses

The Frustration of Purpose Doctrine has long been held in South Carolina courts to be a viable defense for breach of contract only if the principal purpose of the party making the contract was substantially frustrated, and that the absence of the frustration was anticipated at the time the contract was entered into.

The Doctrine of Impossibility is perhaps a greater defense against non-performance and breach of contract than the frustration of purpose. Long-held to excuse performance when impossible acts of God or the other party interfere with contractual performance obligations, the Doctrine of Impossibility may provide a defense for COVID-19 related breached performance. 

South Carolina Business Attorneys, COVID-19, and Your Business

The full impact of COVID-19 and resulting commercial restrictions have yet to be felt. In uncertain times, you need a business attorney to help you navigate contractual obligations between you and your counterparts. South Carolina’s robust business sector has not been immune to the negative effects of COVID-19 regulations heaped on businesses and communities, state and nationwide.

Take steps today to protect your business and economic relationships. Contact our office to speak with an experienced South Carolina Business attorney about surviving the COVID-19 marketplace. 

business owner consider an exit strategy

Business Essentials: Do You Have an Exit Strategy?

Starting a business in South Carolina is an exciting venture that can lead to great success and financial security. But for many, building and running a successful business doesn’t include thoughts about the end-game…when it’s time to walk away.

South Carolina business attorneys advise that comprehensive business plans account for how to leave your business when the time arrives. When reflecting on your business plan and essentials, do you have an exit strategy?

4 Business Exit Strategies

Here are four exit strategies you might want to consider:

1. Leave It to Family

If you have a family-owned business, an attractive option may be to leave the business to your family upon your retirement. 

Not only will you be happy to see your legacy continue, but your family will continue to work in a stable and familiar environment. Additionally, customers and employees will feel confident that the business will proceed with little disruption. 

2. Leave It to Your Employees

An increasingly popular option among business owners is transitioning ownership to company employees through a qualified retirement plan known as an ESOP.  

Through an Employee Stock Ownership Plan, employees earn ownership interest in the company.  This plan allows the owner to transition ownership while incentivizing workers through ownership interests. 

This option works best for businesses that have a stabilized employee base. Likewise to leaving a business to family, customers and employees will have the confidence of minimal disruption to operations. 

3. Management Buy-out

If you have a senior management team in place, an MBO may be another available avenue to explore. In this option, the executive management team would pool their resources and purchase all or part of the company. 

Valuing the company and securing financing can take time, so planning ahead of your retirement years is essential. However, this option is another that presumes the long-term stability of the business under the existing leadership of senior management.   

4. Outside Buyer

If you don’t feel confident that your family, employees, or management team would want to carry on as new owners of the business, seeking an outside buyer may be the right move. 

When you consider selling to an outside buyer, you will need a valuation of your business, which, again, can be a lengthy process.  It is best to plan for this option years in advance of retirement. 

Your company’s customer base, profitability margins, assets, debts, and cash flow will be largely taken into account.  You do not want to sell in a downturn if you wish to get top-dollar for your years of hard work. 

With early planning, you will have a position of strength to sift through potential buyers and negotiate the structure and terms of the sale that best benefit you.

Working with a South Carolina Business Attorney

A well-crafted business plan that includes forethought of how to exit a business is essential to selling profitably and ensuring your legacy.   

Knowing your business exit strategy will guide many other business decisions such as branding, marketing, management selections, employee responsibilities, and family involvement, to name a few.  It will also guide financial decisions regarding leveraging assets and debts, business expansion, and tax mitigation. 

An experienced South Carolina Business Attorney is best positioned to advise you regarding your specific business situation and options best suited for your exit strategy.  

Contact our office today for a complete business review and consultation with a leading South Carolina business attorney.

Business man and woman looking business interruption insurance policy

6 Things to Know About Business Interruption Insurance

Business interruption insurance or business income insurance is a clause or endorsement either within another policy or added on to an existing policy. We will refer to both types as business interruption insurance (BII) within this blog article. We buy insurance to help us through times of difficulty.

Business interruption insurance provides money for business owners when they lose money because of a covered peril. The current “hot topics” for BII are losses from COVID-19 suspending operations and civil unrest resulting in property damage and looting.

With so many claims recently, many insurers will try to find any argument to avoid paying benefits to their insureds. The language in the policy will control which losses have coverage. A South Carolina business attorney can help you prepare your claim to meet the requirements of your BII carrier and advocate on your behalf.

Six Things You Need to Know About Business Interruption Insurance Clauses and Extensions

There is no standard template for business insurance policies. Your policy might include some of the following types of coverage within the main policy, as a clause or extension of the main policy, or not at all:

1. Service Interruption Coverage

When a covered peril causes an interruption in the delivery of utilities like electricity or other vital service providers, and the policyholder sustains a loss as a result, service interruption coverage could provide financial compensation. There are waiting periods before the coverage kicks in. Most policies require the interruption to last at least 24 or 48 hours. The language in your policy will control the length of the waiting period. 

2. Contingent Business Interruption

If you lost business income because someone else could not engage normal business operations because of a covered peril, you might have a contingent business interruption claim. This extension addresses problems with suppliers and those who receive your product in the supply chain.

3. Business Interruption by Civil or Military Authority

Sometimes a business owner gets denied access to his premises by civil or limitary authorities. When this happens because of a covered peril, the owner might have a claim under this type of extension.

4. Reduction in Business Income

BII policies typically cover situations in which the company’s net income got reduced by a covered peril that caused the business to suspend or decrease operations. Usually, business income in these policies includes the ordinary operating expenses the company continued to pay during the suspended operations, like payroll, and the net income the owner would have earned but for the shut-down. Net income generally means the net profit or loss before the payment of taxes.

5. Actual Loss

BII policies only have to pay benefits if the policyholder sustained an actual loss from a covered peril. For example, a business that lost 90 percent of its sales during COVID-19 could be eligible for compensation, while a company that saw a surge in its revenues and profits during that time would not.  

6. Restoration Period

Typically, a business cannot conduct operations while damaged or destroyed property gets repaired or replaced. “Period of restoration” coverage provides cash benefits to replace some of the income the owner loses by not being open for business during that time. Many policies define the restoration period as running for a reasonable period after the damage. 

Some policies give additional benefits to cover the slow return to operations after the restoration period, since many businesses need time to return to the level of activity they enjoyed before the damaging event. The amount of time depends on the coverage purchased, which can range from 30 to 720 days after the completion of repairs or replacement. 

We understand that insurance policies can be challenging to interpret. Contact us today. Our South Carolina business attorneys can review your business insurance policy and provide guidance on your coverage.

Business operating during the pandemic.

Running a Business During a Pandemic: Knowing When to Call it Quits

In these uncertain times, many business owners face multiple challenges from different directions. We have never been in a situation quite like this before, and we do not know whether it will be safe to resume ordinary business operations in a month, six months, or even a year. The U.S. Chamber of Commerce predicts that over 40 percent of the small businesses in America might close their doors forever by the end of 2020.

When a business cannot open its doors because of the pandemic, its revenues can plummet. Some expenses continue, like the rent on the shop you cannot use to sell your products or services to customers. You probably have questions about running a business during a pandemic and knowing when to call it quits. A South Carolina business attorney can guide you through the decision-making process and draft the documents you need.

The Vast Unknown

It is practically impossible to engage in business planning when you do not have all the facts you need. In this pandemic, your business might be struggling to determine answers to these issues:

  • When the government will allow you to re-open your office or store.
  • How long you will stay open until the next shut-down.
  • What restrictions you will have to follow to re-open, and how those things will impact your business.
  • How to keep your workers, customers, and yourself safe during the health crisis.
  • How you will get enough revenues to keep your business going.
  • Whether you can pivot your line of work into a COVID-19 related enterprise to generate income.
  • What legal liability you might have if a worker or client gets sick.

Traditional business planning cannot function without answers to those questions, so we have to develop a new way of thinking about business viability in a pandemic.

Some Options for Staying Open or Closing

One of the first things to ask yourself is whether you want to stay in business. If you lost the passion for having your own business because you are nearing retirement, do not want to try to retrofit your company to the new economic realities during and after this pandemic, or lost a close loved one to COVID-19, you might want to talk to an attorney about wrapping up operations.

If you think your company has a future, you have some options for riding out this storm. Here are a few suggestions:

  • The new Chapter 5 bankruptcy, also called the Small Business Restructuring Act, helps small companies with a quicker, simpler bankruptcy process. If your company has less than $2.73 million in debt, you can reorganize and keep the business in operation. The creditors do not have the option to veto the plan.
  • Filing a Chapter 11 bankruptcy can help if you have a larger company. These bankruptcies cost more and take longer than a Chapter 5, but might be a good choice if your company owes more than $2.73 million.
  • A Chapter 7 bankruptcy can wipe out your debts, but you could lose your personal assets. If you pledged your house as collateral for a Small Business Administration (SBA) loan, for example, a Chapter 7 might force you to sell your home.
  • You can close your business without filing for bankruptcy if you have enough assets to pay off your debts or work out a deal with your creditors. Be sure to have your lawyer draft enforceable agreements.
  • Think carefully about borrowing money to stay afloat in this pandemic. If your company will not have the resources to pay the debt when it comes due, borrowing money could be digging a deeper hole instead of helping you.

As part of your analysis, you might want to write a new post-COVID-19 business plan. You will have to speculate about several factors, so you might write up several “what if” scenarios. A South Carolina business attorney can advise you about bankruptcy, restructuring, and remaining viable during this pandemic. Contact us today.