Category: Business Law

How Do I Avoid Fraud as a Business Owner?

By ,


If you own a business, there is a great possibility that you are going to encounter an issue of fraud. When you do, it is going to be paramount that you understand how to mitigate any monetary damages, along with associated risks that your company’s reputation may suffer in the process.

Your best defense against fraud will be your ability to be knowledgeable on the subject. Being aware of what signs to look for can help your business avoid the pitfalls of scams. Listed below are compiled tips to help avoid business tort litigation involving fraud.

Tactics Employed by Scammers

A great way to deter fraudsters from coming after you is to try and understand their methods of operation. Fraud usually occurs because a scammer is able to build a foundation of trust that will provide them an avenue to get the information they need to gain access to your company. 

Another tactic they use is creating a fast-paced environment that forces you to make quick decisions without any research. Scammers will use fear and intimidation to get their way and con you out of money by having you send them payments that are untraceable. Often, these payments involve wire transfers, digital currency, reloadable cards, or gift cards, making them difficult to track.

Protect Your Business

Inform your employees that you have a plan to deal with potential fraudsters who may be trying to con your business. Encrypt passwords and never send sensitive information through emails that can be siphoned by scammers. Build a rapport with your employees, especially those that interact with finances. You are putting a lot of faith in employees who handle accounting duties, and you should run thorough background checks on them.

When paying bills, make sure that you can verify invoices, payments, and other expenses. Go over the way you handle payments with anyone on your staff who is authorized to sign off on your behalf, and stick to the system at all times. Delegate accounting duties to at least two people within your company to avoid having one person having total access to the books.

Nowadays, a lot of fraud occurs online, so it is in your best interest to be technologically proficient. Never open an email that may contain attachments of files that could contain malware that will attack your computer systems. Hackers can also damage your standing in the community by intercepting your social media accounts and relaying malicious information. In an effort to minimize risks, secure your company’s files, passwords, and financial information.    

You can also protect your business by implementing a mandatory vacation schedule and instituting a medium, whether through email or phone, where a fellow employee can anonymously report any suspicious activity.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Business Owners Avoid Fraud

When you put effort into running an effective business, nothing can be more disheartening than someone threatening your livelihood. Fraud can seep into all aspects of your business and derail your operations. However, our Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. can help you. Call us at 215-574-0600 or complete our online form for an initial consultation. We are located in Philadelphia, and we serve clients throughout Pennsylvania and New Jersey.

  Category: Business Law, Employment
  Comments: Comments Off on How Do I Avoid Fraud as a Business Owner?
  Other posts by

What are the Paycheck Protection Program Loan Updates?

By ,

Paycheck Protection Program

In 2020, the federal government approved a $900 billion relief package due to the Coronavirus (COVID-19) pandemic. This package included the Economic Aid Act to help small businesses, nonprofits, and venues keep their companies running. Essentially, the Economic Aid Act made billions of dollars available to entities under the Paycheck Protection Program (PPP) in the form of low-interest loans through selected lenders. Those granted loans could then apply for loan forgiveness within 10 months from the end of their covered loan period.

It is important to note that the PPP ended on May 31, 2021, when the Small Business Administration (SBA) announced that funding had been exhausted. The information that follows is meant to help current loan grantees better understand the nuances of their loans and how to apply for forgiveness.

First or Second Round of the Paycheck Protection Program

Certain loan grantees may qualify for a second draw loan of up to $2 million. To meet the requirements, the organization must have fewer than 300 employees, used or will soon use the entire amount of the first loan, and has a decline in gross receipts of at least 25 percent in any quarter of 2020 when compared to the same quarter of 2019. Economic Injury Disaster Loan (EIDL) advances received by borrowers are no longer deducted from their PPP loan forgiveness amount.

New Business Entities

New business entity types became eligible to apply for PPP loans in the second round, including:

  • Chambers of commerce
  • Trade organizations
  • Nonprofits or government instrumentalities that engage in destination or tourism
  • Owners who are delinquent on student loans
  • Noncitizens who are U.S. residents
  • Owners with non-fraud related felony convictions

Like the first round, the second round continues to include these eligible entities:

  • Self-employed
  • Sole proprietors
  • Independent contractors
  • Seasonal businesses
  • Nonprofit organizations
  • Housing cooperatives
  • Veterans organizations

The first PPP round required funds to be used for expenses, such as rent, payroll, utilities, employer-sponsored health insurance, and other eligible costs. The second round still includes these plus additional forgivable expenses:

  • Operational expenses:For Human Resources, accounting software, and cloud computing.
  • Property damage: Costs related to public disturbances in 2020 not covered by the organization’s business insurance.
  • Supplier costs:For payments made to suppliers before receiving the PPP loan needed to keep the business running.
  • Worker protection costs: COVID-19 worker safety expenses, facility modifications, and supplier costs related to COVID-19 protections.

Current PPP Loan Forgiveness Requirements

The following requirements from the first round and later are still in effect:

  • The loan must be used to cover payroll costs and other qualifying expenses over the eight- to 24-week period after the loan is made.
  • The borrower can choose a covered period from eight to 24 weeks and submit the forgiveness application before the end of the 24 weeks if they use PPP funds early.
  • Employee staffing and compensation levels must be maintained for loans greater than $50,000. PPP loans under $50,000 are exempt from workforce and wage reductions.
  • Borrowers are eligible for full loan forgiveness if they use at least 60 percent of loan proceeds for payroll expenses, with no more than 40 percent going to qualifying expenses unrelated to payroll.

If a business is experiencing loan issues, it is advisable to speak to a lawyer. A lawyer can assist with business tort litigation matters.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Business With Loans

PPP loans and other government-sponsored programs can be complex. Requirements change often, and businesses need to try to stay on top of them or risk not following the correct procedures. A Philadelphia business lawyer at Sidkoff, Pincus & Green P.C. can address your concerns. Contact us online or call us at 215-574-0600 for an initial consultation. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.

  Category: Business Law
  Comments: Comments Off on What are the Paycheck Protection Program Loan Updates?
  Other posts by

Pennsylvania Supreme Court Strikes Down No-Hire Clauses

By ,


Earlier this month, the Supreme Court of Pennsylvania decided that employers could not enforce overly broad no-hire clauses and non-compete agreements. The ruling on Pittsburgh Systems, Inc. v. Beemac Trucking determined that companies cannot block employees from taking jobs with other companies via non-compete agreements that are created in business contracts. This creates a new precedent that resembles similar rules in neighboring states, like New Jersey.

At the heart of this case was the contract the two companies signed in 2010 that made Pittsburgh Logistics Systems, Inc. a non-exclusive partner of Beemac Trucking to haul the freight of the former’s clients. Pittsburgh included non-solicitation and no-hire clauses, attempting to retain workers. However, Beemac still hired four of Pittsburgh’s employees. The Court ruled that this was acceptable, as the terms of the contract were too broad and did not directly involve the affected employees. This creates a risk to public harm and restraints on trade and free labor, which the Court determined outweighed any concern or interest Pittsburgh had for keeping their employees.

How Does This Ruling Affect Employee Rights?

In Pennsylvania, employees must consent to non-compete or no-hire clauses. Usually this happens when signing an initial employment contract. Employers must disclose the terms of the clauses upon entering the agreement. In this case, when the two companies entered their business contract in 2010, the employees of both were not parties to the deal. Without notifying the employees or gaining their consent, the non-compete agreement is voided. Had there been some input from the employees or some compensation promised by Beemac if they decided to hire Pittsburgh’s workers, that may have kept the contract clauses valid.

Since the language of the contract attempted to cover all of Pittsburgh’s employees, not just those working on matters related to Beemac and the business deal, the Court also found that to be too broad. The length of the non-compete clause, which extended two years beyond the established one-year term of the deal, was problematic.

The Court’s ruling put a spotlight on larger concerns, like the free competition for employees and the overall harm to the public. While acknowledging that Pittsburgh had an interest in retaining talent, the decision noted that the clauses enforced went beyond the scope of protecting that interest. Instead, it not only violated established state laws, but it created a probable harm to the public good. The Court determined restraining trade and limiting the labor market took importance over Pittsburgh’s interests as an employer.

This ruling could have significant impact as more people return to the workforce as the Coronavirus (COVID-19) shutdowns end and more businesses seek normalcy. While employers try to entice those unemployed back to jobs, this has started to create bidding wars that benefit workers.

For those offered new deals, it is important to scrutinize these contracts. Know the terms of employment, especially any non-compete agreements, that may preclude leaving for another position with better pay, conditions, or other arrangements.

Philadelphia Employment Lawyers at Sidkoff, Pincus & Green P.C. Help Negotiate Business Contracts for Workers

Contract negotiations can be confusing and stressful. Even for well-prepared professionals who know their values, there can be concerns. A trusted Philadelphia employment lawyer at Sidkoff, Pincus & Green P.C. can protect your interests. Call us at 215-574-0600 or contact us online to schedule an initial consultation. Based in Philadelphia, we proudly serve hard-working residents throughout Pennsylvania and New Jersey.

  Category: Business Law
  Comments: Comments Off on Pennsylvania Supreme Court Strikes Down No-Hire Clauses
  Other posts by

What are the New Regulations Under the Corporate Transparency Act?

By ,

At the start of the new year, the U.S. Senate voted to override former President Trump’s veto of the National Defense Authorization Act of 2021. With this development, important amendments to the United States anti-money laundering law (AML) took effect. Among these regulations is the Corporate Transparency Act (CTA), which is a set of important provisions designed to discourage “shell” companies and reduce corporate corruption in all sectors.

One of the most significant provisions included in the CTA is the requirement that all businesses file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN). This fundamental transparency stops criminals and illegitimate entities from using anonymous shell companies to hide illegally gained funds.

Key Provisions of the CTA

Under the CTA, businesses operating in the United States must submit the following information every year for each beneficial owner to the FinCEN:

  • Legal name;
  • Date of birth;
  • Address; and
  • Unique identification number, such as information from a driver’s license or passport.

It is worth noting that while reporting this information to the FinCEN is mandatory, there are strict rules about how this data is stored, used, and distributed. While banking and government agencies are permitted to access beneficial owner records, the general public is not.

Several types of employees are exempt from being beneficial owners. Most beneficial owners are individuals who directly or indirectly maintain substantial control over the business or own or control at least 25 percent of the ownership interests in a business.

Does the CTA Apply to Every Business?

The CTA applies to corporations, limited-liability companies (LLCs), other related entities, and new businesses as they form. Large companies, which are generally already heavily regulated and currently reporting to other government agencies, may be exempt from the CTA. Exempt businesses include those with more than 20 employees with revenues over $5 million, most financial institutions, including banks and credit unions, and churches and other nonprofit organizations.

What Does the CTA Mean for My Business?

Businesses that do not comply with CTA provisions face civil penalties of up to $500 per day until compliance is met and criminal fines of up to $10,000 and possible jail time. For this reason, it makes sense for every business owner to consult with a skilled business attorney in their area.

An experienced business attorney can explain the CTA in great detail, help with business tort litigation matters, assess how their client is impacted by the new transparency guidelines, and take steps to ensure they are in full compliance going forward.

Philadelphia Business Attorneys at Sidkoff, Pincus & Green P.C. Ensure Clients Comply with Regulations and Avoid Costly Penalties

There is always a learning curve when it comes to understanding and implementing new business regulations. A seasoned Philadelphia business attorney at Sidkoff, Pincus & Green P.C. can take the guesswork out of navigating new legislation so you can focus on growing your business. To learn more about your case and an initial consultation, call us at 215-574-0600 or contact us online. Based in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.

What are the Legal Considerations for a New Trademark?

By ,

Starting or growing a business comes with many legal considerations. A major component is branding the new venture with a trademark to provide identification. However, with more of the marketplace globally available, it can be challenging to find something that resonates with the business. Small business owners should not impulsively decide. Business owners should invest in researching the industry or product territory both locally and online to avoid resembling competitors.

Completing a trademark search will help identify potentially competing ideas and brands that will help the process. Having a unique last name or combining words can avoid common legal pitfalls. More common names or brands may appear if they are not directly competing in the same sector. Using an established name may create additional challenges, but it is not completely forbidden.

Check social media to see what potential competitors use with trademarks and general branding strategy. Social media platforms have become more vital in building new companies. App stores would be a good place to find brands with similar names and functions. There are also common law databases available for regional companies who entered the marketplace and have done business with a trademark but did not file nationally.

What Should Business Owners Avoid?

The following are some suggestions on what to avoid in creating a new trademark:

  • Being too similar phonetically to other trademarks.
  • Being too visually similar to other trademarks.
  • Being similar to brands with a record of challenging trademarks in court.
  • Coincide with any legal precedent that would warrant a legal challenge.

The U.S. Patent and Trademark Office has videos and other online resources to help companies avoid common mistakes in creating a trademark and expedite the approval process.

What Should Companies Do While Applying for a Trademark?

The application for a trademark will require a physical manifestation of the new mark, both in basic logo form and on apparel or marketing materials. Make sure the wording and illustration are distinctive enough to uniquely identify the brand for consumers.

Rights to a trademark go to the first company to use it in a specific field or region. However, federal registration can allow a company who does not file first to be the owner of a mark or brand name. While the process is long and costly, it may be beneficial long-term for a company to register federally. Locking in usage requirements happens when either a brand comes to market for sale, or the promotion of the brand is used through printed or digital resources. This works best for a consistently marketed or sold product or service. A trademark that is not used for about three years may lose its rights.

If applying, business owners should make sure to follow up with any questions or challenges that may be posed to try to avoid complex litigation issues. If anything arises, the legal process can take months or longer if it is not properly vetted and all procedures are followed.

Philadelphia Business Attorneys at Sidkoff, Pincus & Green P.C. Help Business Owners with Trademark Applications and Disputes

There are many considerations while forming a trademark for a new company. The U.S. Patent and Trademark Office strongly encourages using a licensed attorney with trademark law experience to help with the process. A Philadelphia business attorney at Sidkoff, Pincus & Green P.C. can help your company and defend your new trademark application. Call us at 215-574-0600 or contact us online for an initial consultation. Based in Philadelphia, we serve clients throughout Pennsylvania and South Jersey.

What are Common Legal Issues that Businesses Face?

By ,

Managing a successful small business can be a lot of work, especially in the early stages, when many difficult financial decisions must be made. The biggest ones pertain to what owners plan to spend their limited budget on. Given that resources can be tight, it is understandable why some elect to avoid some big-ticket items, like hiring a lawyer. While that may seem to make sense in the short-term, it could wind up costing the company much more in the long run. There are several common problems that impact all companies that a knowledgeable lawyer would be able to help the firm avoid.

Do I Have the Right Structure for My Business?

One of the first things that an entrepreneur and their partners must decide on is the structure of their business. This is extremely important because it could have serious tax liability issues. Establishing the correct structure will save a company several severe headaches going forward. Some of the different types of structures include:

  • Sole proprietorship
  • Partnership
  • Limited Liability Company (LLC)
  • C-Corporation
  • S-Corporation

Each one of these structures handles the liability and tax responsibilities of the owner in a different way. An LLC, for instance, separates the two and treats them as two different entities. Owners should research the different corporate structures thoroughly before deciding on which to choose.

What are Some Employee Issues I Need to Consider?

Even if the structure of the company is secure, another common problem that all companies deal with is managing employees. One of the biggest aspects of that is deciding how to classify them and verifying that their classification matches their level of responsibility. There are three main types of classifications, which are:

  • Full time employee: This type of employee is someone who works more than 30 hours a week. The company is obligated to offer health insurance, Workers’ Compensation, and other benefits.
  • Part time employee: These employees work a maximum of 30 hours a week and are usually not eligible for benefits, although a company can offer them if it elects to.
  • Independent contractor: This is a person who operates outside of the structure of a particular office and works independently. They are responsible for paying their own Medicare and other taxes, and are not eligible for some universal benefits, like Workers’ Compensation.

Deciding how to classify employees can be a tricky action, as misclassifying someone can lead to litigation later on. The best way to avoid any problems is to evaluate a job description ahead of time and decide what the hours and responsibilities will be, then classify the position based on the added costs of potentially paying for benefits.

If that position cannot be fully funded, the company may have to do without it until it can find the funding somewhere else to pay for that position. The legal costs further down the road are not worth cutting any corners with a person’s pay or benefits.

What Type of Paperwork Should I File on a Regular Basis?

Maintaining a business is more than just keeping employees and customers happy. There is a significant amount of paperwork that must be filed with both the state and the federal government on an ongoing basis. If a firm is publicly held, it could fall under the jurisdiction of the Securities and Exchange Commission (SEC) on the federal level and state regulators. Regardless, the company will be under an obligation to file certain documents, including:

  • Financial statements: These documents contain a snapshot of the firm’s financial status, including its income statement, balance sheet, and statement of cash flow.
  • Financial information: Any data that the company chooses to post about itself on its website.
  • Annual reports: These are issued to shareholders once a year.
  • Prospectus: A document that describes the investment offering for the public.

What Should I Do if I Have a Contract Dispute?

While contracts are supposed to be binding agreements between two or more parties, there can be disagreements between those parties over one’s actions. It may also be necessary to break a contract because the two sides no longer wish to work together anymore. To avoid a messy legal dispute, it is best to thoroughly review any contract before signing it. All parties should include language that grants them an easy escape should certain violations take place, or some other action occur, such as one of the two sides is arrested or has some other public embarrassment.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Small Businesses with Legal Matters

If you are facing legal hurdles within your small business and need help finding a legal remedy, reach out to the Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. For an initial consultation, call us at 215-574-0600 or contact us online. Located in Philadelphia, we serve clients throughout New Jersey and Pennsylvania.

Should I Pass the Family Business to the Next Generation?

By ,

There are about 5.5 million family-owned businesses in the U.S., caccording to advocacy group, Family Enterprise USA. Therefore, many business owners need to decide if, how, and when they will pass on their business to the next generation. The best way to ensure a smooth transition and successful business continuation is to have a succession plan. Business owners should develop the plan with input and support from all family members who have an interest in the business. However, that leads to the question of who should inherit the family business?

Sometimes there are no children to inherit the business. Other times, children do not want to inherit the business, and there are no other relatives or close friends they trust. Still, other business owners do not want to retire, and by the time they do, potential new owners have moved on. Before business owners can develop a succession plan, they need to get buy-in from those they want to inherit the business. The next generation of owners could be children, relatives, friends, or other business owners. Acceptance and support from all potential new owners are crucial before developing a succession plan. If children will inherit the family business, consult with a lawyer about an estate plan as there may be tax and equity considerations.

Why Does a Family Business Need a Succession Plan?

A good succession plan will detail plans for a business when the current owner retires, or if the unexpected occurs, such as a death or disability of the owner. Sadly, a business could simply die out without a solid plan for continuance in place. The business could also be lost to estate and inheritance taxes without a plan that addresses tax issues. If there is no clear plan in place for ownership transfer, family issues could harm both the business and family relationships. A succession plan will cover the details of how and when the transfer will occur, associated costs, a business valuation, and how the transfer will be financed.

What Does a Business Succession Plan Include?

A succession plan must include the right people, such as a business lawyer, accountant, financial advisor, business valuation expert, CFO, and all family members and others who will have a role or financial interest in the transferred business. Every business situation is unique and will require different plans. A succession plan should address the following in detail:

  • The mission, vision, guiding principles, and values agreed upon by the current owner and all successors.
  • A timeline of important personnel transitions, business deadlines, events, projects, and plan implementations.
  • Identify strengths, weaknesses, and development plans for each candidate, in addition to responsibilities and management expectations.
  • A business valuation, stock or other equity positions, sales and growth expectations, as well as budgets, business debts, and other important financials.
  • The types of insurance that need to be acquired, renewed, changed, or stopped.
  • A summary of operating procedures, including processes, policies, partners, vendors and suppliers, products and services, new projects, training, IT, human resources, customer and client demographics, and marketing/sales plans.
  • A communications plan stating how employees, business partners, customers and clients, the community, and local media will hear about the transition.

Creating a succession plan for the family business is a complex task that requires the expertise of trained professionals. Passing the torch to the next generation can go smoothly with the right people helping business owners.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Help Business Owners with Succession Plans

If you are considering passing on your business to a family member, relative, friend, or another business, a business succession plan can help make it a smooth transition. Contact a Philadelphia business lawyer at Sidkoff, Pincus & Green P.C. today. We pride ourselves on staying abreast of all developments in business law and business succession planning. Contact us online or call us at 215-574-0600 for an initial consultation. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.

  Category: Business Law
  Comments: Comments Off on Should I Pass the Family Business to the Next Generation?
  Other posts by

How Can Employers Help Employees Embrace Company Culture Changes?

By ,

A distinct company culture is very important to the success of a business. Company cultures may change periodically to reflect new technologies and policies. Although necessary, this can be difficult for certain employees to embrace and accept, especially if they have been at the company for a long time.

Workplace culture is a broad term that encompasses a company’s physical environment to the mental and psychological space that company executives have created for their employees. It is the personality of a company that employees and clients embrace when walking into the office. Firm culture is important for a company to establish when expanding. A positive workplace culture will ultimately lead to a higher success rate for the company.

How to Handle Changes in Workplace Culture

Finding the perfect firm cultural balance may take time and is something that will continuously need improvement. Creating a workplace that can quickly and efficiently adapt to changes is important in making employees feel comfortable. The first step a company can take before, during, and after workplace change is to assess their current environment and develop a way to produce a more positive culture. To do this, company executives should put more priority on the hiring process to help weed out toxicity and hire positive people. Companies can also develop committees and programs to help maintain a positive work culture and help those who need it while transitioning to new workplace systems. The following are ways to help produce and maintain a positive work environment:

  • Firmwide meetings: Include every employee in a monthly meeting where all team members can ask questions and address their concerns. Seek feedback and employee engagement whenever possible to show employees that they are valued, and their opinions are important.
  • Anonymous complaints: Create a place where employees can address their problems anonymously if they do not feel comfortable speaking to their supervisors face-to-face.
  • Lead by example: Introducing new technologies or protocols to a workplace may be confusing and intimidating to employees. Executives should lead by example and show employees that change is good and necessary for the success of the company.
  • Diversity and inclusion committee: Create a committee that focuses on making a more equitable work environment.
  • Maintain a sense of community: Managers should ensure that their employees feel welcomed and part of a team. They should remind employees that they are a main component to the success of the company and are a valued team member.
  • Appropriate training: Managers should train their employees properly to prepare them for how their work culture is run and maintained. Training should also cover how change is enacted and handled to better prepare new employees for workplace adjustments.
  • Create change from an employee’s perspective: It may be easy for a manager to produce changes that they feel are good for the work environment, but it is more productive to approach change from an employee’s point-of-view and listen to what they have to say.

What to Do If an Employee is Unhappy with the Firm Culture

Not every employee reacts to company change in the same way. If an employee is upset or requires a slower transitional period, discuss with them their concerns. Changing and adapting to new company culture protocol can take time but is necessary when getting employees to embrace a business. Companies should create a workplace culture where employees feel comfortable and valued at work. Establishing a culture where change is embraced and accepted is also important to the success of a company, as well as to the success of individual workers.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Make Company Changes Easier to Understand

The Philadelphia business and employment lawyers at Sidkoff, Pincus & Green P.C. range in experience with business and employment matters to help produce the best outcome for our clients. Call us today at 215-574-0600 or contact us online for help with your legal matter. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.

  Category: Business Law, Employment
  Comments: Comments Off on How Can Employers Help Employees Embrace Company Culture Changes?
  Other posts by

Are Business Losses Due to COVID-19 Covered Under Business Interruption Insurance?

By ,

Many businesses have been forced to close during the pandemic. Restaurants, bars, gyms, and summer camps are just some of the businesses that have recently been seeking insurance coverage for their pandemic-related business interruptions. However, as coverage is typically dependent upon direct physical damage, most of these claims have been thrown out of court. Despite consistent rulings in favor of insurance companies, businesses continue to file claims for interruption and canceled events due to COVID-19.

What is Business Interruption Insurance?

Business interruption insurance replaces lost income that a business suffers after a covered loss. It is typically purchased by companies with a physical location that serves customers and is added on to their property insurance policy. If the business should lose income due to a fire or natural disaster, business interruption insurance can replace any income or business losses. Business interruption insurance does not cover flood or earthquake damage, utilities, broken items, or any undocumented income. Rather, this type of insurance only helps businesses cover operating expenses, such as:

  • Revenue
  • Mortgage, rent, or lease payments
  • Loan payments
  • Taxes
  • Payroll
  • Relocation costs

Although insurance policies differ regarding terms, most include some type of language stating that there must be direct physical damage in order for business interruption claims to be paid out. Therefore, if a hurricane blew away a roof or a fire burned down inventory, business interruption insurance would provide coverage. However, what if there was no physical damage, as is the case with many businesses affected by COVID-19? Business owners seeking legal relief are discovering that when it comes to lost income due to the pandemic, they may be left to their own devices.

What About Pandemic-Related Losses?

A professor at the University of Pennsylvania notes that currently, there are approximately 700 coverage lawsuits brought by businesses seeking coverage for pandemic-related business interruptions. This exceeds the normal number of claims for natural catastrophes by two or three times and is more than the number of case filings for hurricanes Sandy, Irma, and Harvey put together.

So far, this widespread need is not being met; courts in California, Michigan, and the District of Columbia have sided with insurers, leaving businesses without coverage for their losses. This is because most policies require direct physical loss or damage to property for coverage to apply. COVID-19 causes no tangible property damage and therefore does not form the basis of a valid claim.

Insurance companies claim they do not have enough funds to cover all pandemic-related claims and that their policies were not meant to cover losses outside of direct physical damage. However, it remains to be seen whether they will be compelled to do so as policyholders continue to file business interruption claims, attempting to convince the courts to construe ambiguous language in their favor.

Philadelphia Business Litigation Lawyers at Sidkoff, Pincus & Green P.C. Help Business Owners Recover Pandemic-Related Losses

If your business suffered losses due to the pandemic, contact a Philadelphia business litigation lawyer at Sidkoff, Pincus & Green P.C. Our knowledgeable and dedicated attorneys pride themselves on staying abreast of all developments in business law and will fight to obtain the benefits to which you are entitled. Contact us online or call us at 215-574-0600 for an initial consultation. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.

Small Business Fraud Discovered During Pandemic

By ,

Due to the Coronavirus pandemic and to address the financial fallout experienced by many small business owners, the federal government instituted the Paycheck Protection Program. This program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was initiated in March to prevent further unemployment and ease the financial burden faced by many small business owners throughout the nation.

The program sought to prevent unemployment by allowing applicants’ loans to be forgiven if they were used to cover payroll and other specified expenses related to the pandemic. The program meant to support small businesses was exploited by several people who lied about having legitimate businesses and instead used the money for luxury items. Several of the loans were disbursed to large, publicly traded companies and financial firms instead of small businesses that truly needed it.

Program Offerings

The program allowed small businesses to borrow up to 2.5 times their monthly average payroll costs. The loan could be forgiven in full if the small business owner retained employees for at least eight weeks after the loan was procured. Small business owners could also put a portion of the loan toward rent, utilities, and other specified expenses. The program’s loan administration was outsourced to the Small Business Administration (SBA) and a network of banks nationwide. Due to the high demand for loans, the SBA and banks involved were overwhelmed with having to administer 10 times the volume of loans they were used to.

Issues Discovered in the Program

Lack of a definition of what constituted a small business in order to be eligible for the program led to many large businesses partaking in the loans, even if they were able to withstand the financial stress of the pandemic. This limited the funds available to small business owners who truly needed them.

Banks were also uncertain about how the loans should be distributed and how they would be forgiven. Because the program offered immediate loan processing, many banks could not look over paperwork and lacked the necessary documentation and materials to process the loans at the scale and demand presented. Many banks were inexperienced in administering the loans at the scale required. They had to process loans rapidly for which they were not prepared.

Criminal and Fraud Charges Waged by the Justice Department

The Justice Department has charged at least 57 people for stealing from the program. The total amount stolen is more than $175 million. These individuals and groups sought loans ranging from $30,000 to $24 million. Those accused have lied about their businesses or fraudulently claimed to use the money for purposes other than those specified by the program. Some of those who procured the loans involved criminal rings.

The Justice Department is investigating these crimes with the help of the SBA, the Treasury Department, the Internal Revenue Service (IRS), and the United States Postal Service (USPS). They recovered and froze more than $30 million from those who violated the program or acted fraudulently.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green P.C. Advocate for Business Owners Affected by the Pandemic

If your business is being accused of not using SBA loan funds appropriately, contact the Philadelphia business lawyers at Sidkoff, Pincus & Green P.C. We specialize in compliance matters and can help you navigate federal and state regulations and policies affecting business owners. For more information, contact us online or call us at 215-574-0600 for an initial consultation. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.