Ineligibility of individual PPP loans from partners and members
On April 14, 2020, the Small Business Administration (SBA) released a second interim final rule, providing guidance to individuals with self-employment income who file a Form 1040, Schedule C. The SBA will continue to update its guidance document and Frequently Asked Questions (FAQ), regularly. The SBA has made it clear that the US government will not challenge the actions of lenders who comply with the interim final rules and supporting guidance, as well as the FAQ document.
Most self-employed people are allowed to apply for PPP loans directly on their own account to recoup their self-employment income, with one notable exception.
The second interim final rule states that “if you are a partner in a partnership, you Maybe not submit a separate PPP loan application for yourself as a self-employed person. Instead, the self-employment income of the general partners can be reported as a salary cost, up to $ 100,000 annualized, on a PPP loan application filed by or on behalf of the partnership. Partnerships are eligible for PPP loans under the Cares Act, and the administrator has determined, in consultation with the Secretary of the Treasury, that limit a partnership and its partners (and an LLC filing taxes as a partnership) to one. only one PPP loan is needed to help ensure that as many eligible borrowers as possible obtain PPP loans before the legal deadline of June 30, 2020. “
The publication of the second interim final rule comes nearly two weeks after many companies, including many partnerships and limited liability companies, have already filed for and been approved for PPP loans on the basis of a simple reading of the CARES law, which defines “wage costs” as “compensation to employees”.
For companies that filed their requests before the publication of the Second Interim Final Rule, there are indications that companies may rely on information known at the time of the request, although it may prove to be incorrect, there is no no clear indications yet as to the possibility of modifying requests based on new directives or modifications made to previous directives.
Unfortunately, companies that filed their applications before the release of the Second Interim Final Rule appear to be prevented from seeking to amend their loan application once it has been processed.
© 2021 Pierce Atwood LLP. All rights reserved.Revue nationale de droit, volume X, number 107