CARES Act - Action Items for Musicians

/

As you know by now with the CARES act there are 4 primary parts that could affect you as a musician:

  1.  $1200 checks being mailed to all individuals who make under $75k and if you make between that and $99k then you will get a portion of it.  Also $500 per child dependent under 17.

  2. Unemployment benefits are being extended to include self employed individuals. 

    • If you are paid as an employee (through Gusto) then you can already apply as the system is designed for your situation. 

    • If you are owner of LLC or sole proprietor, then you fall in the self-employed category and you’d be eligible for this new type of unemployment.

      • As of writing this (Sunday April 5, 2020) I am not aware of a single state that has integrated this new law into their Unemployment system though. This means that if you go to apply you’ll find a note asking you to wait, or something similar. You’ll need to keep checking in with your state to see when it’s ready.

      • Also note that you can not be on Unemployment AND be recipient and user of Payroll Protection Program (mentioned below) simultaneously. So if you go on unemployment and then you get PPP you’ll need to put unemployment on hold.

  3. Economic Injury Disaster Loan:

    • How much can I borrow and what are the terms?

    • What to use it for?  

    • Who is Eligible?  

      • Businesses with fewer than 500 employees 

      • Cooperatives

      • ESOPs, and tribal small businesses with fewer than 500 employees

      • Sole proprietors 

      • Independent contractors 

      • Most private nonprofits

    • What about this EIDL Advance of $10,000 that I keep hearing about?

      • From what I have read the language is that there can be an advance “up to” $10,000.  Though I can’t find any evidence online of anyone receiving this grant yet.

      • I have read conflicting reports on whether this advance needs to be repaid or not.  Some sites state that it does not need to be repaid under any circumstances. Others state that it might need to be repaid unless used on specific expenses like payroll.

    • In summary, given the lack of details about the advance and the promise of the advance potentially being forgiven, I think it makes sense to apply for this loan through your business entity. If the loan and advance come through and the PPP (below) comes through then we can discuss the best course of action. In other words, we’ll get more details on these things the more that times goes by. Once we starting getting responses on both loans we can determine which one to accept or possibly take both if possible and it makes sense.

  4. Payroll Protection Program (PPP) - 

    • How much can I borrow and what are the terms?

      • You can borrow up to 2.5 months worth of payroll.  This loan is a 1% loan that needs to be paid back in 2 years if any portion of it is not forgiven.  

    • What can I use the money for?

      • Payroll costs, including benefits (up to $100k per person per year);  

      • Interest on mortgage obligations, incurred before February 15, 2020;  

      • Rent, under lease agreements in force before February 15, 2020; 

      • and  Utilities, for which service began before February 15, 2020.

      • The loan will be forgiven if it is used primarily on payroll.  I understand that at least 75% of the money needs to be used on payroll.  

    • Who is Eligible?

      • All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply

      • It is my understanding that businesses that have actual payroll will be able to apply first and then on April 10, independent contractors and self-employed with no employees will be able to apply.  There has not yet been clarity on how partnerships apply for this loan if they don’t have payroll. Still waiting to get clarity on that.

    • And what is included in payroll?  

      • If you run actual payroll through Gusto then these amounts are included in payroll.

      • If you are single member LLC or sole proprietor, then as I understand it you would take your profit from 2019 and divide by 12 to get your average monthly profit and this is what you would claim as your monthly payroll.

      • If you are a partnership and pay yourselves with Guaranteed Payments then, unfortunately this isn’t clear yet how they want to deal with this.  It’s either going to be that you file as partnership and claim guaranteed payments as “payroll” or each partner will file individually. I am hoping for more clarity on this in the coming days early this week.

      • One thing is clear, In the Interim Final Rules document from the SBA they stated clearly in Section 2H that independent contractors do not count as payroll costs. So when you pay musicians or crew on the road who are not owners, this is not considered payroll 

        • Do independent contractors count as employees for purposes of PPP loan calculations? No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.

    • In summary, Artistzen likes this PPP option for every client we work with.  Though we are still trying to figure out how the Partnerships will take advantage of this, we expect it to be cleared up soon.  We are here to help you through this application by helping figure out your annual and average monthly payroll or anything else you need for the application.

      Ideally, these applications get filed and processed quickly and this money comes in to pay team members or yourselves for April, May.  Then if the EIDL comes in and some of that money will be forgiven (the advance) for payroll, etc then that cash can be used for the next month of June.  If money still needed then unemployment would be a good option.