COVID-19 Bankruptcies and License Compliance
The COVID-19 pandemic has impacted nearly every aspect of daily life in the US, and experts are currently monitoring the status of our economy as shutdowns and stay at home orders remain in effect. One marker of the current state of the US economy is the recent surge of bankruptcy filings. This week’s announcement by J. Crew demonstrates the struggle to stay afloat by retailers across the country amid COVID-191. Other national brands such as Hertz, Neiman Marcus, and JC Penney have found themselves in similar positions and may soon follow suit2.
As companies large and small find themselves in similar predicaments to retailers, state and local jurisdictions dependent upon tax revenue have been forced to reassess their cash flows. As a result, LicenseLogix expects to see an upswing in license obligations, penalties, and fees as jurisdictions attempt to account for these revenue shortages.
Whether your business is temporarily closed or shutting down permanently, license compliance in the midst of business cessation should still be a factor for consideration. Even though a business may close its doors, business licenses will not automatically close out along with them. Many state and local jurisdictions require the proactive step of closing out a license; otherwise annual renewal fees and late penalties will accumulate. As an example, the City of Lovejoy in Georgia requires license holders to submit a Business Closure Affidavit in instances of business closure, bankruptcy, or sale3.
State and local tax offices also require final tax returns submitted in order to effectively close out tax accounts such as sales and payroll registrations. Another likely outcome of the pandemic includes new license requirements, along with increased annual fees.
Emergence from bankruptcy presents a unique challenge to license portfolios. As companies reorganize and reopen, many corporate structures have changed. Post-reorganizational changes may include a change in the ownership structure, new officers, an FEIN change, or even name changes. These changes often impact the company’s license portfolio, and may sometimes require new license filings. LicenseLogix is uniquely positioned to assist with the downstream effect of both bankruptcy and reorganization.
In the wake of COVID-19, LicenseLogix has been proactively monitoring changes to licensing requirements and can counsel your business regarding all of your compliance needs during this uncertain economic time. Let us know how we can help!