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The calls of “Defund The Police” are being put into action across the country. Take a quick look at this map below. As a business owner I suggest you continually research the cities you are physically located in or do work in, as the number is growing.
As always, I want to discuss these national events from a business perspective.
Defunding the police does not always mean abolishing the police, but it always means reducing the number of police officers available to protect the citizens and property, and restricting what measures the police can use to stop and detain criminals.
Quite often cities defunding the police also institute the “catch and release” of criminals with little or no bail, and the dismissal of charges against them by district attorneys. For the business owner this means that justice may never be served against criminals who harm your employees or destroy your property.
Anywhere the police are defunded, criminal activity increases, and so the probability of losing your property and your life follow suit.
Employees & Subcontractors
A business owner’s first responsibility is the safety and well-being of their employees and subcontractors.
Are your employees and subcontractors traveling to these cities that are planning to, or already have instituted defunding the police? I would rethink asking your employees to travel to those cities at this time. The civil unrest that is being allowed to occur with the blessing of the elected officials in these states & cities should make this decision simple for you.
I’ve stopped sending staff into these cities and I will not reverse this policy until law and order are restored. I cannot in good conscience ask my staff to take such heavy risks with their lives and property.
I too will not be traveling to any city where defunding has been instituted or is being considered.
Let’s say that you have sales or maintenance people traveling physically to different states and cities, what kind of protection are you going to give them? Can you give them assurance that they will be safe when they’re working on your behalf?
Right now, I don’t believe any business owner truly can give assurance within jurisdictions that are defunding the police.
Do your research. Review police blotters and look for online videos. There are thousands of them. It doesn’t take long to decide if a city is safe to visit.
I would definitely speak to your attorney to discuss your potential liabilities.
Remember, you have a responsibility to keep your employees safe. If there’s clear information that an area is no longer safe, then you may have to choose safety over profit. That is what I am doing.
Larger companies, like Uber and DoorDash, I believe have the same issue. Yes, drivers for them are subcontractors, not employees. You might think this shields them. But they are giving these subcontractors the addresses they are using to deliver people or food. So their responsibility and potential liabilities might be just as high as those of an employer.
Goods and Inventory
Do you sell goods around the country? Do you use your own truckers and trucks? Are you using the US postal service or a delivery service such as FedEx? Either way your products are at much greater risk of being stolen in one of these cities that are defunding their police forces. Everyday more and more trucks are being hijacked and their contents being stolen. Another reason for you to avoid selling anything in these cities at this time or to take additional measures to protect your products being delivered.
Insurance Costs
Insurance companies are constantly adjusting rates based on losses experienced.
We all know that a bad driving record including at fault accidents will cause our car insurance to increase. Imagine this on a much larger scale where entire cities are deemed higher risk.
I can almost guarantee that all of the insurance coverages that relate to these cities that are defunding the police departments are going to be increasing. So, if you’re located in these cities, I would look for your car insurance and your homeowners insurance to skyrocket. I would look for your commercial liability and property insurance to also increase substantially.
All business owners should expect insurance carriers to question where you are physically doing business in the country. You can be sure that they will ask you about these cities where there are increased risks due to defunding the police. If you answer that you are working, delivering or selling there, then this will also increase your insurance costs in a number of categories.
For example, your commercial vehicle insurance rates are based on the risk that those commercial vehicles will face. So you working in a town that is seeing a dramatic increase in criminal activity and vehicle property damage, will increase your insurance rates.
This is already impacting trucking companies’ decision making. We are already seeing cities being boycotted by truckers around the country. This is a very smart move.
Do you own commercial real estate in these cities? Office space? Warehouse space? Anticipate heavy increases in your insurance costs.
Taxes
If you’re physically doing business in these cities that means you have Nexus there. Nexus means that you will have to pay taxes in that jurisdiction.
The cities, counties and states that have had unrest are going to need a lot of money to rebuild. Of course that’s going to mean an increase in taxes. Look for increases in payroll taxes, sales taxes and income taxes. Look for an increase in other fees that jurisdictions charge just to do business within the city limits.
Be sure to discuss this with your CPA as they should be monitoring these things for you.
If your insurance and tax costs increases, AND your physical safety cannot be guaranteed, there may come a time where it is no longer profitable, or wise, to do business in certain places.
Questions? Concerns? Call me on (732) 673-0510.
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Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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