Can LLC (or Business) Owner collect unemployment?Explained with Instructions on How to Apply

Most businesses go through times of prosperity and times that are more of a struggle.

In the case of a smaller business, or a sole-proprietorship, the times of hardship can have a profound impact on the owner.

It’s not all that uncommon for a business owner to be taking little to no salary for themselves, or earning less than somebody working minimum wage.

The goal is that ultimately these sacrifices will pay off, and the business owner will be wildly successful in the long run, but what about when times get tough?

As a business owner, you might see people collecting unemployment and wonder if there’s any support out there for you.

When employees lose their jobs, they can collect unemployment benefits but what about the business owner?

What if you have to close your business, are you just out of luck or can you collect unemployment as you seek out your next opportunity?

Here’s what you need to know about an LLC or business owner collecting unemployment.

Can LLC or Business Owners Collect Unemployment Benefits in 2022?

Yes, you can collect unemployment as a business owner in certain circumstances.

If your business is forced to close, it’s possible that you can collect unemployment as the owner of the business, but this will depend on the structure of the business and the circumstances of the closure.

The key ingredient for being able to file for unemployment benefits as a business owner is that your business should be established as a W-2 employer.

The owner of the business, or member of the LLC in some cases, should be employed by the business as a W-2 employee.

When the owner is working for the business as a W-2 employee, the owner will likely be able to file for unemployment benefits if the business shuts down or there is a loss of work for the owner.

Many businesses of all struceres don’t necessarily have their owners setup as W-2 employees.

It’s most costly, and takes more effort to form this type of structure, so it’s not uncommon for businesses to bypass this route, but there are downsides – for example – missing out on being able to file for unemployment.

Other Options For business Owners to Claim Unemployment Benefits

If the above scenario (the business being a W-2 employer) isn’t applicable, there could still be another scenario in which a business owner is able to file for unemployment benefits to help support themselves while they re-establish themselves for their next venture or find employment to fill the gap.

If the business that closed down was just recently established, and the business owner has a previous work history as an employee, it’s possible that they might be able to file a claim to take advantage of unemployment benefits that exist.

In some cases, for example if a business owner has just recently started their business but had a job before that, then their previous job could be used as a factor to determine whether or not they are able to get unemployment.

Your work history plays a role in your eligibility for unemployment benefits, even if you have recently gone on to start a business and that business has closed its doors.

Many business owners think that they’re out of luck in terms of benefits after starting their business if the business doesn’t work out, but previous quarters are taken into account, so take a look at your work history over the past year or so and keep that in mind when considering applying for unemployment benefits, and seek out guidance from your local benefits office.

They’ll be able to let you know exactly what to apply for, and what you may or may not qualify for.

How Business Owners Can Apply for Unemployment Benefits

If you’re a recent business owner who is out of work now, due to business closure, and you’ve either:

  1. Been set up as a W-2 employee under the business, or
  2. Have a work history in the past year as an employee at another business…

And you’re in need of assistance, then reach out to your state’s local department that handles unemployment claims.

You can visit the Department of Labor for additional guidance and to find out which office in your state handles these types of things.

When you reach out to your state’s unemployment office to consider filing for benefits, you’ll need to gather certain information and documents so it’s a good idea to get these ready ahead of time.

  • You’ll need information about your previous employer (whether that’s the business that you owned, or the business that employed you before you started a business).
  • You’ll also need to provide your current address.
  • You’ll need your past pay stubs to help verify your employment and how much income you were making.
  • In addition, you’ll want to have your previous tax returns on hand to help corroborate this information.
  • Finally, you’ll need to fill in the claim form which will ask for various information from you, which could vary from state to state.

There’s a section for employees to fill out and a section for the employers to fill out.

If you were both the employee and the employer, you will need to fill out both of these sections yourself.

What Benefits Are Available to Business Owners?

The types of benefits that are available for business owners will vary from state to state.

In certain circumstances, like when businesses have to lock down or close their doors for set periods of time, some states will offer additional support outside of unemployment for business owners who are losing out on income.

This will vary depending on the circumstances, the state, and the needs of the business/owner.

You should look into what exists in your region to determine the types of support that are there for business owners.

The amount of benefits and the length will vary from state to state.

You can probably expect to receive benefit payments for anywhere from three to six months, but it really depends on a number of factors.

How Else Can Business Owners Get Help?

There are a number of other ways that business owners can plan ahead for disaster, or seek help in the event that they need it.

These include FEMA relief for natural disasters (along with state relief for disasters), business relief loans, or getting business insurance.

Having insurance can be very helpful for a business as it can protect against a number of different events that could otherwise prove to be catastrophic.

One of the best things someone can do as a business owner or as an employee is to keep a cash reserve on hand in case they lose their job or their business goes under.

It can feel counterproductive, since the money is just sitting there rather than being invested in the business, but think of it as a safety net.

Final Thoughts on LLC Members and Business Owners Collecting Unemployment

There are certain circumstances within which a business owner can collect unemployment, but it requires the business to be relatively new, since the owner will need recent work history.

Other than that, it requires the owner to be paid as a W-2 employee.

If neither of those conditions are met, it will be challenging or impossible for an owner to get unemployment, but there are still other ways that businesses can get loans or other types of support before they fail, which can be the lifeline that ends up saving the business.

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