Practical Advice: Filing for Unemployment as a Small Business Owner
Dan Levenson October 07, 2020
COVID-19 has put a lot of small business owners, the self-employed, and freelancers in a difficult situation. Many have found their income has dropped or eliminated completely. So, can a small business or freelancer that is a single member LLC file for unemployment? The quick answer is yes but there are some things to keep in mind. Let’s look at some of them below.
How unemployment works
First, let’s go over some basics of unemployment and why you can apply for it. If you have paid into unemployment through taxes taken out of your salary you likely meet the basic requirement for unemployment. Remember, most small business owners pay themselves as employees of their own business. As a result, you pay taxes and part of that goes into unemployment.
If your small business is organized differently or you cannot show that you paid into unemployment, you might run into some issues. For example, sole proprietorships are unable to collect on unemployment because they don’t pay unemployment taxes. Let’s look into the CARES act a bit and see how that could affect you.
The CARES act
The Coronavirus Aid, Relief, and Economic Security Act affected many small business owners, gig workers, freelancers by providing an extra $600 on top of the normal unemployment state benefit. That benefit has expired, though some states still offer enhanced benefits and there is hope that Congress will pass another relief measure.
Are you ready and willing to work?
One of the requirements of being on unemployment is being able to take a job if it comes along. You also need to show lost legitimate work – This means you cannot fire yourself just to collect unemployment. You must also file for each week that you are on unemployment and have to actively seek employment.
Most small businesses easily meet this requirement. If you are actively looking to get your business back up and running you will likely qualify. However, you could find yourself in a position where you have to take a job, even if it’s a low paying one, just to be compliant with unemployment. Use common sense and be honest when it looks like your business might pick up again.
Is your company properly insured?
The last thing that you need to worry about when filing for unemployment is any kind of liability. It can be a very scary thought when you are a small business owner. InsureYourCompany.com has insurance solutions for professional liability issues, workers compensation needs, and employment practices liability. You owe it to yourself to protect your small business so you can focus on navigating the ever-changing market.
To review your company’s needs and find out what coverage is right for you, click here to get started with a professional.
*This article is for general information purposes only. We are insurance professionals. We are not accountants, lawyers, or financial planners.