Can a Business Owner File for Unemployment?

business owner

Laws concerning joblessness or unemployment insurance varies state by state. In some states, the business owners are paid unemployment compensation. Contact the local or nearby unemployment office of your state for further more information about it, if you are unsure about it. 

In the current situation due to covid-19, even hourly employees are demanding unemployment compensation. Then what about the small business owners who are forced to close doors? Unemployment is normal since the pandemic and now self-employed small business owners are also eligible for unemployment benefits.

Eligibility Factors:

There are a few factors on the basis of which you are provided with unemployment benefits. Small business owners can only file for unemployment benefits only if:

  • They worked as working-class employees of an organization.
  • They paid government and state unemployment taxes.
  • They lost their job or employee status.
  • They are genuinely looking for an alternative job or work.
  • The business temporarily closed because of COVID-19.
  • You are quarantined and hope to return to work once this all ends.
  • You give up your work positions due to risk and exposure.
  • You must be physically able to work.
  • Effectively looking for a job and jobless through no fault of your own.

Earning a Wage:

As a small business owner, you can only qualify the eligibility to avail of unemployment insurance benefits if you pay yourself wages or salary notwithstanding accepting profits.

The issue is that small business owners are working, many can’t bear to pay themselves a salary or wage. While they have no profit coming from their income, technically they are not jobless, and subsequently, are unable to collect unemployment benefits.

Eligibility of Sole Proprietorships:

If you are the sole proprietor of a business, you do not need to pay an unemployment insurance tax. If you do not pay your state’s unemployment office insurance fund, you are not qualified to get unemployment benefits. Sole owners are needed to pay state unemployment insurance tax on workers.

Loss of employment:

If you have shut down your business because of the Covid-19 pandemic, you also may have lost your employment status. Loss of work is the most straightforward component to show in an unemployment claim. However, your advantages might be restricted, contingent upon how you lost your employment.

Usually, workers are qualified for unemployment benefits if they lost their job by no deficiency of their own. In the event that you lose your job for any of these reasons, you can still avail of unemployment benefits:

  • You were laid off.
  • You were terminated for non-misconduct related reasons.
  • You quit deliberately, with the greater aim.
  • You were terminated because of a labor dispute.
  • You lost your job because of Covid-19.

CARES Act of Unemployment Benefits:

The federal government under CARES Act (Coronavirus Aid, Relief, and Economic Security Act) expand the unemployment benefits.

Self-employed workers who are generally not eligible to collect unemployment insurance benefits are now eligible. They may likewise meet all requirements of the new law that gives an extra $600 every week in unemployment and extends benefits for 13 weeks.

Qualification of unemployment benefits and rules differ by state, and you might be qualified in the event that you are self-employed and have lost your income due to Covid-19 measures, or you can’t work for any reason related to Covid-19, for example, being quarantined or taking care of a sick family member.

Applying for Unemployment Benefits:

When you get to know that you’re eligible to collect benefits, you’ll apply directly to your local state office. The government doesn’t deal with unemployment claims. The state will send you two forms to fill; one that you complete as an employee and one for your business.

Different states require various credentials for application processing. In any case, you should accumulate the following mentioned documents:

  • Business and personal tax returns 
  • Your Employer Identification Number (EIN)
  • Annual income on a pay stub

Expected Unemployment Benefits:

If your case approves for unemployment benefits as a small business owner, you’ll get the advantages accessible in your state. It’s essential to take note that these advantages fluctuate fundamentally among states; most of the states will just give benefits between around three months or a half year.

In terms of the number of unemployment benefits you’ll get in the event that you file for unemployment as a small business owner, there’s a range that depends on your income. You can for the most part hope to get somewhere in the range of $40 and $450 per week. The case manager you work with inside your state office will tell you precisely the amount you’ll get on unemployment.

As referenced above, you may right now be eligible for an extra $600 every week because of the CARES Act. Once more, this advantage is set to lapse on July 31, 2020.

Your unemployment claim will expire in a year, which means that you can’t file another case until this one ends.

See Also
What do you need to open a business bank account?
How long does it take for a tax refund to show in bank account?