If you are an LLC and pay into unemployment benefits, can you lay yourself off and collect employment benefits?

– Brandy, Oregon


Answer

If an LLC pays an employee, and thereby pays unemployment insurance, then a laid-off employee can collect unemployment benefits (provided all the other requirements are met).

Your question seems to be, can a member of an LLC pay him/her self a W-2 wage and then lay herself off for unemployment benefits? No. The unemployment statutes prohibit the owner of the business from laying him/her self off and collecting unemployment.

If the LLC elected to be taxed as a corporation, and you paid yourself a wage for a time, and then stopped paying yourself, your eligibility for unemployment depends on your state. Some states, for example, prevent corporate officers who own more than X% of the company stock from claiming unemployment (in Washington, for example, it’s 10%).

There is a pilot program operating in a few states that might permit the self-employed to collect a form of unemployment compensation:

Self-Employment Assistance.

Here’s how the program is described:

“Self-Employment Assistance offers dislocated workers the opportunity for early re-employment. The program is designed to encourage and enable unemployed workers to create their own jobs by starting their own small businesses. Under these programs, States can pay a self-employed allowance, instead of regular unemployment insurance benefits, to help unemployed workers while they are establishing businesses and becoming self-employed. Participants receive weekly allowances while they are getting their businesses off the ground.

This is a voluntary program for States and, to date, Delaware, Maine, Maryland, New Jersey, New York, Oregon and Pennsylvania have Self-Employment Assistance programs. The State Workforce Agency web sites for these states can be accessed at: http://www.servicelocator.org/OWSLinks.asp.”

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