Laid Off by Your Business

Today TaxMama hears from Debra in Janesville WI, who asks, “Can a small business owner claim unemployment benefits?”

Hi Debra,

Sure. If you’re a corporation (either C or S), and you’re on the payroll and pay into the unemployment fund.You would collect through the state.

But you’d have to prove to the unemployment office folks why you are unemployed – why your business laid you off. In other words, you’ll need to prove that, at present, your business has no contracts or income and no prospect of getting any in the immediate future – no matter how hard you try.

Sometimes, it’s a seasonal thing. This happens a great deal in the entertainment industry. Or your entire business revolves around importing fabrics from China and the quota has been reached, so you can’t get any shipments for the rest of the year. Do you see how you can bring in objective data to prove that your own business laid you off – not because you’re too lazy to come up with work – but because your industry doesn’t have any work for you at the time.

Unfortunately, though, if you’re simply self-employed you’re not on payroll, so, NO, you can’t collect. Sorry.

It’s possible that some states might have a way for those who are self-employed to pay into the unemployment system. After all, some states, like California, let small business owners buy into the state disability fund. So, perhaps there are states that do the same for unemployment. It’s worth checking with your state unemployment authority.

And, remember, you’ll find answers to questions about all kinds of tax issues, free. Where? Where else? At TaxMama.com

  • Ask TaxMama :: Where taxes are fun and answers are free

File Download (1:51 min / 1.3 MB)

Leave a Reply