How to Collect Unemployment Benefits When You’re a Sole Proprietor

Can business owners collect unemployment: When you’re out of work, you likely want to collect as much money as possible.

In addition to your standard job benefits, some states offer unemployment insurance as a way for people out of work to get an income until they find another job or start their own business.

However, eligibility and requirements can vary by state and occupation.
To be eligible for unemployment benefits, you must meet the standards set by the government agency where you live and the company where you used to work.

People who operate their own businesses generally aren’t eligible for unemployment benefits because self-employment is considered fair warning that no employer will provide them with any type of support.
However, there are ways to stay eligible for those benefits if starting your own business didn’t go as planned or if it wasn’t your intention at first.

Here are some steps you should take in case things don’t go according to plan:

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How to Collect Unemployment Benefits When You’re a Sole Proprietor

Can business owners collect unemployment:

Can business owners collect unemployment: The unemployment rate is at an all-time high, and the job market is still pretty brutal. According to the U.S. Department of Labor, only 63% of the population is working in this economy. One in every 12 American workers is unemployed right now, and nearly half of those people have been out of work for more than six months. How are you supposed to support yourself and your family when things like this happen? You might be tempted to take on a second job or cut back on expenses, but there’s another way: collecting unemployment benefits as a sole proprietor. Many people don’t know that self-employed individuals can qualify for unemployment benefits just like employees can. In most states, you must meet certain criteria in order to receive these benefits, but it’s worth looking into before you give up your business as a result of these challenging economic times.

Who Can Collect Unemployment When They’re Self-Employed?

Most people think that only employees are eligible to collect unemployment when they lose their job, but that’s not true. In most states, the only requirement to receive unemployment benefits is that you must have been employed. If you’re a professional contractor or a sole proprietor, you may be able to collect unemployment even if you have no employees and don’t have to pay taxes on your income. Some states even allow partners in a partnership and shareholders in an LLC to collect unemployment if they meet the eligibility requirements. The only type of self-employment that will disqualify you from collecting unemployment benefits is if you’re a professional gambler. In that case, the state will consider you to be pursuing a vocation, not a trade. States don’t consider gambling a trade, so it doesn’t count as self-employment.

Conditions to Receive Unemployment as a Sole Proprietor

There are two main conditions to receiving unemployment as a sole proprietor: you must have lost your job through no fault of your own, and you must be able to prove it. One of the main misconceptions surrounding unemployment compensation is that people think you can collect it any time you get fired. Actually, the only time you’re eligible to collect unemployment is if you were laid off because your company was experiencing financial difficulty, or because of a natural disaster, or if you voluntarily quit your job for “good reasons.” Some of the reasons that will qualify as “good reasons” for voluntarily leaving a job include a reduction in hours, a reduction in pay, or a reduction in benefits. If you’re self-employed, you can’t collect unemployment unless you were laid off due to an economic slowdown or natural disaster. You can’t collect unemployment because you got fired for breaking company policy, or because your industry just isn’t hiring.

How to Apply for Unemployment as a Sole Proprietor?

The first step to apply for unemployment as a sole proprietor is to apply for unemployment through your state’s unemployment office. To do so, you will have to create an account with the state’s unemployment system and fill out an application. Make sure that your application clearly states that you are self-employed and that you intend to collect unemployment as a sole proprietor. You will probably have to take a skills assessment, and you might have to take a written examination that tests your knowledge in your industry. You will have to provide documentation to prove you were laid off or that you left your job under one of the “good reasons” listed above. Acceptable documentation usually includes a termination letter, a layoff notice, or a letter from your employer stating why you left the company.

The Catch: You Might Have to Pay Back the Money

If you’re a sole proprietor and you qualify for unemployment benefits, you will receive a weekly payment based on your earnings in your highest-ever quarter. However, there is a catch: you might have to pay back the money. That’s right: if you collect unemployment while you’re self-employed, you may have to pay the money back. That’s because the way the government calculates your unemployment benefits is different for sole proprietors than it is for employees. What employees have to do is wait for the state to audit their claim for unemployment and review their earnings history before approving their claim. Sole proprietors, on the other hand, have to estimate their earnings from the last three years and enter those estimates online. If you’re honest, this won’t be a problem. However, if you inflate your earnings significantly or falsify your earnings, you will have to pay the money back.

Final Words: Is It Worth It?

Can business owners collect unemployment: The unemployment rate is at an all-time high, and it’s unlikely to go down any time soon. If your business is struggling because a lack of customers, you may want to consider applying for unemployment and taking the time to improve your business. It’s a good idea to apply for unemployment as early as possible so that you can get your claim started while you’re still employed. You won’t get any money as a sole proprietor until you’ve been laid off, and you might need the money before then. Collecting unemployment as a sole proprietor might seem like a good idea when times are tough, but consider the long-term implications of doing so. Taking advantage of unemployment benefits is a great way to bridge the gap between now and when you’re able to collect money from your customers, but it can also be a slippery slope.

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