Can a Business Owner File for Unemployment?

By the end of 2020, the average number of unemployment filings per week was just over 803,000. Meanwhile, more than 97,966 small businesses were forced to permanently shut their doors from April to August alone.

Looking at the latter tally, you may be wondering if there are any unemployment benefits for small business owners.

The answer is yes—small business owners can file for unemployment as long as certain requirements are met. Below, we’ll walk you through what those requirements are, how to file, and some additional financial relief options to set you up for success in 2021.

Unemployment Expansion Through CARES Act

The CARES Act is a federal program put in place to “provide fast and direct economic assistance for American workers, families, and small businesses.” Their goal is to improve the working opportunities in the United States during COVID-19.

Ultimately the CARES Act serves to expand unemployment eligibility. Programs in the act—applicable to small business owners—include the Payroll Protection Program (PPP), Pandemic Unemployment Assistance (PUA), and Economic Injury Disaster Loans.

Let’s take a closer look at PUA which helps extend unemployment benefits to those who would be otherwise ineligible (prior to COVID), such as small business owners, independent contractors, and self-employed individuals. 

Pandemic Unemployment Assistance

The Pandemic Unemployment Assistance program (PUA) is a federal financial assistance program. It is umbrellaed under the CARES Act, providing for small business owners as well as individual contractors and self-employed workers.

This program offers funds to small business owners and self-employed individuals “who are out of business or have significantly reduced their services as a direct result of the pandemic.” The program was officially extended to provide an additional 11 weeks of PUA benefits on December 27, 2020. Details on the eligibility qualifications can be found on the EDD website.

The process to apply for the PUA differs by state, so be sure to review your state’s unemployment website for specific qualifications, requirements, and application processes. Typically, to file a claim for this program, you’ll need to report your 1099 or W-2 wages.

It’s important to note that this program is only available to small business owners who don’t already qualify for regular unemployment benefits.

Requirements for PUA

The PUA is a great option for small business owners in need of financial help. Let’s walk through a breakdown of some of the program’s specifications.

You are eligible to apply if you are:

• Self-employed.
• Seeking part-time employment.
• Currently out of business because of COVID-19.
• Able and available to work.
• An independent contractor.

Meanwhile, you are ineligible for this unemployment program if:

• Your company closed for a reason other than COVID-19.
• Your business can operate remotely.
• You have another source of employment or income.

For additional information on specific eligibility requirements for PUA, be sure to visit the U.S. Department of Labor website.

How to File

To file for unemployment as a business owner, you’ll apply online with your state's department of labor. Each office will have you fill out one form as an employee and another as the business owner. This means you’ll need to have the following documents ready for use:

• Pay stubs from the previous year.
• Both business and personal tax returns.
• Your Employee Identification Number (EIDN).
• Your W-2 or 1099 form.

Once you’ve filed, you’re well on your way to receiving unemployment benefits. Under normal circumstances, you’ll be required to actively seek employment and certify for your benefits bi-weekly.

What are Some Other Financial Relief Options?

Payroll Protection Program

The Payroll Protection Program (PPP) is a CARES Act sponsored program established specifically for helping small business owners foundationally and financially. The program offers business owners monetary support to:

• Maintain their payroll.
• Hire new or recently terminated employees.
• Cover the cost of overhead bills.

This program was started by the Small Business Administration (SBA) and has been wildly successful in supporting 84% of small business employees throughout 2020.

If you believe the PPP is right for you, then visit the U.S. Department of The Treasury website for more information about specific requirements and enrollment options.

Economic Injury Disaster Loans

The Economic Injury Disaster Loan (EIDL) program is another means of economic relief for small business owners. The goal of the program is to support businesses to COVID-specific financial detriment that otherwise wouldn’t have occurred.

This loan is low-interest and available for any small business owner in the U.S.

We encourage you to read more about each of these two financial assistance programs in this explanatory article to determine if either is right for you and your business.

For a non-financial small business support tool, create a free account with GoSite to see how we can help boost your business.

You can also stay up to date with accurate and up-to-date information through our COVID-19 Resource Hub.