Owning a company (LLC) and collecting unemployment in CA

by Steve

(Los Angeles, CA, USA)

Hi,

I am considering forming an LLC. I am aware that California will deny unemployment benefits if you are not working but own a company.

My question is, if I form the LLC in another state, e.g. Nevada, does this shield me from being denied in California?

I very much want to start my LLC, and know it will take some time before I’m making any money from it. In the meantime I have to work my day job, and the industry I’m in is very sporadic with work… so it’s important that I remain eligible for unemployment.

Thank you!

Personally,

Your assumption that they will deny you for just owning a company makes no sense to me.

I think the denial would be based on the fact that you are either earning money from the company .. or you are not able and available for “suitable work” any longer because you are self employed.

You said you are currently employed .. they can’t keep you from benefits which you would be entitled to if you are able and available for suitable work, looking for it, and not receiving any money from a new LLC.

The issue I believe would be one of your availability for new work.

Whether it would be beneficial to open the LLC in Nevada .. I don’t know .. ask a lawyer.

I realize CA exempt Corporate officers and majority shareholders, but that’s from “covered employment”. You would still have to be paid something or limiting your availability for other work. See Coverage

At least that’s what I think. If you’ve found a CA unemployment statute which blows my theory out of the water please copy and paste it here.

If anything .. the LLC should be seen as a part-time job. At least that what you’ve described.

I think it would be beneficial to form the LLC while still employed. You then have proof that you did both concurrently.

Comments for Owning a company (LLC) and collecting unemployment in CA

Average Rating

Jul 06, 2010
Rating

My old employers accusations

by: Anonymous

Well the Issue i have pending right now is that my my old employer has one of his workers calling me and telling me that why am I receiving unemployment benefits if i own my own company. That its agaisnt the law, what im doing. And to be honest Im just a little stressed out and worried on all of this. What can i expect from all of this?

Try reading this and determine for yourself if what you are doing is against the law or simply prevents you from collecting unemployment benefits.

Jul 02, 2010
Rating

USING UNEMPLOYMENT BENEFITS TOWARDS THE BUSINESS

by: Anonymous

I WAS UNEMPLOYED ALL OF LAST YEAR AND I TOOK THE CHANCE TO OPEN UP MY OWN SHOP. WELL IVE BEEN IN BUSINESS FOR 8 MONTHS AND I CONTINUED TO FILE FOR UI BENEFITS. ALL OF MY BENEFITS HAVE ALL BEEN USED FOR THE BUSINESS EXPENSES. IVE HAD CLIENTS AND ALL THE EARNINGS ARE MADE BY COMMISSIONS IN WHICH COME IN THROUGH MY EIN# AND NOT MY SS#. THROUGH OUT THE 8MONTHS IN BUSINESS ALL THE MONEY CONTINUES TO GO BACK INTO THE BUSINESS AND I HAVENT BEEN ABLE TO PAY MY SELF. SINCE I HAVENT SEEN ANY PROFITS FROM FROM THE BUSINESS AS MY EARNINGS CAN I GET IN TROUBLE FOR USING MY BENEFITS TO MAINTAIN THIS BUSINESS RUNNING?

Hi,

It’s not what you use the benefits for .. it’s not being able and available for work or looking for work that becomes the issue.

Unfortunately, the IRS’s data is used in detection of unemployment fraud .. if I’m not mistaken.

Feb 24, 2010
Rating

More about the situation

by: Steve

Hi, and thank you for responding to my question.

The reason for my confusion is that several months ago while collecting unemployment, my claim was put on hold and I received a letter stating that a telephone interview was needed.

In that interview, I was told the claim was put on hold because they became aware that I started a production company, which was odd because I hadn’t started any such company (note: the interview was scheduled for the next month, so I wasn’t receiving checks for the span of an entire month… that’s a whole other story).

I think you may be correct in that if I did start the company and wasn’t receiving any income, and was still available and looking for work, all may have been fine.

I will look more into this issue and will call the California Unemployment Office to see if I can get more clarification (if I can even get through to them on the phone, which seems nearly impossible). I’ll post my findings.

It would be great if any other user(s) have come across a similar situation and can post their findings.

Thanks again!

I second that Steve .. if anyone has had any exprerience with Steve’s issue .. please jump in here.

By the way, several months ago .. when the EDD had an issue raised .. and you don’t know how that happened .. take a look at any state unemployment website .. they all have a “report fraud” button and some even take emails .. I’ve heard of people being reported by their neighbors .. not to mention the fact that “former employers” will send “informational letter” raising such kinds of issues .. I know .. because I’ve done it for them:))

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