Can Business Owners Collect Unemployment?

Small business owners generally cannot collect unemployment.

Unemployment compensation rules vary greatly from state to state, with differences in eligibility rules and benefits. In general, business owners cannot collect unemployment compensation.

Eligilibity for Unemployment

While unemployment eligibility varies from state to state, in general to be eligible for unemployment, one must be unemployed through no fault of one's own, and available and able to work. One must also be actively seeking employment and make required visits to the unemployment office.

Sole Proprietors

Owners of a sole proprietorship are not eligible to collect unemployment because they do not pay into the state's unemployment insurance fund.

S-Corporations

Because owners of S-corporations are considered employees of their corporations and pay into the unemployment insurance fund, technically they might be eligible for unemployment compensation. However, to do so, they must lose their job through no fault of their own; if they quit their job in order to get unemployment, they are considered to have left voluntarily, which negates their eligibility. If the company is shut down, with everyone laid off, the business owner might be eligible for unemployment.

References

• Los Angeles Times: Can Small Business Owners Collect Unemployment?
• CNN Money: Unemployment Benefits for Business Owners
• Thinking Like: S Corporations and Unemployment Insurance