Let’s say you and your friend started a small buisness while in school building computer systems and doing some web page design/programming for other small buisness. It brought in some decent money (not much) but enough so as not to have to seek other employment.
If for some reason you terminate the buisness (not enough time due to school, not enough money due to new responsabilities) are you eligible for unemployment benefits?
The five dollar answer is no. The five hundred dollar answer is–it’s complicated. First of all, like most legal issues, it depends on where you are geographically. Second, it depends on how you structured your company. If you formed a business entity (partnership, LLC, corporation); and the entity qualified as an employer under your local unemployment laws; and you paid yourself wages as an employee of the corporation, you might have a shot.
From what you have described, it sounds like you and a buddy were doing some independent contracting for businesses owned by others and splitting the proceeds. If that is the case, I’m going with the five dollar answer.
I think that if you incorporate (in some form) and carry unemployment insurance for yourself, then if you go out of business for some decent reason you can probably claim unemployment compensation. It doesn’t seem to be so cut and dried as you would think about what constitutes eligibility and probably varies by state.
Unless you (as an employer) paid into your state’s unemployment compensation fund, then you (as an employee) have no claim to unemployment benefits.
Actually in most states, this is a separate issue. Though certainly a related one. Suppose my employer is a deadbeat (I’ve worked for several). My employer does not pay into the fund, and then lays me off. My employer has violated the statute that requires the employer to pay into the fund. But my eligibility for benefits is based on my employer’s obligation to pay into the fund. Otherwise, my employer could prevent my unemployment claim by not paying into the fund.
That is why I said it depends on whether the company qualifies as an employer under the local unemployment law. Most states have a statute that describes which employers must contribute to the fund. Those employers are subject to the unemployment regime. If they don’t pay, they suffer the consequences.
But here’s the rub. In this case Kinthalis is the employer. So he might get benefits, but he might also subject himself (again depending on what the consequences are under local law) to civil or criminal liability. Of course, there is a chance that only the entity would be liable for the contributions. If that were so, then Kinthalis could conceivably get unemployment benefits while the unemployment people chased his now-defunct company for its unpaid contributions.
Since we are getting technical the usual disclaimers must be repeated (everyone sing along):
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And I’m still sticking with the five dollar answer.
Of course, in some states you can get help becoming self-employed if you are eligible for unemployment. http://workforcesecurity.doleta.gov/unemploy/self.asp But that is the opposite of your situation.