Unemployment Benefits for the Self-employed

Hi,

I am graphic designer/cartographer in San Francisco, CA and have been self employed on and off for over 12 years, including the last 3 years (prior to that, was employed by my dad's marketing llc). I am currently just a sole proprietor, paid by 1099s, haven't even done a DBA since I am just using my own name.

I did search the site and read many of your posts, which are extremely informative and helpful--thanks! I didn't see a specific answer to this question, although there was some info in the posts about LLCs.

I am getting increasingly nervous about unemployment, as people are dropping all around me (aunt, uncle, cousin, best friend). I currently do most of my work with one company and they are starting to cut back. I do know that I should be getting at least $20,000 next year, based on work I have started but not billed for yet. So my question--Can I structure my business so that I can pay into, and therefore be eligible for, unemployment insurance?

Would the simplest way be to set up an LLC, and pay myself through payroll? Is there any other way?

thanks
jennie


Dear Jennie,

I just spoke with the IRS to confirm what I am about to tell you. It was surprisingly easy to get through to them. I suppose there's not a lot of people thinking about taxes on the day before Christmas.

Unemployment benefits are a combination of federal and state regulation. Were you to be an employee of your own S-corporation or C-corporation you would pay into the federal unemployment system. You would need to check with California to see if there were any state restrictions on receiving unemployment benefits as the only employee of your own corporation.

You might want to consider the cost and hassle of incorporation as well as corporate recordkeeping, and that as employer you will pay into the system versus the small amount of unemployment benefit you would receive after only a year of income of about $20,000.

Happy Holidays!
June