Collecting unemployment while working on a startup that I take no money from

[volvo79]

What is the name of your state (only U.S. law)? New York/New Jersey

About my job:
I have been working at a full-time remote job from New York that I expect to be laid off from soon. I just moved to NJ in 2019. I have never collected unemployment before but I did notify my job of the location change. I intend to search for a job if I do go on unemployment, but I read here that New York may consider working on a side project as 'working'. I will not be eligible for SEAP since I am no longer living in New York. New Jersey has a rule that fits my situation entirely, here, but I know for a fact my current employer has not yet paid NJ unemployment taxes (my pay check is still contributing to NY). They said that should be altered any day now, but I expect to be laid off within the next two weeks.

About my LLC:
My startup has revenue but no employees (just contractors) and I do not keep any of the money that flows through it because we're not profitable yet. The company is registered as a Delaware LLC based in NJ.

Given this situation, I'd like some information on the following:

1. Where should I collect unemployment from?
2. Can I legally collect unemployment given my situation?
3. Could my LLC be argued as a hobby? (The IRS can classify businesses with losses as hobbies with continual losses, according to my accountant)

 

[Zigner]

1. Where should I collect unemployment from?
2. Can I legally collect unemployment given my situation?
3. Could my LLC be argued as a hobby? (The IRS can classify businesses with losses as hobbies with continual losses, according to my accountant)

It's doubtful that you even qualify for unemployment.
The IRS classification as a hobby is more complicated than just showing a loss.

 

[adjusterjack]

To collect unemployment compensation you have to be available for suitable work that is offered to you and actively seeking suitable work.

Working in your LLC means that you are neither and therefore disqualified from collecting unemployment compensation.

 

[volvo79]

What about this stipulation from NJ's DOL? (copied from https://www.nj.gov/labor/ui/eligibility.html)

Part-Time Corporate Officer/Owner​

If you operate a part-time corporate business while you are employed full-time, you may be entitled to unemployment benefits if you lose your full-time job. This is because you would be able to establish a claim based on your full-time work (your earnings with the corporation would not be included on your claim). Your earnings from your part-time corporate business would be deducted from your "partial benefit rate."

 

[xylene]

In New York ANY work, including working without pay or for deffered compensation counts as work for your certification.

Any day you do any work, any amount of hours, including working without pay or for deffered compensation is not a day you can claim.

If you are only working 1 or 2 day a week you could still certify for partial benefits. BUT the totality of you situation makes it seem unemployment is not on the table.

 

[commentator]

File a claim in New York. Tell them exactly what is going on. let them tell you where your wages were paid in if you have monetary eligibility based on the past five quarters of work. Let them decide what state the claim is from, you don't get to pick this, it has more to do with where the eligible wages were paid in for you. Now, concerning what your plans are, if you are not able, available and actively seeking full time equivalent work, that will probably disqualify you. BUT LET THE AGENCY DECIDE THIS. There is no downside to filing a claim and letting the people who can look at your wage records and discuss YOUR individual situation with you make a decision about whether or not you qualify. You do not get to "argue" your case with them, you tell them what is what, and they'll make an eligibility decision.

 

[adjusterjack]

What about this stipulation from NJ's DOL? (copied from https://www.nj.gov/labor/ui/eligibility.html)

That's for someone who has a 9-5 job and in the evenings does something else, then loses the 9-5 job and actively seeks a replacement 9-5 job while continuing his evening activities but still being available to take the suitable 9-5 job that comes along.

That's not what your situation is.

Though I do agree that you should file for unemployment when the time comes as commentator suggests, but being honest about your self employment activity.

 

[commentator]

Yes, by all means, any time you file a claim for unemployment insurance, be honest about your intentions and situation. Whether it is a New Jersey claim or a New York claim, the basic eligibility requirements will be quite similar. They'll get you a decision. If you aren't honest, they can certainly come back later and determine you have committed fraud.

Your eligibility is something you cannot decide for yourself and something that is very individual to your situation, and you will not be given the opportunity to cite laws and debate your eligibility with the agency. They have a whole lot more practice and familiarity with the law than you do. And it is also something you are not able to get "previews" about before you actually file the claim. They can't answer hypothetical questions before your claim is filed about "well, would I qualify for unemployment if I am....." But it isn't necessary. You just file the claim.

Incidentally, because the IRS can classify things as a hobby, or anything else, that's totally unrelated to unemployment insurance, which is not a federal program, not related to the IRS and not interested in the income you make on this job nearly so much as they are interested in your availability for other employment based on what you tell them, your willingness to make job searches and your continuing certifications for weeks in which you self report as being fully able, available and actively seeking work.

What you have to think about, always in providing information about your availability for work to the agency, if someone anonymously called them up while you are receiving unemployment benefits and told them you aren't really unemployed, this caller knows that you are actually working at XYZ full time, and the agency investigated the situation, would they determine that you are in fact, fully employed by XYZ? Remember, they don't really give a whoop how much money you're making, the program is not needs based. It is based on your having been employed by a covered employer in some state or another, being unemployed through no fault of your own, and able, available and actively seeking other work.

 

[volvo79]

Thanks for the detailed info here. Much appreciated.

One follow-up Q...I was wondering if there's any benefit to applying for unemployment after I am done with my startup project? My project is timeboxed. If it's not profitable within 2 months, I'm moving onto another job. If it's profitable, I don't need unemployment. Should I wait to file unemployment then (would be 2 months after being fired from my job)? Or is there no harm in filing as soon as I'm unemployed from my 9-5?

I ask because at that point in time, I would seemingly fill all eligibility criteria. I am not sure if explaining this situation now will make it harder to collect unemployment at that time, rather than just telling them simply in 2 months "hey i lost my job at ABC 9-5 2 months ago and have been trying to make self employment work but it isn't". I realize that I don't make this decision, but I don't want to shoot myself in the foot when I really would need to rely on it in 2 months, if all goes wrong with my project. What do you suggest?

 

[commentator]

File immediately. This will set up the claim based on the first four of the last five completed quarters. Under special circumstances, the next to current quarter might be used. But there is some reason that you do not want these from the quarters we are in now to be the wages used to set up the claim, and you actually want to wait till the quarters change the first full week in April, when the earliest of these quarters (Oct. Nov. Dec. 2017)will drop off and another quarter will pick up, you should not delay.