Hello Tax-Guru,

Im very concerned with my situation. I got layed off recently, I receiving an unemployment check every 2 weeks which helps tremendously, however, in an effort to improve i registered a company with the state of florida. The problem is that so far the balance of earnings and expenses of the corporation are almost 0. Do i have to report the earnings of the corporation as my own? Im the principal officer. Will I loose the unemployment even though I'm not making any real money? I havent received any paychecks from my corporation so far.

If the corp remains inactive, will I still loose my unemployment benefits?

thanks so much

No, you do not have to report the earnings as your own. The corporation would be filing its own separate corporation tax returns, and as an officer, if you have received any "Salary or Wages", then, you are required to report these on the first page 1 of the Corporation tax return, on Line 12, Compensation of Officer.

Since you have not received any earnings or salary from the corporation, you would not generally lose your unemployment benefit. I would not be concerned about losing these unemployment benefits, so long as the Corporation is not active and making a profit.

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Oh ! thanks so much ! you have no idea how helpful this is, I love this webiste, but please one inquiry about the same topic.
I will receive 1,200 dollars for my corp in about 2 weeks, however, the corp has invoices to pay for around 800 dollars in equipment soon. There will be another expense following that one for around 600 dollars. initially the 1,200 would seem like earnings, during that week my unemployment check will be issued..how does this work? do i have to wait until the end of the year to see what is really an earning in order to report it to the state of florida unemployment agency?

once again, thaks a lot !!

I think that during the week that you claim unemployment I think that you should certainly not withdraw or take a salary that would undermine your claim for unemployment.

I really think that this is immaterial as long as you have expenses to offset the $1,200 in income that was received by your Corporation.

The Corporation will report its tax return by March 15th 2010, that is after 2 1/2 months after the closing the year as of 12/31/09. So, you should not worry unless you are contemplating taking a salary in the immediate future.

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Hello Tax Guru,

I am in a similar situation as the person above. I started an LLC 5 months ago and have made $4k with the understanding it was a seperate entity and a corporation (I really thought I had the benefits of a C-Corp). I haven't taken any of that money and just let it sit in the seperate bank account not considering it personal income. Now 5 months into my unemployment benefits I realized that a C-Corp is the only legitimate way to work and not pay myself. Can I still convert to a C-Corp before the end of this tax year and continue to collect unemployment?

Thanks!
Jtrane25

I don't think you can easily convert an LLC into a C-Corporation prior to the year-end. It is best that you consult a CPA who would discuss your circumstances and he may be able to better advise you of your options.

Regarding collecting unemployment, "as long as your LLC is in existence you are an employee of the LLC and the legal way to collect unemployment is to close the LLC. In this way, you would no longer be employed and you may qualify to legally collect unemployment benefits."

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Hello Tax Guru,

Thank you for the advice. I recently filled out form 8832 (Entity Classification Election) to change the taxation of the LLC to mirror a C-Corp. Basically, C-Corp taxation without all the bylaws associated with a C-Corp (quarterly meeting with minutes, annual shareholders meeting etc.) does this qualify the LLC as a C-Corp for financial status and create a fundementally seperate entity from myself? Am I no longer self-employed but an officer of a C-Corp?

Thanks!
Jtrane25

One more thing... I'm partners in the LLC with a friend of mine. Could I just GIVE him my half of the LLC (50% of cash & laptop) walk away, go back to collecting unemployment benefits and pretend like nothing happened? I can't afford to not collect unemployment right now and don't want to do anything illegal or even operating in a gray space.

Also, the LLC hasn't made a dime of profit! If we were to shut down today we MIGHT have enough $$ just to pay taxes. How could this qualify as personal income if I haven't taken a distribution and the company has no assets aside from our 2 laptops?

I've been looking for a job for almost a year now and haven't been able to find anything decent and am worried that if my benefits run out I won't have anything so this was just plan B if I ran out of benefits while I searched for a job.

Please tell me that form 8832 is the silver bullet :^)

Thanks Again,
Jtrane25

Hi again !!

As you probably remember I established a C-Corp this year, at the same time, I was claiming unemployment benefits because my corp didn't produce any profit, so far it was only paying bills. the company received a small payment $1,300 with which it payed, cell phone bills, car insurance , computer bill and office phone bill until the money ran out. The corp doesnt have any employees, just me the officer. The fact that the company paid bills means that I wasn't entitled to unemployment? or does it mean I wasn't unemployed? so far I havent received any checks or bonuses from the company.

Also, the company has made more money recently ( 1 month) and I stopped filing for unemployment but I'm concerned about the beginning of the year..'

One more kink, in preparation for my soon to be conceived company I bought this mentioned computer ( $2,000) BEFORE i created the company (2 weeks), can it be deducted from expenses???

Thanks so much