Can self-employed LLC owners qualify for EDD benefits after losing major client?

Unfortunately, if you've been taking owner's draws instead of setting up a formal payroll where you're paying into UI as an employee, you generally won't qualify for regular unemployment benefits in California. EDD unemployment is funded through payroll taxes that employers pay on behalf of their employees, and as a single-member LLC taking draws, you likely haven't been contributing to this system. Your options might include: 1. Check if you have any W-2 employment in your base period (typically the 12-15 months before filing) 2. Consider changing your structure going forward to pay yourself as an employee if you want this protection 3. Look into Disability Insurance Elective Coverage (DIEC) for future protection, though it won't help for this current situation Sorry to be the bearer of bad news, but traditional UI benefits probably aren't available in your situation.

this is why self employment is so risky!!!! the EDD system is basically USELESS for actual business owners. been there, got screwed by the system. i had to liquidate my retirement account when my business collapsed in 2023 becuz I wasnt eligible for ANY help. the whole system is designed for traditional employees and screws over entrepreneurs. I'd call EDD anyway just to double check but dont get ur hopes up

I was in a similar situation with my graphic design LLC last year! I had mostly been doing owner's draws too, but I did have 1 project where I worked as a W-2 contractor for about 3 months. When I applied for unemployment, they actually approved me for a small benefit amount based just on that W-2 work, even though it wasn't my main income. So definitely check if you have ANY W-2 income in the base period - even a small side gig could qualify you for something. Also, did you pay yourself any official salary through payroll during these 3 years? Or was it 100% owner's draws?

check if ur LLC is registered as an S-corp. some LLCs are, some aren't. if u elected S-corp status and paid yourself a salary (not just distributions) AND paid into SDI/UI, then you might qualify. but based on ur post sounds like u didn't do this.

Try calling EDD directly to confirm your status. I know it's nearly impossible to get through to them, but I recently used a service called Claimyr that got me connected to an EDD agent in about 20 minutes when I had a similar question about my eligibility. Their website is claimyr.com and they have a video showing how it works: https://youtu.be/JmuwXR7HA10?si=TSwYbu_GOwYzt9km Even if you don't qualify for regular UI, there might be other programs you're eligible for, and an EDD rep can tell you for sure. Worth checking rather than just assuming you're out of luck.

One other thing to check - what state were you in before starting your LLC? If you had W-2 employment in another state within the last 18 months, you might be able to file an interstate claim. The base period rules can sometimes give you a bit more runway than you'd expect.

For the future, you might want to consider the following structure: 1. Elect S-Corporation status for your LLC (you can do this for future tax years) 2. Put yourself on payroll and pay a "reasonable salary" that includes UI and SDI contributions 3. You can still take distributions beyond your salary, which won't be subject to self-employment tax This creates more paperwork and higher administrative costs (payroll service, more complex tax filings), but provides the safety net of unemployment insurance if needed. For your current situation, definitely check on that W-2 work from last summer. California looks at your highest-earning quarter during the base period to determine your weekly benefit amount, so even a short period of W-2 employment might help.

Sorta related but did u pay into CA SDI (state disability insurance)? That's different from unemployment but at least provides some protection if you get sick or injured.

The good news is that if you did have any W-2 income in the last 18 months, even just that 2-month contract, you'll likely at least get a minimum benefit. When you file your claim, make sure to report ALL employment, including your self-employment. EDD will calculate your benefit based on the W-2 wages. It might not be much, but something is better than nothing while you rebuild your client base!

I'm sorry you're going through this tough situation. As someone who's been self-employed for years, I can relate to the stress of losing a major client. A couple of additional thoughts that might help: 1. While you're figuring out the EDD situation, consider reaching out to your local Small Business Development Center (SBDC) - they often have resources for business owners facing cash flow issues and can help you create a plan to diversify your client base. 2. If you do qualify for any unemployment benefits based on that W-2 work, remember that you'll need to report your self-employment income weekly. EDD allows you to earn up to a certain amount while still receiving partial benefits. 3. For immediate cash flow, consider taking on some freelance work through platforms like Upwork or Fiverr while you rebuild your consulting practice. It's not ideal, but it can help bridge the gap. The silver lining is that you're learning these lessons now and can restructure for better protection going forward. Many successful consultants have been through similar situations and come out stronger. Hang in there!

I went through something very similar when my consulting business lost its anchor client in 2022. Here's what I learned from the experience: First, definitely file that UI claim based on your W-2 contract work - even if it's a small amount, every bit helps with cash flow. When I was in your shoes, I was surprised that my brief contract work actually qualified me for partial benefits. Second, while you're dealing with the immediate crisis, start implementing the "1/3 rule" for future client relationships - never let any single client represent more than 1/3 of your revenue. I know it's easier said than done, especially when you have a great client, but this situation shows why it's so important. For immediate relief, consider reaching out to local business networking groups and letting them know you have availability. Sometimes word-of-mouth referrals come faster than online marketing efforts. Also, don't be afraid to contact former clients - they might have new projects or know someone who needs your services. You mentioned mortgage payments - if things get tight, contact your lender immediately to discuss temporary forbearance options. Most lenders would rather work with you than deal with foreclosure proceedings. The restructuring to S-corp election that others mentioned is definitely worth doing once you're back on your feet. It's about $200-300 in additional annual costs but gives you that safety net. You'll get through this - losing a major client is scary but it's also an opportunity to build a more resilient business model.

Have you considered looking into emergency business loans or grants while you sort out the EDD situation? The SBA has disaster loans that sometimes apply to economic hardship situations, and many local governments have small business emergency funds. Also, check if your industry has any professional associations that offer emergency assistance to members - I know the marketing industry has a few organizations that provide grants to consultants facing unexpected hardships. In the meantime, you might want to reach out directly to your lost client's competitors. Sometimes when a company brings services in-house, their competitors realize they need to outsource those same services. Your knowledge of that industry could be valuable to their competition. Also, don't forget about your network from that W-2 job you had 2-3 years ago. Former colleagues might have moved to new companies that could use your services. It's worth sending some "catching up" emails to see what doors might open.

I'm really sorry to hear about losing such a major client - that's every consultant's nightmare. Based on what you've shared, you're probably not going to qualify for regular UI benefits since you were taking owner's draws rather than formal payroll, but definitely pursue that W-2 contract work from last summer. Even if it was just 2 months, it could qualify you for some benefits. A few immediate suggestions while you sort out the EDD situation: 1. Contact your mortgage lender NOW, before you miss any payments. Most have hardship programs that can give you a few months of breathing room. 2. Reach out to every former client and professional contact. Let them know you have immediate availability - people often have projects sitting on the back burner waiting for the right person. 3. Consider interim work while rebuilding - even part-time contract roles can help with cash flow. For the future, definitely look into electing S-corp status so you can put yourself on payroll and access these safety nets. It's more paperwork but worth it for the protection. You mentioned 3 years in business - that shows you have the skills to rebuild. This is a setback, not the end. Focus on diversifying your client base so you're never again dependent on one source for 75% of your income. You've got this!

I feel for you - losing 75% of your income with no warning is absolutely terrifying. While others have covered the UI eligibility issues well, I want to emphasize something important: don't let this situation make you feel like you failed as a business owner. Having one client represent that much of your revenue is extremely common in consulting, especially in the early years when you're grateful for steady income. A few things that might help immediately: 1. Draft a professional email to send to your entire network announcing your increased availability. Don't mention the client loss - just position it as expanding capacity for new projects. 2. Consider offering a "new client discount" for Q2 to incentivize quick starts. Sometimes a lower rate that starts immediately is better than full rate that starts in 3 months. 3. Look into your state's small business emergency assistance programs - many states have grant programs specifically for situations like this. The silver lining is that this forced diversification will make your business much more resilient. I know it doesn't feel like it now, but many consultants who've been through this say it was ultimately the best thing that happened to their business structure. You clearly have the skills since you built this once already - now you'll build it back stronger and more stable.