Can you start an LLC while on NYS Department of Labor unemployment benefits?
I've been on unemployment for about 6 weeks now and I'm thinking about starting my own business as an LLC. I have some savings and a solid business plan, but I'm worried this might mess up my unemployment benefits. Does anyone know if NYS Department of Labor allows you to start an LLC while collecting UI? I don't want to do anything that could get me in trouble or make me have to pay back benefits. Has anyone been through this situation before?
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Jasmine Hancock
You can start an LLC while on unemployment, but there are some important rules to follow. The key thing is you need to continue being available and able to work for other employers. If you're actively running the business and earning income from it, that needs to be reported on your weekly claims. NYS Department of Labor considers you self-employed once you start operating the business, even if it's not making money yet.
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James Maki
•Thanks for the info! So if I'm just setting up the LLC paperwork but not actually operating yet, that would be okay? I'm still applying for regular jobs too.
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Cole Roush
be careful with this... i tried starting a small business last year while on benefits and it was a nightmare. they made me pay back like $2000 because i didnt report some small income correctly
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James Maki
•Oh no! What exactly did you do wrong? I want to make sure I don't make the same mistake.
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Scarlett Forster
The main issue isn't forming the LLC itself - that's just paperwork. The problem comes when you start operating the business. NYS Department of Labor requires you to report any work performed and any income earned on your weekly claim certification. Even if you work just one hour on your business during a week, you need to report it. If you're not available for full-time work because you're running your business, that could disqualify you from benefits.
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Arnav Bengali
•This is so confusing! I've been trying to call NYS Department of Labor for weeks to ask about this exact situation but can never get through. Their phone system is impossible.
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Sayid Hassan
•I had the same problem reaching them until someone told me about Claimyr (claimyr.com). They helped me get through to an actual NYS Department of Labor agent in like 20 minutes. There's a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Saved me so much frustration trying to call on my own.
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Rachel Tao
I started my consulting LLC while on unemployment in 2024 and it worked out fine. The trick is being completely honest about everything on your weekly claims. I reported every hour I worked on the business, even if it was just updating my website or doing research. As long as you're still actively looking for jobs and available to accept employment, you should be okay.
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James Maki
•That's reassuring to hear! Did you have to provide any special documentation to NYS Department of Labor about the LLC?
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Derek Olson
ugh the whole system is so ridiculous. they want you to find work but then penalize you for trying to create your own work. makes no sense to me
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Jasmine Hancock
To answer your follow-up question - you don't need to provide LLC documentation to NYS Department of Labor unless they specifically request it during an audit or investigation. The important thing is accurate weekly reporting. If your business starts generating income, even $1, report it. If you work on business activities during a week you're claiming benefits, report those hours.
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James Maki
•Got it, transparency is key. I think I'll file the LLC paperwork but hold off on any actual business activities until I know more about the rules.
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Aisha Mahmood
I went through this exact situation last year and want to share what I learned. You can absolutely form an LLC while collecting unemployment - I did it and had no issues. The key is understanding the difference between forming the LLC (which is just legal paperwork) and actually operating the business. NYS Department of Labor doesn't care about the paperwork part, but once you start doing any work activities for the business, you need to report it on your weekly claims. My advice: file the LLC if you want to get that step done, but be very careful about any business activities until you're ready to potentially transition off unemployment. Also, keep detailed records of everything - dates, hours worked, any income, etc. The documentation saved me when I had questions later.
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Molly Chambers
•This is really helpful, thank you! I'm curious about one thing - when you say "be very careful about any business activities," what exactly counts as business activity? Like if I just research competitors online or brainstorm ideas, does that need to be reported? I want to make sure I understand where the line is between planning and actual work that needs to be documented.
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