Contract investigators who are incorporated: You are eligible for PPP money

Many contact investigators were required over the last few years by their vendors (CACI, Keypoint, etc) to incorporate. I was one of them. It was a pain and cost me a few hundred dollars to incorporate as Redacted Company LLC. (That should have really been the corporate name I used!)

The vendor I work for issues a 1099-MISC to my LLC, not me by name. Really didn’t change much other than making my taxes more complicated.

HOWEVER: sole-proprietor LLCs are eligible for the latest pot of PPP money. I have not been paid yet but I know other sole proprietor LLC guys who have. My bank said my application looks good and will submit it today.

This is not a scam or an encouragement to cut corners. This is entirely legal and within the intent of the PPP. And certainly consult with your banker, tax professional, etc.

Maybe many of you already knew this - I did not until a few days ago. I am optimistic that the cash comes through – it will be a big help. ICs who are incorporated as LLCs should definitely check into this. Good luck.

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Is the money that you receive from the PPP considered a loan?

It is considered a loan, but most/all of it is forgivable if you use the funds for a permissible purpose - such as paying yourself.

For example, your PPP loan of $10,000 would be deposited into your business checking account for your LLC, VelcroTech LLC. You as the corporate entity VelcroTech LLC would then pay yourself (Mr John Smith) personally. That is entirely permissible and in concert with the intent of the PPP - paying people who are now not working.

I am not clear if just 75 percent of the loan can be used for payroll or all 100 percent. So to be cautious the wise thing to do is to pay yourself $937 per week for eight weeks, totaling $7,500. That leaves $2,500 untouched that you can use to pay back the unforgiven part of the loan.

The rules on PPP are changing every day - check with your banker, your tax preparer and your financial planner. But, yes, it is considered a loan, but as much as 75 and maybe 100 percent is forgivable.

The pot of money is running out, so call your banker - do not delay.

I am a grown adult and expect zero consideration from the large company that I am a contract investigator for. But it would have useful, even classy, for the company to e-mail out-of-work contractors – and advise them that as LLC owners they are eligible for PPP funds. Like I said, I expect zero consideration from the company and that is exactly what I got.

Call your banker!

PPP money came through on Friday. Around $8,500. Big relief at our house.

Again, call your banker!

BOOM. Well done, IntjM.

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Is incorporation as an LLC required? What about sole proprietors (IC) that do not have an LLC? Do we qualify as well?

I unfortunately do not know the answer to your question. My brick-and-mortar bank would not have lent to me unless I was an LLC; fortunately I was.

You might try the PayPal loan builder site or another less traditional financial provider. But at least call your bank first. While the overall rules come from the SBA, I think every bank/financial institution has different underwriting requirements.

As an IC, you should be eligible for the stimulus unemployment , $600 per week.

I agree Regina, you should be eligible as an IC. However, I live in a state where the unemployment system is a disaster. Many applications have fallen into a black hole. I was more optimistic that my PPP funds would be approved than my unemployment application would make it through the system.

Hi there just a quick question… how are IC eligible for PPP loan or unemployment if we can’t correlate lack of work directly to covid19 reasons? Lack of work started before the virus so I’m not sure how I’d qualify. Asking because I’d love to file for either to get some help so any direction/advice is appreciated!

@JHendy1, the PPP loan and unemployment are two completely different things, administered by different parts of the government.

I cannot speak to unemployment - every state is different, and ICs have been fighting an uphill battle on that front. Consult an employment law attorney or other subject matter expert in your state.

The PPP money, however, is available to all businesses and has nothing to do with lack of work, reasons for lack of work, etc. The local hardware store that has been open full speed ahead throughout the pandemic is just as eligible for PPP money as the coffee shop that has been closed. The IC who has been working nonstop via phone through the pandemic is just as eligible for PPP money as the IC who has had no income.

The difference is that for businesses/ICs that have been working steadily, the PPP money is a pure windfall. The taxpayers handle your payroll for two months and you take the money that you would have spent on payroll and… do whatever you want with it.

The verbiage is a little different for sole proprietor ICs like most people here. I don’t have employees, and I’m not even an employee of my LLC in the traditional sense. So the funds are called “owner replacement compensation.”

For me, it has been a huge positive, because I have had very little work. But for the IC (regardless of field) who has worked steadily through the pandemic, it has provided a nice taxpayer-funded windfall.

In short, there is no means testing for the PPP funds. For ICs the amount is based on your 2019 Schedule C line 31. So if 2019 was a good year for you, you’ll get a nice PPP loan. If 2019 was a bad year, you won’t see much of a loan.

To elaborate, for ICs the loan amount is based solely on how much money you reported as your net profit on your 2019 Schedule C. So if you are an IC who does this on the side and maybe only netted $10,000 in 2019, you will get a loan of $1,923 and of that $1,442 is fully forgivable as “owner replacement compensation.”

However, if you really crushed it in 2019 and netted $60,000, you would qualify for a PPP loan of $11,358, of which $8,653 is fully forgivable as “owner replacement compensation.”

The real winning ticket is someone who did very well in 2019 as an IC but then in February 2020 took a salaried office job that has continued through the pandemic. That person is collecting their full salary for their new office job (or maybe being paid by their employer with PPP funds) but also qualifies for a PPP loan as an IC based on their 2019 income.

Full credit goes to the company I contract for, which forced all ICs to incorporate as LLCs a couple years ago. An onerous and costly task, but is allowed me to easily qualify for PPP funds.

Every meeting I have been on for the past two months with my company, the reason given for no work is due to Covid-19. There is an option to select similar to this when you fill out the Unemployment application. Be sure to apply for the Pandemic Unemployment Insurance (PUI). By the way, the PUI payments are retroactive, not sure exactly, but mid April I believe. Good luck.

Side question: does anyone know if we can apply for both PUI and the PPP Loan? Has anyone done this? Thanks

Thanks so very much for all the guidance! I’ll definitely be trying to apply for that PPP money! Sincerely appreciate you taking the time to explain all that! It’s been a super slow 6 months so this is welcome advice :wink:

The question “can I, as an IC, take both PPP funds administered by the federal SBA and also unemployment payments administered by my state unemployment office?” is hotly debated on the Internet. No firm answer that I can find.

Taking both violates the spirit of the underlying legislation, which is to replace income lost because of the pandemic. Not to create a windfall.

On the other hand, many/most larger companies don’t give two hoots about the spirit of the underlying legislation. They are taking every nickel, legal or probably legal, that they can.

There is nothing in the PPP paperwork from the SBA about whether you can also take unemployment. The SBA is silent on this issue. Similarly, my state unemployment application does not ask “hey, are you also getting PPP money?”

As ICs we are in a population that the rule-writers for these programs don’t give much consideration to. So it does not appear that either a) the SBA or b) the states have stated explicitly whether it is OK or not OK to take PPP money and also unemployment payments.

Bumping this thread back to the top to remind all ICs out there that you are eligible for PPP money. The repayment rules have been loosened so now instead of having to pay back 20 percent of the loan you have to pay back 0 percent as long as you are using it all as “owner compensation replacement.” Which you should be doing.

It has been a lifesaver for me, thousands and thousands of dollars. Talk to your banker so you can get paid.

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