Unemployment for an unpaid startup co-founder?

December 11, 2008 2:05 PM

Do I qualify for CA unemployment as an unpaid founder of a startup? What if the company goes under or lays me off?

I started a company (a California C-Corp) over a year ago. We're self-funded. I'm co-director and an executive officer of the company. My co-founder and co-director and I have not taken any salary, only stock.

Everything's above board - we have a tax id, we keep our books, we pay our contractors, we've sent out invoices, and we may have our first revenue soon.

However, the company has insufficient cash flow to pay me, after it's paid our contractors and our other bills.

Do I qualify for unemployment in California? What if the company ceases to operate?

What if the company did pay me a salary, or agreed to do so at some future date? Would I then qualify for unemployment the company could no longer do so? What if the company terminated my employment as a CxO?

posted by anonymous to work & money (3 comments total)

Here in NYC, the employer needs to have paid unemployment insurance on you for six months, and your benefits are based on your salary. You could nominally receive a salary and reinvest it, I guess.
posted by StickyCarpet at 2:11 PM on December 11, 2008

It's my understanding that to collect unemployment, your company must have paid state unemployment taxes for the employees. The amount and length of time you could collect unemployment would be related to the number of quarters and amount the company paid in unemployment taxes. In other words, there's no free money -- if the company hasn't paid unemployment taxes because it hasn't paid you a salary, then the state won't be paying out unemployment benefits.
posted by junesix at 2:26 PM on December 11, 2008 [2 favorites]

IANAL but if your company did not pay you a salary then it did not pay unemployment insurance for you (since that is wages-based) and thus you are not eligible for unemployment benefits.
posted by Jacqueline at 7:59 PM on December 11, 2008