The US government established the Paycheck Protection Program (PPP) in 2020 to offer small companies financial support during the coronavirus pandemic. One of the most frequent queries from small business owners is whether LLCs qualify for PPP loans as the program gives forgiven loans to qualified companies.
Yes, LLCs are qualified for PPP loans, to address your question. In reality, LLCs are among the most popular corporate structures for which PPP loans have been requested and approved. However, there are some criteria that LLCs must fulfill in order to be eligible for a PPP loan.
An LLC must have been active on or before February 15, 2020 to qualify for a PPP loan. Additionally, the LLC must employ no more than 500 people, whether they work for the company full-time, part-time, or in any other capacity. The LLC must also have been affected by the COVID-19 pandemic and use or plan to use the loan proceeds to pay off debts, keep the payroll running, and cover other eligible obligations.
PPP loans are also available to LLC members, however there are some limitations. Whether LLC members are regarded as employees or independent contractors determines whether they are qualified for PPP loans. An LLC member is qualified to qualify for a PPP loan as an employee if they get a salary or wages from the business. However, the LLC member may apply for a PPP loan as a self-employed person provided they are regarded as self-employed and record their income on Schedule C of their tax return.
If certain requirements are completed, PPP loans are forgiven and are not treated as income. However, the costs that are covered by PPP loan profits cannot be claimed as a tax deduction by the borrower. Therefore, if an LLC receives a PPP loan and utilizes the money to cover payroll costs, such costs cannot be claimed as a tax deduction.
Finally, while 1099 workers who operate independently or for themselves are not eligible for PPP loans, they are. The Small Business Administration (SBA) does, however, allow them to qualify for Economic Injury Disaster Loans (EIDL).
Finally, if an LLC satisfies the criteria, it may be eligible for PPP loans. Additionally, depending on their work position, LLC members may also qualify. If certain requirements are completed, PPP loan proceeds are forgiven and are not considered income. The costs incurred with PPP loan funds, however, cannot be claimed as a tax deduction. SBA loans are available to 1099 employees, but not PPP loans.