Can Single Member Llc Apply For Ppp

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May 5, 2021: The SBA has stopped accepting PPP applications due to lack of funds. The SBA will continue to fund outstanding applications that have been already approved.

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February 23, 2021 – The SBA has announced changes to the PPP, including a revised funding formula for sole proprietors, independent contractors, and the self-employed. We will update this article when the SBA releases further guidance on the new rules.

The latest COVID-related stimulus bill was signed into law on December 27, 2020. The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs are expected to return in January 2021. Learn more about the new legislation in our article, Congress Passes New PPP Legislation, Targeted EIDL Program.

With this latest round of PPP funding, businesses — even those that received a PPP loan during the first funding period — will have a second chance to take advantage of the popular relief package. This includes businesses whose owners may have assumed they did not qualify due to being sole proprietorships with no employees (this status technically applies to freelancers as well).

In April, the SBA released guidance in the form of an "interim final rule" clarifying who does and doesn't qualify for the PPP. It specifically addresses the question of PPP funding for sole proprietorships and businesses without employees. The most recent interim final rules released by the SBA after the latest aid package was passed in December confirm this guidance.

Read on to learn more about PPP sole proprietor funding.

Am I Qualified For A PPP Loan?

If you're an individual with self-employment income, you can qualify for a PPP Loan as a sole proprietor if you meet the following criteria:

You filed or will file a Form 1040 Schedule C for 2020
Your principal place of residence is in the United States

Note that if you're in a partnership, you are still eligible for PPP, but you shouldnot submit a separate application for yourself as a self-employed individual. Instead, you'll file a single application for the company with each partner's income reported as a payroll expense. This is meant to cut down on the volume of applications and eliminate confusion regarding which companies and partners have applied.

Be aware that applying for a PPP to cover self-employment income may complicate your application for state-level unemployment insurance. Make sure you take a look at those guidelines to ensure you're maximizing your eligibility.

How Much Money Can I Apply For?

Here's how the interim final rule says to calculate the maximum amount you can apply for:

On line 31 of your 2019 IRS Form 1040 Schedule C, you'll find your net profit. If it's over $100,000, reduce it to $100,000. If the number is zero or less, you're not eligible.
Divide the number you arrived at from step 1 by 12 to get your average monthly net profit.
Multiply your average monthly net profit by 2.5.
Add the outstanding amount of Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, that you're trying to refinance, minus the amount of any advance you received under an EIDL COVID-19 loan, which does not have to be repaid.

If you're applying as a partnership, you'll treat each partner's income as a payroll cost. The maximum amount is up to $100,000 annualized. Otherwise, consult our guide on applying for a PPP Loan.

Calculating PPP Loan Amount Using Gross Income

On February 22, 2021, President Joe Biden announced changes to how sole proprietors can calculate their maximum PPP loan amount. The IRS provided further guidance on March 3, 2021, breaking down how sole proprietors can use their gross income to calculate how much money they can receive through the PPP.

In order to calculate your loan amount using gross income, you must be a sole proprietor that has filed a Schedule C. If so, here's how you calculate your loan:

On line 7 of your 2019 or 2020 IRS Form 1040 Schedule C, you'll find your gross income. If it's over $100,000, reduce it to $100,000.
Divide the number you arrived at from step 1 by 12 to get your average monthly gross income.
Multiply your average monthly gross income by 2.5.
Add the outstanding amount of Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, that you're trying to refinance, minus the amount of any advance you received under an EIDL COVID-19 loan, which does not have to be repaid.

What Will I Need To Apply?

The first thing you'll need is a lender, which I will touch on in the next section. As government programs go, the PPP application is surprisingly short. No, really, it's only two pages long.

Your specific lender may have particular document requirements, but you should be prepared to provide tax documents, organizational documents, and government-issued identification. Since you don't have any employees, you won't have to worry about W-2s and payroll documentation.

How Do I Apply For Forgiveness?

You'll need to apply for forgiveness through the lender that serviced your PPP loan. The details concerning which form you'll need to submit are spelled out in our article on PPP forgiveness. Whichever form you use, remember that you need to submit your application to your lender, not the SBA itself.

You'll also need to spend your loan proceeds on qualifying expenses to have your loan forgiven. Your forgiveness application form should spell out what kinds of documentation you'll need to provide that shows how you spent your loan funds. Forgivable expenses include the following:

Payroll costs
Mortgage interest
Rent
Utilities
Software
Property damage from civil unrest
Necessary supplier costs
COVID-related protective measures

To help businesses navigate the unprecedented difficulties of the COVID-19 crisis, we've created a centralized hub of guides and resources. We're updating them frequently, so check it out.