Can You Claim Unemployment Benefits If Your Company Got Shut Down?

Being between jobs can be a financial disaster, but the government's unemployment insurance programs help workers weather the times in which they don’t receive a paycheck. If your company was shut down, regardless if it was an official shutdown caused by nonpayment of taxes or violating other regulations, you’re likely to be covered by unemployment insurance benefits if you meet other requirements dictated by your state’s unemployment insurance laws.

Federal law mandates that workers who are unemployed through no fault of their own may qualify for unemployment benefits. This qualification, the primary criteria to qualify for unemployment insurance, applies to virtually every state’s unemployment insurance program. If the company you worked for was shut down and you lost your job in the process, your job loss wasn’t caused by your own actions. Therefore, you meet the qualifications for being unemployed through actions beyond your control.

Read More: Definition of Unemployment Benefits

Although laws differ between states, if you’re the owner of a small company that goes out of business, you qualify for unemployment benefits in most states. Your situation becomes more complex if you’re the owner of a business that was shut down by a governmental agency because of noncompliance. If your unemployment insurance agency determines that the closure was directly caused by your actions—such as willfully violating licensing or certification requirements or nonpayment of taxes, your employment agency may determine that your actions led to your unemployment, and thus may deny you benefits.

As an employee of a shuttered company who lost his job when the bottom fell out of the business, you don’t automatically qualify for unemployment benefits. States’ regulations on earnings or minimum wages to qualify for unemployment benefits vary, although many require workers to have earned a modest amount in the preceding base period—the first four of the prior five quarters following the loss of your job—to qualify for benefits. Other states require workers to be employed for a minimum amount immediately preceding their unemployment.

If you meet other qualifications to receive unemployment benefits, you must also meet weekly conditions to continue receiving benefits. All states require beneficiaries to be available for work—those on vacation, working a temporary job or in school may not qualify in many circumstances—and be physically available to take a job if it’s offered. In most cases, you must continue weekly search for replacement employment, reporting your contact with potential employers to the unemployment benefits office, and many states require beneficiaries to register with the state labor office to receive benefits.