If you operate your business as a partnership or an S or C corporation, you are looking at entity-specific Payroll Protection Program (PPP) loan forgiveness rules that apply to you as an owner-worker in the business.
The rules that apply to you do not apply to the ordinary employee group. The government places you, the owner-worker, in a separate “owner-employee” category to limit your business’s PPP benefits.
There are four types of owner-employees:
1.) General partners in partnerships.
2.) S corporation shareholder-employees.
3.) C corporation shareholder-employees.
4.) Form 1040, Schedule C filers (e.g., the self-employed, sole proprietors, 1099 recipients, single-member LLCs, and husband and wife LLCs treated as single-member LLCs).
If you own all or part of your business and work in the business, you fall into one of the four categories.
The maximum loan attributable to and forgiveness available for the “compensation paid” to any SBA-defined owner-employee across all businesses is:
1.) $15,385 for borrowers who received a PPP loan before June 5, 2020, and elected to use an eight-week covered period.
2.) $20,833 for borrowers under the 24-week covered period.
Owners of Multiple Businesses Take Note
If you have ownership interests in more than one business, you need to consider that the owner-employee loan maximums apply to all your businesses.
The new interim final rule puts the $15,385 or $20,833 deemed compensation cap on the loan forgiveness for the defined owner-employee, but contains no guidance on how to allocate or otherwise deal with the caps when you have ownership interests in multiple businesses.