Yes. PPP Loans are always available to companies and nonprofits that do not have workers. This program is intended to provide financial assistance to small enterprises during the COVID-19 pandemic in America. Your payout will be calculated by multiplying your monthly payroll expense by 2.5.
Payroll expenditures underneath the PPP could include both wages and health insurance premiums. Have in mind that you will not report your worker’s wages for the PPP loan because you do not own them. Rather, you’ll disclose your gross business income, which will re-appear on line 7 of Schedule C. (for loans prior to March 3, 2021, this was net income).
You could apply for the Paycheck Protection Program if your company was in operation before February 15, 2020. Contingent on which period you utilized to determine your loan amount, you will be required to submit a Form 1040 Schedule C for either 2019 or 2020.
Even if you’ve lodged your taxes, kindly send a copy of your completed Schedule C to your lending institution. If you haven’t filed your taxes yet, it is necessary you get retroactive bookkeeping in place so you can calculate your gross income and fill out your Schedule C properly.
Note that in the absence of a payroll service, bookkeeping is the method for determining your net profit as a sole proprietor (which is what the PPP will ask for). Your yearly gross profit split by 12 will be your monthly average payroll expenditure. If your gross profit for the year exceeds $100,000, you can claim up to $100,000 split by 12.
How Can You Calculate Payroll Expenses If You Have No Employees?
- Obtain Schedule C from 2019 or 2020. If you’re using 2020 to determine payroll costs but haven’t filed your 2020 return, you can measure the value by filling out your 2020 Schedule C.
- Select the number that will be used to determine payroll. It will be either gross income (line 7 of Schedule C) or net profit (found on line 31 of Schedule C). If the amount is more than $100,000 per year, reduce it to $100,000.
- Divide that figure by 12 to determine your monthly payroll costs
- Divide the monthly total by 2.5
Eligibility Requirements for PPP Loan with No Employees
As a sole proprietor, you may be able to qualify for a PPP loan if the following conditions are met:
- On February 15, 2020, you were operating. ( you cannot expect to receive PPP funds if you started a business in March or April.)
- You reside in the United States. (You do not have to be a US citizen to apply)
- Your company has submitted a 2019 or 2020 tax return to the IRS. For independent contractors, this indicates a Form 1040 Schedule C displaying self-employment income for 2019 or 2020
- Enterprises in collaboration with China are disqualified for the second draw of the PPP loan
- PPP loans should be your only source of funds.
How Business With No Employees Can Spend PPP Loan
- Substitute your remuneration (based on your 2019 or 2020 income)
- Pay the interest on a mortgage or loan (like an auto loan) you use to operate your company
- Make rent fees for your business
- Make utility transactions for your company
- Management costs for business software and cloud computing services, as well as other human resources and accounting requirements that aid in daily operations
- Payouts to a vendor for goods that are necessary to the borrower’s activities under a contract or acquisition process in effect before the PPP loan is granted, or payments for perishable goods.
- Property damage costs incurred as a result of plundering, caused by public disturbances in 2020 that aren’t compensated by insurance.
What Documents Are Required to Apply?
The following documentation is required for the PPP application;
- Owners with a 20% or greater stake in the company must provide a copy of their government-issued identification
- Must provide evidence that you were in operation on February 15, 2020
- If you have W2 workers: IRS Form 941 from the first quarter of 2020, or a third-party processing report from February 2020.
- If you do not have W2 employees, you must provide a February 2020 bank statement or a February 2020 customer invoice.
- Form 1040 with Schedule C, or Form 1099-MISC.