Understanding your filing type
A limited liability corporation—or LLC for short—is a hybrid entity that allows for you to file taxes as a corporation (paying corporate income taxes) or as a pass-through entity such as a sole proprietor or partnership.
When applying for the PPP, you’ll need to indicate what your tax filing type is, since that will dictate how your PPP loan is calculated. The main LLC filing types we’ll cover in this PPP guide include:
- Single-member LLCs filing as sole proprietorships
- Multi-member LLCs filing as a partnerships
- Multi-member LLCs filing as as S corporation
You can skip down to the section most relevant to you.
Single-member LLCs (filing as a sole proprietorship)
If you are a single-member LLC, you will be filing for the PPP as a sole proprietor, since that’s how you’re taxed.
How to calculate your loan amount
As a single-member LLC, your potential loan amount is based on two factors: your 2019 net income as reported on line 31 of your 2019 Schedule C, plus any payroll expenses you may incur.
To get to your monthly payroll expense number, find your monthly payroll expenses (zero if you are not running payroll) and add in one month of your 2019 net income by dividing it by 12. Note that just like employee earnings, your net income will be capped at $100k (maximum monthly amount of $8333.33). After adding these two amounts together, you can multiply by 2.5 to find your loan amount.
Loan forgiveness
When applying for forgiveness, you are entitled to eight weeks of your 2019 net income. Take the same net income number used in determining the loan amount and divide by 52 to find the weekly value then multiply by 8. This amount will be reported on line 9 of the Schedule A worksheet on the forgiveness application.
Multi-member LLCs (filing as a partnership)
If you are an LLC with multiple members, you’ll be applying for the PPP as a partnership (unless you’ve filed Form 2553 to the IRS, in which case you’ll be filing as an S corp).
Previously, partnerships were only eligible to apply for a PPP loan to cover payroll expenses. This meant if you were a partnership owner getting paid through owner draws (and not through payroll) then your compensation couldn’t be covered by the PPP.
But on May 14th, an Interim Final Rule was passed to change this—partnership owners can now be compensated based on net income, and not just payroll expenses. All partnerships now can apply for the PPP using each member’s net income as reported on their Schedule K-1.
How to calculate your loan amount
Include the 2019 net income as reported by each partner in box 14 of their respective Schedule K-1, minus any section 179 expense deductions. This number will then have to be multiplied by 0.9235 to remove the “employer” share of self-employment tax before dividing by 12 to get the monthly amount.
Loan forgiveness
Similarly, partners are entitled to eight weeks’ worth of this amount when applying for forgiveness. Use the amount after accounting for the employer taxes when dividing by 52 and multiplying by 8. The total across all partners will be recorded in Line 9 of the Schedule A worksheet.
Multi-member LLCs (filing as an S corp)
The last filing type you can be while being an LLC is an S corp. As mentioned before, to become an S corp, you will have had to have filed Form 2553 with the IRS. Unlike sole proprietorships and partnerships, they are not able to apply for the PPP using any pass-through income—in other words, if you’re an S corp owner paying yourself through owner draws, you won’t be eligible for the PPP.
Your PPP loan amount will be equal to your average monthly payroll costs multiplied by 2.5.
Loan forgiveness
Ideally, S corps will be paying owners through payroll and you can apply for the PPP and forgiveness using those amounts. For an S corp that has payroll in place, owner payroll payments are eligible for forgiveness. Owners can’t pay themselves more than they were paid in 2019.
