Changes to unemployment coverage for LLC members

Recent decisions of the New York State Unemployment Insurance Appeal Board (UIAB) have held that members of an LLC that has elected S Corporation tax treatment for New York State purposes are employees of that LLC for unemployment insurance purposes. This is a change from prior UIAB decisions holding that all LLC members regardless of tax election are self-employed and therefore not employees and their earnings are not reportable or subject to unemployment insurance contributions. As a result of this change, members of an LLC that has elected S Corporation tax treatment for New York State purposes are now considered employees and their compensation is reportable and subject to unemployment insurance contributions. Members of an LLC that has not elected S Corporation tax treatment for New York State purposes are still not considered employees and their earnings are not reportable or subject to contributions. LLCs that have previously not reported compensation to LLC members should confirm that they are reporting properly in light of these decisions.