The employer who owns multiple businesses can apply for the ERC, but only after clearing specific eligibility. The IRS has divided the multi-unit businesses into categories to examine their eligibility.
To understand how this payroll tax relief affects the employers who own multiple businesses, you need to understand the structure that the IRS considers for the multiple business owners.
Understanding The Multiple Business Ownership Structure According To IRS-
There are three primary types of groups in control.
The IRS recognizes a business as a parent subsidiary, where one entity owns 50% or more of all entities.
According to the notice issued in 2020-21 IRS states where 5 or fewer people own at least 80% of each entity in a group with at least 50% of the voting power can be considered brother-sister subsidiaries.
A third group also exists. IRS also considers the combination of brother sister and parent-subsidiary companies.
Let’s Understand This With An Example Of Restaurants-
Multi-unit owners own many restaurants in real scenarios. Suppose a multi-unit franchisee manages three restaurants, for example. In that case, the total number of employees and total earnings must be added together to determine the ERC based on year-over-year reduction. This is essential since it is at this level that you may decide if the firm is too big to be eligible for the ERC.
Other Rules For The Multi Units Business Owners-
All the rules are the same if the business has branches for the same company. But what if an owner wholly owns two different businesses? Let’s say a restaurant and a construction business. What then? How can you determine the ERC in this category?
The IRS has a clear-cut answer. No matter what, you have to follow the threshold of 500 employees. This means if you have two businesses, you can maintain the employee threshold by combining the employees of both businesses. And also, you have to keep the previous criteria. Which states as-
- You can apply for the ERC if your businesses have faced partial or full suspension in 2020.
- You are also eligible to apply for the ERC if your collective gross receipt has declined more than 20%.
- A business owner can also apply for the ERC if they have faced supply chain obstruction.
To be eligible for the ERC, you have to maintain the 500 W2 employee threshold along with either of these criteria. And after that, you can apply for the ERC.
Remember, there can be certain situations when one business does good, but the other does not. In that case, or matter of fact, in all cases, you have to see the collective results, whether they are about the gross receipt, partial suspension, or supply chain destruction, to apply for the ERC.
Do You Want To Know More And Apply For The ERC Successfully?
If you want to claim the ERC without getting dazzled, visit the ERC Specialists. They are the leading ERC counselors in the USA to assist employers in claiming credit and other small business payroll loans. You can visit their website, add your information and then wait. Once they gather all the data about the credit part that you are eligible to claim, they will reach out to you. You only have to once you receive your credit, so no financial or any other risk is involved. Therefore, don’t hesitate to reach out to them.
ERC Specialists is a dedicated payroll company to understanding and maximizing the CARES Act Employee Retention Credit (ERC) for small businesses affected negatively by COVID 19. Our dedicated staff will help you receive maximum funding while ensuring your submission stays within IRS guidelines.