4 Common Misunderstandings of Startups on ERC

In the past decade or so, there has been an explosion in startups. It’s not unusual to find a new company every day, and many of these companies succeed. The constant and intense changes and regulations in the startup sector, along with COVID restrictions from the side of the government have left many startups devastated. Moreover, startups have been the most affected ones during the COVID time. In the last few months, the “startup fever” was not just a case of an over-hyped and over-appreciated market but it has all culminated into a total meltdown. 

The question here is, like any other business, can startups qualify for Employee Retention Claims? Yes, actually. You can learn more about ERC and its criteria on

Let us now see into 4 common misunderstandings of startups on ERC.

  • Startups don’t qualify for ERC

Not really. Startups are actually not excluded from ERC. However, like for any other business, you need to adhere to some specific guidelines while claiming your benefits. The startup model is a new and dynamic one that has never been done before. But it doesn’t mean that startups don’t qualify for Employee Retention Claim.

  • You can’t claim ERC if you have a PPP loan

PPP loan is not a problem for claiming ERC. Not at all. You can continue claiming ERC even if you have a PPP loan. A PPP loan will never be an obstacle to claiming ERC. That means startups are not exempted from claiming ERC if they are PPP-funded companies. PPP provides you with money, which will be paid back. In fact, it is a good idea that you get a PPP loan to get your business off the ground. 

  • You can’t qualify for ERC with a partial shutdown

This is one of the most common myths about ERC. Many companies think that a partial shutdown automatically disqualifies them for ERC. The truth is that partial shutdowns are fine for claiming ERC if they meet other criteria. Actually, a partial shutdown can help you to be eligible for ERC, and it is a good reason why you should claim ERC even if you have a partial shutdown.

  • ERC is taxable

That is not true. ERC is not taxable. Actually, ERC does not lead to tax liability as you claim it on income tax as a refund.

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