Can you own a business and collect social security disability

One of the many concerns that clients seeking disability benefits have is what to do with their business interests. They are concerned that they will not qualify for Social Security Disability Income (SSDI) if they have any significant income or assets. The good news is that you can qualify for SSDI if you have an S-Corp or LLC.

However, you must also be very careful to avoid performing “significant services” for the company, or you could jeopardize your SSDI benefits. In addition, there are other factors that you must consider regarding business income that can jeopardize your SSDI benefits. Before you start a new company while on SSDI, consult with a social security disability claims lawyer first.

Qualifying for SSDI Benefits

SSDI does not have the same income and asset limitations that are required under the Supplemental Security Income (SSI) program. The SSI program is a low-income disability program that is also administered by the Social Security Administration (SSA). To qualify for SSI, you must meet the definition of disabled under SSA guidelines and meet the income requirements.

When applying for SSDI, your main concerns are qualifying as disabled under the SSA’s definition of being disabled and earning enough work credits before you apply for benefits. The program does not limit the amount of cash, assets, or income you have when you apply for disability benefits. It also does not limit the amount of income your spouse earns. However, if you have countable income that exceeds the current SSA limit, your SSDI application can be denied. Therefore, one of the key factors is to demonstrate that the income from your S-Corp or LLC is passive income instead of “earned” income.

Income from Substantial Gainful Activity

Substantial gainful activity (SGA) is work you perform that provides income above a set amount each month. To qualify for SSDI, you cannot earn more than the maximum amount of countable income each month. If so, the SSA assumes that you can engage in a substantial gainful activity that earns sufficient income; therefore, you are not disabled.

The maximum amount of countable income for 2018 that an applicant can earn without the presumption of engaging in an SGA is $1,180 for a person who is not blind and $1,970 for a person who is blind. Therefore, if your business income is less than the maximum amount for SGA, you may qualify for SSDI. In some cases, the income can exceed the maximum amount if you are not “working” for the business or engaging in an SGA with regard to the business.

CAUTION — This is not the only hurdle you must pass.

Significant Services and Substantial Income Tests

If the SSA determines that you provide significant services to your business or you are engaging in a substantial gainful activity, your application may be denied. Significant services are defined differently based on the type of business. For a sole proprietorship, you are typically considered to be providing significant services because you are the only employee of the business. If the business has more than one person working for it, then the SSA will closely review how many hours you spend working each month and the type of work you provide.

In addition, if you are a new applicant or you have been receiving SSDI for less than 24 months when you begin the business, you must also prove that income from the company is not “substantial” income. The SSA utilizes a complex set of tests to answer whether your income is substantial. Without assistance from an experienced attorney, it can be extremely difficult to navigate these tests.

Call a New York Social Security Disability Attorney for Help

You can own an LLC or S-Corp and receive SSDI, but you must be very careful, or you could jeopardize your benefits. We urge you to contact our office to discuss your situation with an experienced NY SSDI attorney before taking any steps to apply for benefits, open a business, or purchase an interest in a business. To protect your rights, you should talk with an experienced New York disability insurance attorney. Contact us today to arrange a free consultation.

Owning a business is a dream for many but the question of starting a business while on disability brings much uncertainty.  While there is a general belief that disability benefits will be eliminated upon starting a business, that is not always the case.

Fortunately, the rules for starting a business while collecting Social Security Disability Insurance (SSDI) encourage people with disabilities receiving benefits to become self-sufficient.  The Social Security Administration (SSA) allows recipients to test their ability to work or start a small business. The SSA has rules in place to allow people to continue receiving benefits should the business not be successful. These rules called work incentive rules, encourage recipients to become self-sufficient without fear of losing benefits.

Trial Work Period

The Trial Work Period (TWP) allows someone receiving disability benefits to test their ability to either work or start a business.  Under these rules, money can be earned 9 months over a rolling 60 month period without losing benefits.

During the TWP, recipients can earn any amount of self-employment earnings and the SSA will still send the full SSDI payment.  Each month counts separately and they do not have to be consecutive. Any month the recipient earns more than the Trial Work Level (TWL) during the rolling 60 month period counts toward the TWP.

Any month during where someone works over 80 hours or has net earnings from self-employment over $850 counts toward the TWP in 2018.

At the end of the 9 month Trial Work Period, the SSA looks at how much was earned.  If the recipient earned more than $1,090 (2018) in income or Substantial Gainful Activity (SGA) in each of the 9 months, the SSA considered the recipient able to support themselves and stop benefits.  If they did not earn more than the $1,090 each of the 9 months, the SSA will send then the entire amount of benefits provided they didn’t earn more than $1,090 in a single month.

This means if the business fails or the recipient’s condition causes them to not be able to run the business, SSDI benefits can be reinstated within five years.  There is no need to file a new application or wait for the benefits to restart either.

This can be a bit complicated, but the SSA has a program called PASS which is the Plan for Achieving Self Support. This program is available to help people find a way to become self-sufficient. While often thought of as a way to enter the workforce, they also help people who want to start a business.

Substantial Gainful Activity (SGA)

Because someone has a business, especially a business start-up, the number of hours put into it does not necessarily correlate with the self-employment income received.  It’s not uncommon to not show a profit in the first few years of a business, if ever. Because of this, the Social Security Administration will look at the amount and type of work being done.  If it is beyond what the disability guidelines allow. If the SSA considers the reasonable value of the recipient’s work is more than their benefit amount, benefits can be suspended or terminated.  

As a result, the SSA has tests to determine if the work the recipient is doing is considered Substantial Gainful Activity (SGA).  For self-employed individuals, the SSA will use three tests to determine whether this work is considered a SGA.

The three tests include:

• Significant services and substantial income test
• Comparability test
• Worth of work test

If any of these tests consider the work done in the business as SGA, the recipient will lose their benefits.

Significant Services and Substantial Income Test

The SSA will consider work to be a Substantial Gainful Activity if the recipient receives a substantial amount of income from their business.  Substantial income is considered an amount over $1,180 monthly in 2018 or comparable to what the recipient earned before becoming disabled. Because business earnings vary from month to month, the SSA will use an average of the earnings over a period of time.

Comparability Test

This test compares the recipient’s work activity with that of an unimpaired person in the local community performing the same work.  If the work is similar, the Social Security Administration will consider this work to be SGA regardless of earnings.

A few factors that are considered include:

• Hours worked
• Energy and difficulty to do the work
• Efficiency in being able to do the work
• Skills of the recipient

Worth of Work Test

Even if the work activity isn’t considered comparable, the SSA will consider the work as a Substantial Gainful Activity if the apparent value of the work is worth more than $1,180 a month (2018) or if it would cost more than $1,180 to hire someone to perform the same tasks.

Resources

The evaluation guidelines are too complex to summarize here, but more information is available from the Social Security’s operations manual. For a summary of working while receiving disability benefits, refer to this Social Security publication.

Other Questions about Self-Employment and Social Security Disability Insurance

There are a lot of questions about whether can you own a business while on disability.  Here are a few common ones.

When figuring income, does the SSA look at total revenue or profits?
When dealing with business or freelance income, the SSA is looking at the net earnings or profits of the business.  This amount is the total revenues minus expenses. It’s also important to note that SSA looks at profits and not just salary. A business can make a profit but the owner doesn’t receive any money because the profits were reinvested in the business.

Even if the business makes no money, do I report that I’m self-employed?
Whether the business makes any money or not, due to the Worth of Work Test, any work activity must be reported.

Will incorporating affect my Social Security disability benefits?
The business structure does matter and a corporation is usually not the best legal structure to choose.  Incorporating is popular because it separates the business and personal assets of the owner. The main reason for not incorporating is that the owner owns stock in the company.  This stock is counted as a resource for SSI eligibility. If asset protection is what you are after, consider an LLC that elects to be taxed as a sole-proprietorship or partnership.

Before forming an LLC when also receiving SSDI, be sure to work with a CPA, accountant or bookkeeper who is familiar with SSDI as many are not familiar.

Please note this is general advice and if you have questions about this contact an attorney in your area.  A qualified Social Security Attorney can assist in better understanding the rules and regulations around returning to work, owning a business, and SGA.

The laws around income and disability benefits are very complicated and difficult to understand. Even unknowingly violating the code of federal regulations could cause benefits to be terminated.

You might also like

• Can You Run A Business Out Of Your Home? 
• Navigating the Types of Insurance Your Business May Need
• Does a Home-Based Business Need Business Insurance?
• Home Business Taxes
• How to Write a Business Plan
• What Is Business Vehicle Insurance?
• What is a sole proprietorship and how do I register?
• Finding the Money to Start a Business
• Sole Proprietorship vs. LLC | What's Right for You?

Can you start a business while on Social Security disability?

Does having an LLC Affect SSDI benefits?

How does self