Can You Be On Disability As A Business Owner?

Social Security Disability Insurance (SSDI) is primarily intended for those who are too disabled to retain employment or support themselves. However, one may wonder whether it is possible to get disability benefits as a business owner.

It is possible to get disability benefits as a business owner, and the process is the same as for beneficiaries who do not fall under “self-employed.” However, business owners may need to go through a series of tests to satisfy the criteria. 

Keep reading below as we describe the stringent criteria for disability benefits pertaining to business owners.

Can You Be on Disability as a Business Owner?

Yes, it is possible to receive SSDI as a business owner. However, in order to be eligible for Social Security Disability Insurance benefits, there are certain requirements you must meet as a business owner. Some of the general criteria that you must satisfy are as follows:

• You need to have accrued sufficient social security credits through your employment to qualify for benefits.
• You must be diagnosed with a serious medical condition that is expected to last for more than a year or is terminal.
• You cannot put in more than 45 hours a month into managing the business.
• You’re not able to “engage in substantial gainful activity” (SGA).
• Your average monthly salary is lower than the specified threshold.
• You put in fewer than half of the hours needed to maintain your business.

How SGA is Determined for Business Owners

If you are receiving SSDI and are self-employed, you must take either the “Countable Income Test” or the “Three Tests” to see if your work counts as substantial gainful activity. 

The Social Security Administration’s (SSA) tests on applicability may vary depending on the business’s founding date and the nature of its current operations.

The Countable Income Test

The Social Security Administration will consider “countable income” when deciding whether to extend a recipient’s SSDI benefits if the recipient has been receiving them for more than 24 months and subsequently starts a small business or does freelance work. 

The Social Security Administration could terminate your benefits if it finds that you engaged in substantial gainful activity, such as earning for yourself or running a business.

Self-employment will be considered substantial gainful activity, and the benefits will be terminated if the monthly countable income is greater than $1,470 as of 2023. The one and only exception to this rule is if you provide evidence that you are not providing major services to your company.

The salaries or earnings you make based on your own productivity are considered as countable income. The Social Security Administration will do the following evaluations in order to estimate your contribution:

• Calculation of the monetary value of unpaid work carried out by you or your close family members.
• Calculation of costs associated with work-related impairments.
• Calculation of incurred expenditures paid by you.

The Social Security Administration views a one-person business very differently from a multi-person business since the owner of a one-person business must perform the vast majority of the work themselves or risk losing their benefits.

The Three Tests

If you have been collecting benefits for a period of less than 24 months or if you are just beginning to receive them, the Social Security Administration will conduct the “three tests” to find out if your contribution to the business qualifies for SGA. These tests include:

• The significant services and substantial income test
• The comparability test
• The worth of work test

You will not be eligible for benefits if any of the tests determine that the job you undertake for the company is SGA.

The Social Security Administration will evaluate whether you offer substantial services to your business and get substantial earnings from the business as part of the significant services and substantial income test.

If your monthly countable income exceeds $1,220 or if your countable income is less than $1,220, but your business is still your primary source of support like it was before your disability, then you are similar to other self-employed people in your community. The income from your business is regarded as substantial.

The SSA will use a rolling average of income over several months to account for the natural monthly fluctuations that come with owning a small business.

If the individual’s employment activity for the same type of business is similar to that of a non-disabled person in the community, the SSA will probably consider the income to be SGA based on the comparable test.

The Social Security Administration will evaluate the amount of income made by the business alongside the relative characteristics of the community when determining the value of the worker’s contributions to the company.

In some cases, a person’s eligibility for benefits may end if it becomes obvious that their time is worth more than $1,220 per month.

Explore the Trial Work Period

Anyone collecting disability benefits can put their skills to the test during the Trial Work Period (TWP) by working or starting their own business. This policy allows for nine months of earnings within a 60-month rolling period before benefits are reduced.

While in TWP, the Social Security Administration will continue to pay the entire SSDI benefit to claimants despite any profits they may get from self-employment. Each month is counted individually, and they do not need to be in sequential order. 

During the 60-month period, the Trial Work Period credit is given for any month in which the beneficiary earns more than the Trial Work Level (TWL).

The Social Security Administration reviews earnings at the conclusion of the 9-month Trial Work Period. 

The Social Security Administration will no longer provide financial assistance to a beneficiary if the individual has engaged in Substantial Gainful activity and earned a total of $1,050 (in 2023), or more in income in each of the nine months. 

If their income for the entire nine-month period was less than $1,050, the Social Security Administration will continue to send the full benefit payment.

Conclusion

In conclusion, it is possible to receive SSDI as a business owner. Due to the more stringent eligibility criteria in place for business owners, you need to make sure you qualify for these benefits before applying.