For some individuals receiving social security disability benefits (SSDI), it can be difficult to understand what to do with their time. Their disability may not allow them to be able to do traditional work, but things that are less stressful on their bodies may be an option.

One situation that arises is the subject of business ownership. Often, the individual is able to hire others to do the physical work. But, the Social Security Administration still factors in that income through a small business could qualify as substantial gainful activity (SGA) through a variety of tests. Therefore, it can play into ongoing benefits.

Can someone own a small business while receiving SSDI?

Anyone self-employed and receiving SSDI is subject to either the “Countable Income Test” or the “Three Tests” to determine whether the work would be considered substantial gainful activity. The use of the test from the SSA may depend on when the business was started and what kind of work is being done.

The Countable Income Test

If you are someone who has been receiving SSDI for more than 24 months and then begin to operate a small business or do freelance work, the SSA will use “countable income” to determine if you should continue to receive benefits. If benefits are discontinued, it will be because the SSA has determined that the income you earn from the business or freelance work is substantial gainful activity.

If countable income is more than $1,220 a month as of 2019, the self-employment will be considered SGA and benefits will be discontinued. The only caveat to this is if you can show that you are not providing significant services to your business.

The countable income is the salary amount or profits that you earn based on your own productivity. To determine your contribution, the SSA does the following tests:

  • Calculates the value of unpaid help performed by you or your immediate family
  • Calculates any impairment-related work expenses
  • Calculates unincurred expenses paid by you

A one-person business is much different than a business with one or more people working for it in the eyes of the SSA since a one-person business requires the individual to do a bulk of the actual work, potentially putting themselves at risk for losing benefits.

The Three Tests

If you have been receiving benefits for less than 24 months or are just starting to receive them, the SSA will conduct the “three tests” to determine if your work is considered SGA.

The Three Tests are:

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

If one of the tests shows that the work you do for the business is SGA, you will not qualify for benefits.

For the significant services and substantial income test, the SSA will determine if you provide significant services to your business and receive substantial income from the business.

The income from the business is considered substantial if the countable income for the individual averages more than $1,220 a month, or countable income doesn’t average that amount but the livelihood of the business is comparable to what it was before you were disabled or comparable to other self-employed people in the community.

Due to variable income from month to month associated with small business ownership, the SSA will use an average income over a variety of months to calculate.

For the comparable test, if you work activity that the individual does is comparable to what an unimpaired person in the community does for the same kind of business, the SSA will likely conclude the income to be SGA.

For the worth of work portion, the SSA will consider the amount of income earned by the business, in addition to the comparative nature of the community. If the work done by the individual is clearly worth more than $1,220 per month, or it is clearly worth more than $1,220 per month compared to the cost to hire someone else to do the job, the individual may no longer be qualified for benefits.

Getting an Attorney Involved

If you are currently attempting to receive benefits, have been denied benefits due to SGA or have benefits and are being questioned by the SSA with any of the above tests, don’t hesitate to get the professionals at Tabak Law involved. Call 844-432-0114 for a free consultation.

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