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Can You Own A Business While On Disability?

Can You Own A Business While On Disability?

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Can You Own A Business While On Disability?

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.


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 all of this is general advice and I am not an expert in this subject. There is a lot to lose if this is done incorrectly, so 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.


  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

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Can You Own A Business While On Disability?

Can You Own A Business While On Disability?

4 Responses

  1. Hi
    I want to start 2 small companies.
    1 that invests. and a second company that can hold assets for anyone.
    It would be a trading platform and will use treasury bonds to hold asset in transfer and secure trading.
    All trades done via system assets assigned in cash equivalent to user.
    All assets held for trade use options matched put/call to recover asset full cost + options. When user sells, asset remains in system as stock.
    options payments cover costs.
    Spot trade all assets unassigned to users.
    Cost is = options premium for each asset allocation user chooses. Asset value remaining Is net gain to system.
    Short term bonds and matching ,1 week transfer time. Ach 3-4 business days.
    To cover all user 101% assets.
    Can a trading system reward its own warrants/stocks or other equity based on usage?
    I’m trying to make a not for. or non profit trading system.
    Uses bonds to pay options and holds asset requested for future user allocation of value.
    All cash profits in bonds, bond proceeds cover options and user covers stock allocation.
    Warrents purchase matching.
    Buy back via warrants, rewards via warrants.
    Would that be possible?
    It would allow users to control dilution using short term bond contracts matched to short term warrants. Allowing measured growth to be purchased instead of splits or dilution.
    Wanna help me?

    1. Hi Christopher – Unfortunately, this is way too complicated for me, and given you are dealing with securities, I would really recommend working with an attorney specializing in securities law.

      Sorry I can’t do much for you here!

  2. Hello~my name is Kathy, and I have a question for you. I have recently become disabled. I have been self employed as a realtor for 17 years, but the last three I have not worked the business. I would like to try to get back into it, but am hesitant for fear of losing my SSDI benefits.
    I “thought” if I have and LLC it would protect my benefits. I am in Arizona, and would love to know what my options are if any.
    Can you help me understand my options if any.

    1. Hi Kathleen – This is a super complicated area and I’m by no means an expert. There are a lot of factors to consider and doing something wrong could be very costly to you. I would recommend talking with at SSA or an attorney who specialized in benefits.


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