Self Employment and Social Security Disability Benefits

“Working” and receiving social security disability simply do not go together: if under social security disability guidelines an individual is engaging in what social security calls “substantial gainful activity” (SGA) they are not eligible for social security disability benefits.  There is a specific dollar amount of earnings on a monthly basis that social security uses as a benchmark: amount above that figure are presumptively SGA, and amount below are presumptively not SGA.  A common myth has developed in the public (and sometime perpetuated by social security office staff) that it is “OK” to earn less than the SGA amount.  This has led to a belief that supplementing social security disability benefits with earnings that are under SGA is a good strategy.  I refer to my blog post earlier this year on this issue:  Common & Dangerous Social Security Disability Myths (1 of 5): Part-Time Work is “OK”? to convince you this is a bad strategy.

I would like, however, to discuss another “working” problem – that of self-employment.  Over the years I have had many clients who were self-employed, or ran their own business.  Often due to their physical or mental impairments, they became less active, often delegating significant parts of the business to others.  The issue of when such a person became disabled, or when they stopped all SGA, is more difficult in such a case, in contrast to the situation where the client had to quit their hourly wage job with a large corporate employer.  Many self-employed struggling with a significant disability find it hard to understand why self-employment is different.

Just the other day I had to discuss this issue with a client who had a house cleaning business or a period of time in which she maintained that she was disabled.  Her disability kept her from doing the work, so her daughters did the actual housecleaning. Her business generated monthly income in excess of the SGA amount.  She had a hard time understanding that she was unlikely to receive benefits for that period of time.

I analogize to the health condition of British physicist Stephen Hawking who is virtually immobile due to a motor neuron disease related to Lou Gehrig’s disease.  He directs others in research and writing with tiny gestures and the aid of technology.  Now, I know that there is a BIG difference between running a home cleaning business, and directing mathematical research on the secrets of the universe, but the concept is still the same.   In the case of my client with the home cleaning business, her involvement in the business may have changed or been reduced, but she was still in charge of the business.

In addition to this significant issue of just how involved the struggling self-employed person may be in her business, the success of the business (i.e., how much does it bring it a monthly basis) is not determinative of whether that person is indeed working.  You will note above when I talked about the monthly SGA amount I said work-related receipts below the SGA amount are “presumptively” not SGA.  the fact that a business is not making money does not mean that the business owner is not working.  Consider sales work that is “all commission”: a saleman can work 50 hours a week and make no money if the product is not right.

So what is my advice to the self-employed person who is struggling with a disability and is seeking social security disability?  Every situation is different, so I urge you to consult an experienced social security disability attorney in your area.  But in general, severing ties with the business is the best strategy so that in social security’s eyes you are no longer a business owner.


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