Hi there,
I'm new to business and this forum so bare with me if this question has been asked before. My situation is this, I was laid off from my job a couple of months ago, and now I'm collecting unemployment. During this time, I have decided to start my own business (sole proprietor) as I am not a corporation as of yet. I read that I am still responsible for taxes being a sole prop., however; does this mean I can still collect unemployment? Someone told me that I can still do it because technically I'm not receiving a paycheck. It is a web store I am planning to run (selling clothing accessories). Thus, not only do I not know how much I'll be making profit wise, but there may be instances where I don't earn a profit at all. So that is the first part of my question, the second part is, if I am able to manage and maintain my unemployment, then can I write off tax expenses for my sole proprietership? Or will that look fishy and get me into trouble. Any help would be greatly appreciated. Thank you

I know in Canada that if you have unemployment and start a business that does generate revenue that your unemployment will be revoked.

Webhostingtalk.com is not a licensed lawyer agency. I'd suggest you call up your State's IRS department regarding taxes.

It depends on your location. Each state has it's own laws.

Do your research. But generally you can only collect unemployment if you are actively seeking full-time employment. Any earnings you do make are supposed to be reported.

For instance, I completed a freelance assignment while on unemployment and reported the earnings during the automated, biweekly filing process. I was then instructed to call the unemployment office. The official asked me a few questions and then called the company I did the work for and verified the nature of the work. These earnings were deducted from my next unemployment check.

Originally posted by Andrej
I know in Canada that if you have unemployment and start a business that does generate revenue that your unemployment will be revoked.

Actually, it does not matter if you are generating revenue or not. The rules are clear about this... the "value" of your time is what counts, not the "result" of your time.

In other words, if you are unemployed and are spending TIME in a business in ANY capacity.. then you are considered self-employed are are NOT eligable for unemployment insurance.

It doesn't matter if the time you spend on your business activities results in income, revenue, or anything else.. either to you personally (sole proprietor) or to the business (assuming it's incorporated).

Not sure if it's a state law, but here in Massachusetts, you can still collect unemployment, but you must report each week what you earn, and unemployment will pay you the difference between what you made and what your full unemployment benefit usually is.

Anyone can figure in their own 'unemployment insurance'. This could just be a % off the top of your income you would set aside in another bank account. When I was figuring self-employment billing rates, I took into account 30% for taxes, 10% benefits (medical premiums, etc), 10% unemployment stash, leaving me with around 50%. These are things you may want to figure in when working as a self-employed person.

My father was unemployed for 1 year after being terminated from his current occupation, but during that 1 year he also overlooked his photography store that he has owned for 6 years.

Originally posted by Alex042
Anyone can figure in their own 'unemployment insurance'. This could just be a % off the top of your income you would set aside in another bank account. When I was figuring self-employment billing rates, I took into account 30% for taxes, 10% benefits (medical premiums, etc), 10% unemployment stash, leaving me with around 50%. These are things you may want to figure in when working as a self-employed person.

I think he means that will he be able to collect unemployment since he's laid off, and pursueing his own business.

see my answer above

I think he means that will he be able to collect unemployment since he's laid off, and pursueing his own business.

see my answer above

It seems as though the unemployment laws vary in each state. But, I believe in our state, we can collect unemployment for a few months after being laid off from a job that was paying in unemployment taxes. If someone were to be self-employed though for an extended period of time and not paying in unemployment taxes, then unemployment probably wouldn't cover them. I'm not sure, but it's possible unemployment works similar in my state also, but I've never been able to survive long on our unemployment rates to try self-employment during those times. I was always out trying to actively seek something full time.

A good boyscout tries to be prepared just in case. Probably the best option is to check with the local unemployment office regarding that states laws. Either way, one should still be prepared for the future and try to set aside some income if possible.

Greetings:

Your best bet would be to consult an attorney or ask the unemployment agency how much money you can earn without impacting your unemployment.

The issue is "earning money," and not simple whether or not you get a pay check. However, see the 1st paragraph.

Thank you.

I had a couple of PM's about this, so here is an example of "TIME" -vs- "EARNING".

Let's say you lose your job and start a small business. You incorporate the company.

So you "work" for your new company, but of course it is web hosting so you don't really make any money for about 6 or 7 months or so.

During this time, you are working "full time" for your company (yourself) and you are paying the bills, but not paying yourself a salary or anything...

Are you still "working"? Yes. You are working. It does not matter that you are not taking a salary and not actually seeing any of the money personally. The employment insurance folks will see your business as a replacement for employment so you are NOT allowed to collect insurance.

The fact that your business is not making you any money is YOUR fault for going into that business.

Or, since you're incorporated, you may simply be choosing to not pay yourself a salary.. instead deciding to declare dividends at year end, or a yearly bonus, or paying your wife instead...

Whatever... the important thing to understand is that in the eyes of the government, you ARE spending your TIME in an endeaver that is designed to replace employment...

My hobby was web hosting until my un-employment ran out. Now its a business ;)

Whatever... the important thing to understand is that in the eyes of the government, you ARE spending your TIME in an endeaver that is designed to replace employment...
I just hope they consider the 20-40hrs/wk I spend in the evenings developing my online presence after my 40-50hrs/wk I spend on-site with 1 client and give me my mileage even though I hadn't officially opened my online presence for sales. Afterall, 10 of those hours per week are driving to and from the clients site.