One of the many concerns that clients seeking disability benefits have is what to do with their business interests. They are concerned that they will not qualify for Social Security Disability Income (SSDI) if they have any significant income or assets. The good news is that you can qualify for SSDI if you have an S-Corp or LLC.
However, you must also be very careful to avoid performing “significant services” for the company, or you could jeopardize your SSDI benefits. In addition, there are other factors that you must consider regarding business income that can jeopardize your SSDI benefits. Before you start a new company while on SSDI, consult with a social security disability claims lawyer first.
SSDI does not have the same income and asset limitations that are required under the Supplemental Security Income (SSI) program. The SSI program is a low-income disability program that is also administered by the Social Security Administration (SSA). To qualify for SSI, you must meet the definition of disabled under SSA guidelines and meet the income requirements.
When applying for SSDI, your main concerns are qualifying as disabled under the SSA’s definition of being disabled and earning enough work credits before you apply for benefits. The program does not limit the amount of cash, assets, or income you have when you apply for disability benefits. It also does not limit the amount of income your spouse earns. However, if you have countable income that exceeds the current SSA limit, your SSDI application can be denied. Therefore, one of the key factors is to demonstrate that the income from your S-Corp or LLC is passive income instead of “earned” income.
Substantial gainful activity (SGA) is work you perform that provides income above a set amount each month. To qualify for SSDI, you cannot earn more than the maximum amount of countable income each month. If so, the SSA assumes that you can engage in a substantial gainful activity that earns sufficient income; therefore, you are not disabled.
The maximum amount of countable income for 2018 that an applicant can earn without the presumption of engaging in an SGA is $1,180 for a person who is not blind and $1,970 for a person who is blind. Therefore, if your business income is less than the maximum amount for SGA, you may qualify for SSDI. In some cases, the income can exceed the maximum amount if you are not “working” for the business or engaging in an SGA with regard to the business.
CAUTION — This is not the only hurdle you must pass.
If the SSA determines that you provide significant services to your business or you are engaging in a substantial gainful activity, your application may be denied. Significant services are defined differently based on the type of business. For a sole proprietorship, you are typically considered to be providing significant services because you are the only employee of the business. If the business has more than one person working for it, then the SSA will closely review how many hours you spend working each month and the type of work you provide.
In addition, if you are a new applicant or you have been receiving SSDI for less than 24 months when you begin the business, you must also prove that income from the company is not “substantial” income. The SSA utilizes a complex set of tests to answer whether your income is substantial. Without assistance from an experienced attorney, it can be extremely difficult to navigate these tests.
You can own an LLC or S-Corp and receive SSDI, but you must be very careful, or you could jeopardize your benefits. We urge you to contact our office to discuss your situation with an experienced NY SSDI attorney before taking any steps to apply for benefits, open a business, or purchase an interest in a business. To protect your rights, you should talk with an experienced New York disability insurance attorney. Contact us today to arrange a free consultation.