May 31, 2020 is a daily online magazine covering small business news. We help entrepreneurs transform ideas and innovations into greatness.

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Starting a Business While Collecting Unemployment Benefits

Wouldn't it be great if you could continue to collect unemployment benefits while you get a new business off the ground? Depending on where you live, maybe you can.

For some entrepreneurial business professionals, an unemployment scenario can provide the inspiration for starting a business.
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A layoff or downsized position frees up time, energy and focus for a new business startup. However, it can also have devastating consequences for your personal finances, especially if your startup endeavor makes it impossible to continue to collect unemployment benefits.

To continue to qualify for unemployment benefits, recipients must either be actively pursuing employment or full-time education. Traditionally, entrepreneurial activities haven't qualified as an approved activity for unemployment benefits, even though the individual probably won't receive income from the business during the startup phase.

But for some unemployment recipients, the Self-Employment Assistance Program bridges the gap and ensures the collection of benefits while they launch their startup. Although the program has conditions and isn't available in every state, it can enable qualifying, displaced workers to transition into small business ownership.

Program Overview

Faced with rising unemployment rates, the federal government created the Self-Employment Assistance Program to help displaced workers create their own positions by starting a business. The government has always encouraged small business startups, but this program took encouragement to a new level by allowing unemployed individuals to continue to collect unemployment benefits while launching their company.

Sound too good to be true? Not surprisingly, it does have limitations. The most significant barrier to participation is the fact that only a few states (Delaware, Maine, New Jersey, New York, Oregon and Pennsylvania) have met the program requirements. If you're not located in one of these six states, you're out of luck at least until your state legislators get with the program.

How to Qualify

To qualify for the program, you first have to qualify for unemployment benefits. Once you have overcome that hurdle, you will need a business plan that includes a timeline. You then apply for the program directly with the agency that handles unemployment benefits in your state. If you qualify, you can continue to receive normal unemployment benefits without actively pursuing employment or educational opportunities. You will also need to explore the continuing qualification requirements to make sure your benefits don't expire before your company is off the ground.

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