Starting your own business? Say “goodbye” to unemployment comp benefits.

I was recently contacted by a lawyer who knows that I am a Pennsylvania unemployment compensation lawyer. He asked me a question that is becoming more and more common. He told me that he may be separated from employment at his law firm and, if so, he intends to file for Pennsylvania unemployment compensation benefits.

He wanted to know if, when he gets unemployment compensation benefits, he can start to set up his own law practice and still receive benefits? I had the sad displeasure of telling him: “probably not.”

Can you collect Unemployment Benefits while Self Employed?

In discussing the matter, I informed him, as I do with others in this situation, that the unemployment compensation law, frankly, doesn’t make much sense in this area. The current law of Pennsylvania is that a person who begins to engage in self-employment activities puts their continuing unemployment compensation benefit payments at risk.

There are more recent cases that even say that a person who begins to do things to set up their own business will be disqualified from receiving unemployment comp benefits – even if they make no money from it!

Yes, you read that right. Even if you make no money from your self employment activities (i.e., you lease some space, buy some business cards, advertise a bit, get a phone number, etc.) you may be cut off from receiving benefits. While some activity may not be considered sufficient enough to disrupt benefits, anyone who thinks they are going to start up their own business while still getting unemployment benefits as long as they don’t make a profit, has another thing coming.

What makes this even worse is that you may subject yourself to an overpayment determination, thus requiring you to pay back any amounts you received as a result of any activity the Unemployment Compensation office deems to be sufficient self-employment activity.

Receive Answers for Your Unemployment Compensation Questions

If you are currently or in the future may be receiving unemployment compensation benefits, and are thinking about starting your own business while receiving such benefits, you should absolutely consult with a Pennsylvania Unemployment Compensation lawyer before doing so. Hopefully, the law will be changed to at least allow the receipt of benefits so long as no profit is being made during the typical start-up phases of the new business; but for now, this is clearly not the case, and those who choose to ignore this reality, do so at their own financial peril.