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SSDI and Owning a Business (but not working there)

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  • SSDI and Owning a Business (but not working there)

    So I have a hypothetical question. For me it certainly won't matter for the foreseeable future, but I was curious and wanted to see what you guys think or if any of you have personal experience.

    Can you receive income from a business that you own, but do not manage or work at, even if the money is more than the SGA amount?

    Here's my hypothetical example. What if you own a successful food truck. You work in the retrofitted food truck serving cajun-asian fusion paleo gluten free tacos. And of course the people love it. Pretty soon you hire a couple of other people to work a couple of other trucks. Eventually you wonder to yourself "Self, why the hell are you working in this hot ass metal box ten hours a day, making your spasms worse and risking ruining your shoulders with all that awkward reaching to grab the ten gallon jugs of Sriracha from over your head, when you're making more income from the labor of these other people working the additional trucks than from working your own truck?". So you decide to hire someone to work in your truck and now you are just sitting at home and answering the phone if your workers have a problem.

    Then you start thinking to yourself, "Self, why are you sitting at home staring at the phone when you could pay someone to run your little company, move to Alaska, buy a little cabin and pursue your one true passion, making ice sculptures of prominent Fijian politicians?"

    So what if you didn't sell your foot truck business, you just paid a manager to manage it and moved away? No longer is your labor contributing to the company, but you still own it 100%, and your manager might get in touch with you to okay big things like buying a new truck or switching from tacos to tapas, but otherwise you're not involved in the day to day business. Is your income still SGA? It wouldn't seem to be to me.

    I'm sure some SSDI reviewer might look closely into it, but if you're really not working at the company or involved in any way in day to day decisions, it would seem pretty straight forward that this is now an investment and not income... and since you can have unlimited investments and assets and still be on SSDI, you ought to be able to continue to get income from your company, right?

    Say you were making $5,000 a month from your taco trucks and you could sell the company for $1,000,000. If you sold the company you could definitely invest that $1,000,000 you gained from the sale in XYZ company and earn yourself $5,000 a month in dividends while continuing to draw SSDI. Why wouldn't you be able to do this if you owned the company outright instead of owning shares?

    Whadda y'all think?

  • #2
    It may come down to whether the manager of your food truck empire is willing to work (on the books) for a little over $14k a year and not be tempted to skim.

    1. Three tests that the SSA uses to determine if your business is considered SGA under the SSDI program
    The Social Security Administration will use three tests to determine if your work is SGA:
    Significant services and substantial income test: If you are the sole person in your business, it is considered significant. Additionally, if you work with others, but you provide more than half of the services or manage the business for more than 45 hours a month, your work is considered significant. If you bring in more than $1,180 a month or if you earn what you earned before you became disabled, you work may still be considered SGA.
    Comparability test:This test compares your work activity with that of an unimpaired person performing the same work. Utilizing factors such as hours, skills, energy output, efficiency, duties, and responsibilities, your work is comparing to that of a healthy person performing the same job.
    Worth of work test: If the work that you do for your business is apparently worth more than $1,180 a month in services or if it would cost you more than $1,180 to pay someone else to perform your responsibilities, your work may be considered SGA.



    • #3
      If you set a company up as a C-corp and take dividends instead of a salary over $14k then you'll have to deal with a potential double-taxation situation, but it won't jeopardize your SSDI.
      T3 complete since Sept 2015.


      • #4
        Originally posted by 2drwhofans View Post
        It may come down to whether the manager of your food truck empire is willing to work (on the books) for a little over $14k a year and not be tempted to skim.
        I'm not sure why the manager would have to work for less than SGA. I figure I could pay someone a billion dollars a month or $1 a year to run my business empire and that would have didly to do with MY SSDI eligibility.

        I meant to link that disability secrets site as well in my original post, that's where I found the most helpful information, though I'm not sure how reliable it is (seems reliable, just doesn't seem like an "official" source).

        In my story above I don't think that violates any of those three rules though.
        1. I am not the sole person in the taco business. I am not working any at all, much less providing "half of the services" (unless you count the occasional phone call to check on things and coordinating with accountants/tax people because I'm the owner of record), it certainly doesn't rise to the level of "managing the business for more than 45 hours a month". - I would definitely be "bringing in more than $1,180 a month", but I would not be "earning" it, I'm essentially just reaping the profits from the business that I built in years past.
        2. There is little to no "work activity" as I've moved to Alaska and spend most of my time deep in the woods far from cell phone coverage carving ice into the likeness of Prime Minister Frank Bainimarama. So I'm not using my "hours, skills, energy output, efficiency, duties or responsibilities" like a normal WORKER, though any AB could be hands off and just cash a check and sign a form every once in a while.
        3. This is probably the closest it comes to being questionable. Certainly if you were involved in the day to day operations of a successful business to pretty much any degree one could argue that your "expertise" was worth x number of thousands of dollars per hour, but if I literally moved to Alaska and am incommunicado for most days and had hired someone to take over the job of managing the business, surely the work of signing a couple forms every once in a while and chatting with the manager bi-monthly wouldn't be considered "worth more than $1,180 a month"


        • #5
          Originally posted by Mize View Post
          If you set a company up as a C-corp and take dividends instead of a salary over $14k then you'll have to deal with a potential double-taxation situation, but it won't jeopardize your SSDI.
          This is kind of my point. I could DEFINITELY do it if I made the business a corporation and took a dividend, just like if I sold the company and invested all of the money in the stocks of XYZ company which could just as well be a successful Botswanan Barbecue Food Truck that my buddy started.

          So do you think I could do it if I retained sole ownership of the company, I was just an absentee owner who didn't contribute any meaningful work to the company.

          Sorry to go so far off in the weeds, something just made me think about it today and I was wondering. It wouldn't seem to make any sense to me that I would have to sell my own company in order to get SSDI, when if instead of owning the company outright my ownership was the same amount of shares in microsoft or monsanto or whomever I would be fine.

          I'm sure this situation has occurred in real life before: ie the pop of a mom and pop shop becomes disabled and can no longer work in the business, but doesn't want to sell it, instead he hires his son/daughter/cousin/nephew to run the business for him while he recuperates, but needs SSDI to help make ends meet.


          • #6
            If you do it as an LLC or S-corp it will count as regular income.
            T3 complete since Sept 2015.


            • #7
              SSA doesn't consider passive investments, like stock. You want to be a shareholder not an employee.


              • #8
                Originally posted by August West View Post
                SSA doesn't consider passive investments, like stock. You want to be a shareholder not an employee.
                Right, but what about a passive owner. Almost like a silent partner, except the non-silent partner is the manager you hired.

                Like what if you had a real estate business. You bought houses and rented them out. Then you get disabled (or are SCI and no longer work for whatever reason).

                If you hire a property management company to rent out those properties that you already own, it's definitely just an investment and not "income" as defined with regard to SGA.

                But what if instead you hired a person to manage all the properties and that person worked as an employee for you, but handled 99% of all the business related "work", you just signed on the dotted line when it came time to pay taxes or cut paychecks. Would the mere fact that they were an employee and not a company mean that now you are doing substantially gainful activity yourself? It doesn't seem that it should.


                • #9
                  It doesn't matter if you handle 1% or 100% of work. What matters is the form of your compensation. If you collect rent from real estate that is ordinary income. If you sell the real estate that is capital gain.

                  There are two ways to collect rent and still not have ordinary income: 1) show a net operating loss (expenses greater than rent), or 2) get the properties off your personal tax return and into a corporate tax return.


                  • #10
                    Always make sure to completely lose your ass on your rentals, as you then could deduct those catastrophic losses up to 24 or 25K from your W2 taxed job. No tax on your rental income, and reduces your tax liability on your other sources of income.


                    • #11
                      funklab, why don't you just go to work and let SSDI function as it should?


                      • #12
                        Originally posted by Patton57 View Post
                        funklab, why don't you just go to work and let SSDI function as it should?
                        I do... and SSDI doesn't do anything for me...

                        But I was just thinking too hard and wondered why investment income should be treated different than business income if your business had transitioned to just being an investment that you no longer put work into.

                        I gotta plan for my future, you know... I might need SSDI to fund my retirement when I move to Deadhorse and start working on my masterpiece, a life size bust of Ratu Solomone Bauserau carved out of glacial ice.