Can I Start a Business While on Unemployment?


Since the onset of the COVID-19 pandemic, unemployment rates in the US have skyrocketed. For reference, unemployment rates during the 2008 recession peaked at 10.6%. In comparison, the US government estimates that in May 2020, unemployment reached, at minimum, 16%, per Pew Research study

While the recent surge in unemployment has crippled many households across the country, others have taken it as an opportunity to pursue an entrepreneurial dream. In the midst of challenging financial times, you could get frustrated and give up … or, you could double down and start your own business.

Can you start a business while on unemployment?

In short, yes. It may affect the amount that you receive weekly and put a damper on the job search traditionally required to continue your unemployment eligibility. But with enough determination, you can at the very least start the process while still on unemployment.

Taking advantage of your free time while unemployed to align the details of your business venture is a productive use of time. As long as you can still prove that your ongoing job search is legitimate, there is nothing stopping you from pursuing new opportunities.

If your venture is successful, you could not only solve your own unemployment problem but that of others as well.


When you start to bring in income from your new business venture, you’ll be required to check your local statutes. In California, you can earn up to 25% of your weekly unemployment benefits while working at a lower-paying venture. Once you exceed that amount of income, your benefits will be reduced by that amount.

For example, if you are receiving $1,000 per week in unemployment benefits, you can earn up to $250 and still receive the same amount in unemployment. Let’s say your business begins to bring in $500 per week. This will cause your unemployment benefits to be reduced by $250, or the difference over the $250 you are eligible to earn without reduction.

Pros and Cons of Starting a Business on Unemployment

While being unemployed is a challenging state to be in long term, it also provides ample opportunity to pursue projects you may not have had the time to pursue otherwise. There are significant benefits and disadvantages to starting a business while on unemployment. Here are a few:

Pros of Starting a Business on Unemployment
  • Ability to try it out: One of the benefits of starting your own business while on unemployment is being able to use it as a trial run. You don’t have to quit your day job as they say and your unemployment benefits are there to support you while you test the waters and give your business venture a trial run. Entrepreneurship isn’t for everyone. Being your own boss might not be the right fit for everyone and you might just need to try it to find out.
  • Turn a hobby into a business: Today’s market thrives on turning hobbies into businesses. Mark Twain said it best when he said to “Find a job you enjoy doing, and you will never have to work a day in your life.
Cons of Starting a Business on Unemployment
  • Wages earned may decrease your unemployment benefits: As mentioned above, any income over 25% of your weekly unemployment benefits will result in a reduction of the difference from your benefits going forward.
  • Starting a business brings on its own challenges: While the opportunity to turn a hobby or interest into a business may be exciting and promising, it’s not always sunshine and rainbows. Starting a business can be complicated and challenging, especially when you’re already in a challenging financial situation. There are legal business filings you’ll need to make at the outset.  That’s why @VirtualCounsel has special packages for entrepreneurs.  SO you can budget for what's to come and get your legal issues squared away at the outset.

While starting a business on unemployment is possible, if you go forward with jump-starting a new business venture or are looking for additional guidance, let our team of experts at @VirtualCounsel help.


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