Options for the self-employed...who feel unemployed

While the national unemployment rate is 7.2% and may reach 10% before the year is up, there are a number of self-employed people, I imagine, who feel unemployed... or at least less employed... and so it sort of begs the question: What do those people do? They can't just go to the unemployment office and collect a check -- can they? And if not, what recourse do they have to, well, survive?

I asked around and got varying answers.

Can self-employed people claim unemployment? Yes, and no. Mostly no. As Josh King, an attorney and vice-president of Avvo, a site designed to help people find the right lawyer, told me: "Unemployment law differs from state to state, but generally speaking, the self-employed are not eligible for unemployment benefits for a simple reason: They haven't paid into the state's unemployment insurance fund."

If you're self-employed and have an S-Corp, you can collect unemployment, but in that case, your corporation is paying you a salary and putting money into the state unemployment insurance program, says King, adding: "There is no free lunch."

Well, actually, you can have free lunch. You are eligible for benefits like food stamps, says King, adding that it's need-based, "depending on their income. Being self-employed does not disqualify them from these benefits." You're also eligible for Medicaid (health insurance for the unemployed and low-waged) and the WIC program (which provides nutrition and nutritional supplements to women, infants and children up to age five).

If you're self-employed but want to make yourself eligible for unemployment. There are ways to do that like the aforementioned S-Corp, or you can volunteer to pay unemployment taxes, suggests D. Jill Pugh, an employment law attorney in Seattle who also has an employment law blog.

She points out that "unemployment benefit eligibility varies somewhat from state to state," so check with your state first rather than decide this is gospel. "Here in Washington," says Pugh, "a self-employed person could theoretically qualify for unemployment benefits, if they took time to register with the state and had been paying unemployment taxes." However, that doesn't happen often, says Pugh, and adds that there are other eligibility requirements as well.

The best form of protection during lean times: A big, fat savings account, of course, and the ability to keep your optimism up as you work 24/7 to bring in more income: after all, cliched as it is, everyone always says that small businesses (which includes the self-employed) are the engine that drives our economy. But it's a fitting analogy since so many self-employed people are in the driver's seat without much of an air bag to protect them in a crash.

As Joyce Aldawood, who owns her own jewelry studio, wryly observes: "The only benefits you get are those that you specifically negotiate when you begin a job with whoever signs your check."

Geoff Williams is a freelance journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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