Many Americans are, unfortunately, receiving unemployment compensation right now. But that could be an opportunity for would-be entrepreneurs. Have you considered starting a business with that unemployment money?
And there’s a real need for innovation.Unemployment rose in the U.S. in April with the biggest monthly spike since 1948. Small Business Trends contacted Mike Nunez, Chief Communications Officer at Incfile, to find out how to get your business up and running this way.
How to Start a Business with Unemployment Money
“With unemployment on the rise, more and more Americans are applying for government assistance,” he writes. “The job market has significantly contracted, and the chances of finding new opportunities for employment are few and far between.”
Drop The Job Search?
He says that’s forced some Americans to drop the job search and start an LLC. These are also known as a limited liability company.
Nunez supplies a little extra information to sweeten the pot.
“Lucky for them, collecting unemployment and starting an LLC is a viable option supported by the Department of Labor and a number of states.”
Nunez has 21-years of experience on the Internet. His resume includes four years at Google. He spent time on the Shopping and DoubleClick Search teams there. He’s well qualified to supply practical advice to folks who want to be entrepreneurs.
Millions of People
Like suggesting starting out in the same place you draw your UI from.
“Are you one of the millions of people applying for unemployment insurance (UI) each week? A visit to your state’s labor department website is the first place to start.”
Look to see if the Self-Employment Assistance Program (SEAP) is offered. Then look over the criteria for applying to see if you are eligible.
Establishing Your Business
“SEAP will allow you to work on establishing your business while collecting weekly unemployment checks,” Nunez says. “You do not need to actively look for work while on the program.”
If your state’s labor department website doesn’t offer it, there’s no need to give up. Unemployment insurance payments can still be used to start your LLC. There’s one important difference though. Any money earned from the business needs to be reported and deducted when you make weekly UI claims.
“This same rule would apply if you accepted a part-time job, so working on your business and getting paid would be considered part-time work.”
There’s more budding entrepreneurs need to know about. Like the fact that if you start earning some money for your new enterprise, that cash will not be deducted from unemployment payments while you’re on SEAP. Nunez also says there are online instructional videos for support and training. You can also get more training with a business counselor.
Your Own Boss
He stresses the bonuses to being your own boss.
“The great part about starting your own business is creating your own ideal job! Whether your passion is marketing, food, retail, consulting or a myriad of other choices, use your passion to create your business.”
It’s also a great way to direct your energy in a positive way when you’re quarantined.
“Besides,” Nunez says, “You have the opportunity to create something from nothing and reap the fruits of your labors.”
Still, you’ll need to tread into these business waters carefully. Protecting yourself legally is a good idea.
“Entrepreneurs need to create an LLC. These can provide you with limited liability coverage and help protect your personal assets if a lawsuit gets filed against your company. And although an LLC does offer liability coverage, it is important to remember that the first “L” in LLC stands for limited. So having additional business insurance may come in handy.”
He also suggests avoiding big purchases in the beginning. If you don’t need it right away you should start slow and evaluate everything you want to buy early on.
There are some other considerations.
“Before you start a new business, you want to make sure it’s going to be right for you and for the market, “ he says. “Don’t blindly dive headfirst in—research everything you need to do before your doors open. Look into key areas for your industry—from market data and customer needs to taxes and setting up your business. Understand rules, regulations and laws and choose the correct business entity.”
Nunez offered up some final words of encouragement.
“Starting and running a business is hard work. It will require risk, a positive attitude, networking, people skills, commitment and a plan. But if there is ever a time to get started and pursue the dream of becoming your own boss, then it is now.”
This article, “How to Start a Business Using Your Unemployment Money” was first published on Small Business Trends