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There are many types of self-employment structures. Eligibility staff should determine the structure based on how the income flows to and from the household member, rather than applying rules based on how the business is classified. Unincorporated v. incorporated is the first important distinction. Again, even a business with a name ending in “Inc.” might not actually be incorporated, and some incorporated businesses might not use “Inc.” in their name. Eligibility staff determine the correct structure during the interview. These guidelines apply when determining whether a business is self-employment: • The income and resources of an unincorporated business, whether a sole proprietorship or a partnership, are treated as self-employment income and resources of the owner(s).

• Income earned as an employee of an incorporated business (typically a corporation) is treated as earned income, and the value of stocks or dividends someone held as a shareholder is treated as a resource. Wages paid to corporate officers or employees are considered wages, but fees paid to corporate officers are considered self-employment earnings. Any corporate income reported on Schedule E as income received from a corporation must be annualized and used as countable unearned income even if the household did not receive the money. Any loss reported on Schedule E as loss received from a corporation is not used in any budget calculation.

SELF-EMPLOYMENT STRUCTURES These structures ARE self-employment and income and costs of producing income are entered as self-employment in CHIMES: 1. Sole Proprietorship: A self-employment business that is not incorporated and has one owner. The business income and liabilities are the responsibility of a single owner. 2. Partnership: A self-employment business set up with two or more partners. In addition to personal income tax forms, partnerships are also required to file 1065 and K-1 forms. The business income and liabilities are the responsibility of all the partners with the partnership defining shares of ownership and responsibility. Partnership income is determined in the same way as other self-employment. 3. Independent Contractor: An individual who pays their own employment taxes and does not have an employee/employer relationship is considered self-employed. 4. Sharecropper: If the sharecropper pays the costs of doing business and receives a portion of the net income in exchange for labor, the sharecropper is considered self- employed. The sharecropper is not considered self-employed if the sharecropper is not responsible for paying the costs of doing business.