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Starting a business while on EI
If you are thinking about starting a business or take on a self-employment work while on EI, there will be a determination that the claimant is considered self-employed, then the claimant’s share of all income from that self-employment/business is considered to be earnings Footnote5 , and may affect benefits payable.
That is whether or not those earnings arise from the work of the claimant or from the work of others on their behalf. This does not include pure investment income. The key issue is the availability of work intention. Remember, when you are on regular EI, you are declaring that you are ready and available to work. If your full energy is to run your business, then you will not meet those criteria, therefore you may be disqualified for your regular EI.Â
To ensure you do not get into trouble with EI, you must complete a self-employment questionnaire (Form # INS3977) and submit it to Service Canada. EI processing will then use the information you provided to evaluate your intention to be available for work; therefore they may decide if you continue to qualify for EI. Under this circumstance, you must declare that you are ready to drop your business to go to work when the opportunity arises.
Operation of a business
Regardless of the nature of the business, once there is a finding that the claimant is engaged in the operation of a business, any moneys arising from that business are earnings to be considered for EI benefit purposes, unless the claimant sells the business or permanently withdraws from its operation.
This is because it is not the mere ownership of a business that leads to a finding of being self-employed; rather it is a decision that the claimant is engaged in the operation of that business which makes the claimant self-employed. There can be no self-employment nor any earnings from self-employment, if a claimant takes no part in the operation of the business or if the activities performed by the claimant are in the nature of exhibiting a natural concern for an investmentFootnote6 . Taking no part in the operation of a business does not include periods when the business continues to operate and the claimant temporarily ceases taking part in its operation Footnote7 . In the case of EI self-employment special benefits, this is particularly the case, where individuals may take a partial or full temporary leave from their business or venture in order to recover from an illness, take time off due to maternity and/or parental responsibilities or require leave to care for a gravely ill family member.
Source: Canada.ca / 5.16.2 Determination of earnings from self-employment
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