Texas Unemployment Benefits for the Self Employed

The Texas Workforce Commission imposes a one-week waiting period for benefits.
The Texas Workforce Commission imposes a one-week waiting period for benefits. (Image: Comstock/Comstock/Getty Images)

The Texas Unemployment Compensation Act is included the Texas Labor Code, and establishes the requirements for unemployment eligibility. Under the Act, the commission can deny benefits to an applicant who was responsible for the sale of his business before applying for unemployment benefits, and this may include self-employed sole-proprietors.

General Rule

Generally, the Texas Workforce Commission does not provide unemployment compensation benefits to self-employed applicants, unless they paid self-unemployment taxes as sole proprietors. Generally, most sole proprietors are neither required to pay self-unemployment taxes nor pay them. However, under Texas law, an employee who is a self-employed independent contractor is eligible for benefits if the commission determines he was actually an employee of a company, and the employer improperly and illegally categorized him as an independent contractor to avoid paying employment taxes and providing him with fringe benefits.


The Texas Workforce Commission will deny benefits to corporate shareholders if they owned a majority share of their corporation, and they were in control of their corporation’s sale. Additionally, limited and general partners and sole proprietors are not eligible to receive benefits if they sold their business. However, self-employed individuals are eligible to receive unemployment benefits if they are still performing business activities, report their earnings and voluntarily pay self-unemployment taxes.


Most commonly, if an unemployed sole proprietor is eligible to collect unemployment insurance benefits, the Texas Workforce Commission based its decision on his employment history as an employer for a company that paid unemployment taxes for its employees. Approved self-employed claimants must report their gross earnings each week they submit a claim for benefits, even though they did not generate a net profit.


If the Texas Workforce Commission decides an applicant was not actually self-employed but a temporary employee of a staffing company, it may approve benefits. Additionally, if the commission approves a self-employed applicant’s claim for benefits before she became a sole proprietor, the state will reduce her weekly benefit allowance when her profits exceed 25 percent of her weekly amount. If the commission denies her benefits, she can file a written appeal within two weeks of receiving her formal denial notice. If she requests a hearing, she may be able to convince the adjudicator that her self-employment should not be counted against her.


Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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