The thrills you experience as a self-employed entrepreneur, such as the freedom to make your own hours, set your own rates and to be directly rewarded for your hard work, have always been balanced by accepting potential down side risks as well. You’re always hustling to make ends meet, clients can drag their heels when it comes to paying you, and work that can slow down without warning are just some of the challenges you face on a daily basis.

But if you’re self-employed, you’ve obviously decided the rewards far outweigh the risks. And although it’s not a glamorous part of your job as the CEO of your personal brand, you should be focusing part of your business efforts on minimizing those risks.

Chief among these is that while job satisfaction means a lot, unless you can consistently find a way to make ends meet, your dream of working for yourself will end much sooner than you’d like. After all, at the end of the day, the bottom line is the bottom line.

If business as a self-employed entrepreneur is consistently booming for you, then congratulations! You’re free to tackle a different and much less daunting set of problems that if you’re struggling to make ends meet.

But if cash flow issues remain a challenge, then you’ve got to figure out a way to get over the rough spots. Stashing cash for a rainy day is always advisable, but did you know you may also be able to draw unemployment benefits to help you through slow periods as well?

Before you rush out and apply for benefits, know that the ability to do so comes with some caveats and pre-planning on your part to position yourself to take advantage of this benefit.

Are you a sole proprietor, independent contractor or a freelancer? If so, and you experience a loss of income, you’re not eligible to collect unemployment benefits. That’s because, in order to take money out of the unemployment system, you first need to have paid into it. As an employee of a company, your employer is required to pay into your state’s unemployment fund, thus buying you “insurance” that you can draw unemployment if you are laid off. But if you’re not an employee, and you haven’t paid into the fund, you aren’t eligible for benefits.

The key to drawing benefits. Once you understand that you must pay into the system before you can withdraw from the system, the question then becomes, “How do I do that?” For most self-employed people, the answer is to set up an S Corporation. But it is not enough to just set up an S corporation. You must also structure it so that you draw a salary as an “employee” of the corporation and then pay a percentage of your earnings into your state’s unemployment compensation fund.

Creating an S corporation has other implications as well. Overall, you’ll probably pay less taxes, and any liability–such as for debt and other financial obligations—will be borne by the corporation and not the people who own it. The flip side of this is that as an employer, you’re required to pay Medicare and Social Security taxes on wages for your employees, including any salary you pay yourself.

Rules vary from state to state. Another important point to consider is that while the federal government has established the overall framework of unemployment benefits, those funds are administered and dispensed at a state level, and each state has different rules regarding eligibility.

What this means is that some states do not require you to pay state unemployment insurance even if you have an S corporation. Others may require you to pay just the federal unemployment tax, but that does not necessarily mean you’ll be eligible to collect state unemployment benefits. If this all sounds a bit confusing, it can be. The best thing to do is to check with your particular state’s unemployment benefits administrator and find out exactly what rules apply to you.

Get answers from the U.S. Department of Labor. The U.S. Department of Labor maintains a comprehensive list of employment-related programs and services, including each state’s agency that administers unemployment benefits. Go to their website at to get answers regarding unemployment benefits for self-employed entrepreneurs, as well as to explore many other private and state-run programs and services.