Income and Asset Considerations in Certain Circumstances 510-05-75

 

Ownership in a Business Entity 510-05-75-05

(Revised 06/01 ML #2590)

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  1. Assets

An asset consisting of an ownership interest in a business entity (e.g. a corporation or partnership) that employs anyone whose assets are used to determine eligibility may be excluded as property essential to earning a livelihood if:

  1. That individual’s employment is contingent upon ownership of the asset; or
  2. There is no ready market for the asset. A ready market exists when the interest in the business entity (e.g. the corporation stock or partnership interest) can be publicly traded through a broker. A ready market does not exist when there are unreasonable limitations on the sale of the business interest, such as stock that must be sold at par if par is considerably lower than the actual value of the stock, or if there are other written limitations that prevent a reasonable sale.

 

Example 1: An applicant works at a firm that has publicly traded stock. Employment at the firm requires ownership of some of the firm’s stock. Even though there is a ready market for the stock, it is excluded because the applicant is employed at the firm and that employment is contingent upon stock ownership.

 

Example 2: An applicant works on a private farm that has been incorporated. He owns some of the family farm stock, however, ownership of the stock is not required in order for him to be employed on the farm. Even though stock ownership is not an employment requirement, the stock is excluded because the applicant is employed on the farm and there is no ready market for the farm stock.

 

Example 3: An applicant is actively engaged in a partnership. There is no ready market for buying or selling a share in the partnership and the applicant must own part of the partnership in order to be employed by it. Accordingly, the applicant’s share in the partnership is excluded as an asset.

  1. Income: Countable income from a business entity (e.g. a corporation or partnership) that employs anyone whose income is used to determine eligibility is established as follows:

  1. If the employed applicant or recipient is the sole owner of the business entity, or all owners are in the Medicaid unit, calculate income using the medically needy self-employment rules described in 05-85-20; or
  2. If the employed applicant or recipient owns a share in the business:
  1. From the business entity’s gross income, subtract any cost of goods for resale, repair, or replacement and subtract any wages, salaries, or guarantees (but not draws), paid to actively engaged owners to arrive at the business entity’s adjusted gross income; and
  2. From the adjusted gross income, establish the applicant or recipient’s income share; and
  3. Add any wages, salary, or guarantee paid to the applicant or recipient to the applicant or recipient’s income share; and
  4. Apply the medically needy self-employment income disregards described in 05-85-20.