Nationwide Mortgage Licensing System (NMLS) Practice Exam

At what minimum percentage of ownership is an individual considered self-employed?

1. 5%

2. 10%

3. 25%

4. 50%

The correct answer is: 25%

An individual is considered self-employed when they possess a minimum ownership stake of 25% in a business entity. This threshold is significant because it establishes a clear distinction between employees and business owners in terms of their involvement and control over the operations of a business. Owning 25% or more of a business typically indicates that the individual has a substantial stake in the profits and decision-making processes, which aligns with the definition of self-employment. This level of ownership allows them to have a significant impact on the company's direction and is often a factor in financial assessments, such as when lenders evaluate income and risk factors for mortgage applications. The other ownership percentages mentioned do not meet the criteria for self-employment, as lower stakes like 5% or 10% might signify a minor investment or shareholder status without significant influence or control over the business operations. Ownership at 50% or more reflects a controlling interest but is above the minimum standard for self-employment classification, which is set at 25%.