Unemployment Compensation-Creating Entrepreneurial Incentives

I've been told that persons receiving unemployment compensation from the government must declare any income earned while receiving those benefits and that income will be 100% offset by a decrease in the benefit paid the unemployed person. This creates a disincentive to do anything other than seek long term employment where the compensation exceeds the benefit. Perhaps this is the best case but I also think it is worth investigating the cost and impact of decreasing or eliminating this offset so that income earned through self-employment would be income kept I think this could encourage many to consider entrepreneurial activities that may lead to improved communities and even more employment. What do you think? There is certainly reason to consider unintended consequences.