It depends. If your business is unincorporated, and you have net earnings from self-employment, you are eligible to establish and fund a retirement plan, including a SIMPLE IRA, based on that income. The IRS defines net earnings from self-employment as gross income from your trade or business minus allowable business deductions. If your business is incorporated, you may establish a retirement plan for the business and your contributions will be based on W-2 wages you receive from the business.
IRS publication 560 includes a definition of net earnings from self-employment as well as other important information about establishing a retirement plan for your business.
(For further reading, see IRA Contributions: Eligibility and Deadlines, Plans the Small Employer Can Establish and Simple IRA Tutorial.)
This question was answered by Denise Appleby