I have a single-member LLC. Do I need workers’ compensation insurance?

It depends. In most cases, as a single-member limited liability corporation (LLC), you may not be required by your state to have workers’ compensation coverage. However, you might choose to obtain coverage once you see what workers’ compensation insurance can do to protect your assets.

Workers' compensation LLC exemptions vary by state

Check with your state’s workers’ compensation board to find out whether you are exempt from coverage as a single-member LLC. No matter your business structure, whether you are a sole proprietor, independent contractor, multi-member LLC, or partnership, be sure to confirm and comply with the regulations. Contact your state’s workers’ comp board directly if you have questions. You can find contact information on the U.S. Department of Labor state workers’ compensation agency map.

Why might I choose to have workers' comp coverage for myself?

To answer this question, let’s compare the protection you receive from your LLC with that from a workers’ compensation insurance policy.

What an LLC does:

An LLC protects personal assets. It serves as a barrier, separating your personal assets from your business. That way, if your business is sued, your personal belongings, including your home, personal property, vehicle, bank accounts, and other valuables cannot be used to settle your business-related liability. An LLC is a business structure that is outlined by state law.

What a workers' compensation insurance policy does:

A workers’ compensation policy protects business assets by keeping companies from being sued by employees for workplace injuries, and  preventing those companies from having to pay directly for injuries. In exchange for the premium paid for the workers’ compensation policy, the insurance policy helps cover employees’ lost wages and medical bills. This coverage can reduce the risk of significant financial loss in case an employee is harmed while performing work duties. Each state administers its own workers’ comp program through a commission or board that makes sure businesses comply with workers’ comp laws.

So, if you have no employees, but you obtain workers’ compensation coverage for yourself, the insurance would protect you if you were injured while performing work-related activities. This makes good sense if you work in a high-risk industry such as construction, transportation, or health care. Additionally, if you work as a subcontractor, contractors may require you to show proof of workers’ compensation coverage. 

To be absolutely sure of the best route for you and your LLC, enlist the help of an attorney who specializes in workers’ compensation. And don’t forget, always comply with the workers’ comp laws in your state.

Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.

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