If you own a business, you’ve probably heard about workers compensation insurance. As the name suggests, workers comp helps to protect workers. This type of insurance is often required for businesses with employees depending on the state and type of business.
As a single-member LLC or sole proprietor, you may wonder, “Do I need workers compensation insurance if I have no employees?”
It’s a great question, so let’s talk it through.
We’ll cover what you need to know about workers comp and why you may want this type of coverage for your small business.
Do sole proprietors need workers comp? It depends. A small business owner with no employees is typically exempt from carrying workers compensation insurance, but you should check the workers comp laws in your state to be sure.
Even if you are exempt, there are a few reasons why a sole proprietor may want to consider sole proprietor workers comp.
Did you know that many health insurance plans may not pay your medical expenses if you get hurt on the job?
And if you work as a contractor, many customers and clients may refuse to work with you if you don’t have proof of workers comp insurance.
The bottom line? It may be worth having workers comp coverage even if you have no employees.
Most likely, your single-member LLC will not be legally required to purchase workers compensation insurance. However, every business is unique, so check your local state laws to confirm whether or not you are required.
Even if you aren’t required to get workers comp for your LLC, you may want to protect your business with coverage.
If you’re injured or sick on the job, your health insurance may not cover your medical expenses. You would have to pay those costs out of your pocket, and they can add up. A sole proprietor workers comp policy is an affordable way to help protect your business from a financial burden.
At Simply Business, we’re here to help get you covered. If you’re a single-owned LLC or sole proprietor, we will help you find the best solution to fit your needs.
We currently offer two types of sole proprietor workers comp policies.
Solo X is a workers comp policy that typically excludes the business owner from coverage. However, the Solo X plan includes an accident policy that provides fixed-amount payouts for certain types of work-related injuries. If you need to show proof of WC coverage to land a project, Solo X is an affordable way to obtain a certificate of insurance so you can meet insurance requirements depending on the state and type of business.
Solo I is an affordable workers comp policy that protects sole proprietors, LLC members, and other business owners who have no employees. It can provide coverage much like a traditional workers comp policy does for an employee.
One thing to keep in mind if you are a sole proprietor preparing for a workers comp audit, is that while you might not be paying anything out in employee W2 wages, certain 1099 subcontractors can be factored into your total premium.
Subcontractors who you do business with during your policy period are likely to be factored into your workers' compensation premium unless you are able to present to your auditor the subcontractor's certificate of worker's compensation insurance or an Executive Officer exclusion, the validity of which is contigent on the subcontractor being the officer of a corporation.
If you employ one or more people, even part-timers, they need to be covered by workers' compensation insurance. If you paid W2 wages to any employee it will be revealed by your workers' compensation audit and accounted for accoridingly. Simply Business can help you find an affordable workers' comp insurance policy that fits your business’s specific needs.
Employees are generally defined as a people who perform tasks for your business while under your supervision, direction, and control. That person doesn’t have to be working for you full time to be considered an employee. So in short yes, even if you only hire temporary employees and don't have workers otherwise, you still need workers' compensation insurance to cover them.
Unsure which policy is right for you? No worries. Our licensed insurance agents are here to help. We can find a policy that meets your needs and fits your budget. Just call 855-930-2844 today.
Ready to get your quote?
Still wondering "but do I need workers comp if no employees work for me?" To put it simply, if you’re a small business with no employees, you may think that workers compensation insurance isn’t necessary- but workers comp for sole proprietors can actually be a great way to protect yourself and your business. And in some instances, you may need it to secure a contract or bid on a job.
Workers comp can give you peace of mind when the unexpected happens. And it makes it safer for you to do business with others. When you’re financially protected, you will have an easier time growing your business.
I've always loved to write and have been lucky enough to make a career out of it. After many years in the corporate advertising world, I'm now a freelance writer—running my own show and contributing to Simply Business. Fun fact: I have three desks in my house, but I still do my best thinking walking in the woods.
Susan writes on a number of topics such as workplace safety, customer sales, and workers' compensation insurance.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.