Do Members of an LLC Need Workers' Comp? Key Requirements

A question that often arises is whether members of an LLC need workers' comp insurance. Generally, members of an LLC may opt out of workers’ compensation coverage, should they choose to do so. 

Double check your state’s regulations and a licensed insurance agent to confirm, as some states impose limitations on who may opt out. Also, the exclusion process is different in every state, so it’s important to double check your state’s process. It would be nice if it was the same for all states, but that would make it too easy :)

Opting out of Workers' Comp: What you need to know 

The criteria for opting out of workers' comp coverage isn't the same in every state. Some states require LLC members to own a certain percentage of the company—such as 10%, 20%, or even 50%—to qualify for exclusion. 

Also, there may be a cap on the number of members who can opt out, depending on your state’s laws. Make sure you check what your state’s rules are so you can make sure to follow them. If you don’t follow the guidelines correctly, you can have issues at audit that will increase your bill. So it’s best to find out beforehand and avoid nasty surprises like that!

State-Specific Workers' Compensation Rules for LLC Members

Here’s a summary of each state’s workers' compensation rules and regulations for LLC members:

Please note that the following summary is provided for informational purposes only and may not reflect the most current changes in workers' compensation laws. 

Alabama LLC Members 

Members of a limited liability company can exempt themselves from coverage. 

Alaska LLC Members 

LLC members are excluded from coverage, but may elect to be included. 

Arizona LLC Members 

LLC members are excluded from coverage, but may elect to be included. 

Arkansas LLC Members 

LLC members are included in coverage, but may elect to be exempt. 

California LLC Members 

LLC managing members are included in coverage but may elect to be excluded.

Colorado LLC Members 

LLC members may elect to reject the requirement to carry workers' compensation insurance. A member is someone who owns at least 10% of the membership interest and who controls, supervises, and manages the business affairs. 

Connecticut LLC Members

Members of LLC’s that contain only one member are considered excluded but they may elect to be included. Members of multi-member LLCs are automatically included but may opt-out.

Delaware LLC Members

LLC members are included in coverage. Up to four (4) members of an LLC may elect to opt out of workers' comp coverage at any one company.

Florida LLC Members

LLC members are included in coverage; however, they may elect to be exempt. 

Georgia LLC Members

LLC members are included in coverage. Up to four (5) members of an LLC may elect to opt out of workers' comp coverage at any one company.

Hawaii LLC Members

Members of LLCs who own at least 50% of a company are excluded from coverage.

Idaho LLC Members

LLC members are included in coverage; however, they may elect to be exempt. 

Illinois LLC Members

LLC members are included in coverage; however, they may elect to be exempt. 

Indiana LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Iowa LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Kansas LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Kentucky LLC Members

LLC Members are excluded from coverage, but qualified members may elect to be included. To be a qualified member one must participate in the decision making process and the profit and losses of the company.

Louisiana LLC Members

LLC Members can elect to be exempt if the member owns 10% or more interest in the company.

Maine LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Maryland LLC Members

LLC members who get paid are covered. Those covered, but owning more than 20% or more interest in the LLC may elect to be exempt.

Massachusetts LLC Members

LLC members aren’t required to carry workers' compensation insurance for themselves, but may choose to purchase coverage. 

Michigan LLC Members

LLC members are included in coverage. An active member with no more than ten (10) members owning a minimum of 10% of the company may elect to be exempt. 

Minnesota LLC Members

LLC Members and relatives that are a spouse, parent or child of the executive officer who own at least 25%, are automatically excluded if there are less than 10 shareholders and less than 22,880 payroll hours the previous year. Other relatives, including brothers, sisters, aunts, uncles, grandparents and grandchildren can be excluded by written request.

Mississippi LLC Members

LLC Members are excluded from coverage, but can elect to be included. 

Missouri LLC Members

LLC members are included in coverage but can elect to be exempt. 

Montana LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Nebraska LLC Members

LLC Members are excluded from coverage by default, but may elect to be included.

Nevada LLC Members

LLC members are included in coverage but can elect to be exempt.

New Hampshire LLC Members

LLC members are included in coverage. Up to three (3) members of an LLC may be excluded. However, this does not apply to members who are actively engaged in on-site work at a construction site. 

New Jersey LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

New Mexico LLC Members

LLC Members are automatically included in coverage, but they may elect to be excluded. They must own at least 10% of the company's stock to be exempt.

New York LLC Members

LLC Members of an LLC that has employees are excluded from coverage and may elect to be included. If the LLC has no employees, the members are included by default and may elect to be excluded. 

North Carolina LLC Members

LLC members are excluded from coverage; however, they may elect to be included.

North Dakota LLC Members

Coverage for the owners, partners, or corporate officers of a business corporation, partnership, or limited liability company is optional. 

Ohio LLC Members

Whatever the LLC considers itself for tax purposes determines whether the LLC owner must have workers' compensation coverage. If the LLC considers itself a sole proprietorship or partnership, coverage is optional for the owner. If the LLC considers itself a corporation and has employees, the officers are statutorily covered. They must follow the minimum/maximum reporting requirements and report the wages with their employees' payroll.

Oklahoma LLC Members

Members of a limited liability company (LLC) who own at least 10% of the capital may be exempt from workers' comp coverage. 

Oregon LLC Members

Most members of LLCs are exempt. Members of construction companies must have substantial ownership interest and are usually limited to two (2) exempt members or one (1) exempt member per ten (10) employees. However, this restriction does not apply when members of the LLC are members of the same family.

Pennsylvania LLC Members 

LLC members are excluded from coverage; however, they may elect to be included. 

Rhode Island LLC Members

LLC members are included in coverage but can elect to be exempt.

South Carolina LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

South Dakota LLC Members

LLC Members are automatically included in coverage, but they may elect to be exempt.

Tennessee LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Texas LLC Members

LLC members are excluded from coverage; however, they may elect to be included. 

Utah LLC Members

LLC Members are automatically included in coverage, but they may elect to be exempt.

Vermont LLC Members

LLC Members are automatically included in coverage, but they may elect to be exempt.

Virginia LLC Members

LLC members are not covered by workers’ compensation unless specifically covered by an insurance policy or either elected or appointed as a manager. The manager is included in coverage but may elect to be partially exempt – A corporation’s officers may choose to reject workers’ compensation coverage for accidents, but not for occupational diseases. To do so, officers must file a “Notice of Rejection” with the insurer and with the Commission. If the officers are paid regularly, they are nevertheless counted as employees to determine jurisdiction under the Act. 

Washington LLC Members  

LLC members who manage the company (and there are no managers), or managers of an LLC who are also members and who exercise substantial control in the daily management of the company are exempt. Only eight (8) managers may be exempted unless all managers are related by blood within the third degree of marriage. 

Wisconsin LLC members

LLC members are excluded from coverage; however they may elect to be included.  

Wyoming LLC members

LLC members are excluded from coverage; however they may elect to be included.  

How do you notify carriers of exemption?

If you're considering opting out of workers' comp coverage as an LLC member, you must follow your state's specific requirements, which may include notifying both your insurance carrier and the state's workers' compensation board. The notification process usually is to submit the proper paperwork, such as exemption forms or written notices.

Be aware that the number and type of forms required can differ by state. For example, in Pennsylvania, you may need to complete two separate forms.

It's important to note that in some states, LLC members are automatically included in workers' comp coverage and must actively opt out, while in others, they are excluded by default and must opt in if they want coverage.

Check your state's laws to figure out what you need to do to opt out and be in line with local regulations.

What other types of business insurance do Limited Liability Companies need? 

Beyond workers' comp, there are other types of insurance policies that may be necessary for your LLC. These may include:

• General Liability Insurance: Protects against claims of third-party injuries or property damage
• Professional Liability Insurance: Offers protection against claims of professional errors or omissions
• Commercial Property Insurance: Covers loss or damage to your business property due to events like fire, theft, or natural disasters
• Commercial Auto Insurance: Necessary if your LLC uses vehicles for business purposes, covering liability and damage from auto accidents
• Cyber Liability Insurance: Protects your LLC against the aftermath of data breaches

How can I save money on Workers' Comp for an LLC? 

Here are some strategies to save you money on workers' comp insurance.

Safety Program 

Maintain a safe workplace to minimize the likelihood of accidents and related claims.

Compare quotes

Shop around and compare quotes from different insurance providers to find the best rates.

Ghost Policy

Consider a ghost policy if you're the sole member of your LLC, which can provide proof of insurance without the typical coverage at a much cheaper rate.

Get the right policy for your LLC today 

If you're a member of an LLC, it's important to understand your options and obligations regarding workers' compensation insurance. The rules can be complex and vary by state, so it's critical to do your due diligence. 

To get a clear picture of what you need and potentially save on workers' comp insurance, use our instant quote today. It's a simple tool that can provide you with a quick and accurate estimate, helping you make the best decision for your LLC's needs.