sole proprietor working at a job

Sole Proprietor

September 22, 2023
Mordechai Kamenetsky

Worker’s compensation is a requirement for most businesses. However, there are some notable exceptions in certain states. 

In many states, sole proprietorships are excluded from workers’ compensation requirements. 

But what is a sole proprietorship? Does your business fit the bill?

Sole Proprietor

A sole proprietorship is a formal business type. In this situation, the business is owned and operated by a single individual with no distinction between the owner and the business. 

Profits pass directly through the business to the owner, who claims that income on their income taxes every year. 

These types of businesses do not have the same protections as LLCs, C corps, or S corps when it comes to taxes or lawsuits.

Do Sole Proprietors need Workers’ Compensation Insurance?

In most states, sole proprietors are not required to carry workers’ compensation insurance. However, that is not true across the board. For instance, California requires that all roofers carry workers’ compensation insurance, regardless of their business type. Florida has a similar requirement for those in the construction industry.

Additionally, even if your state does not require sole proprietors to carry workers’ compensation insurance, there are compelling reasons to purchase a policy.

1. You work with other companies. 

If you work with other companies that require independent contractors to provide their own workers’ compensation insurance, you’ll need coverage. Even if your state does not require sole proprietors to have workers’ compensation insurance, entering an agreement with another business negates that exemption. 

Even if you’re not working with other businesses, serving your clients as a business owner could mean having to comply with their requirements. 

For example, a client might want to limit their liability by requiring you to carry workers’ comp coverage. These types of clients will usually require that you provide a certificate of insurance as proof of your coverage.

2. You’re injured on the job.

Many sole proprietors feel that workers’ compensation insurance is unnecessary if they have health insurance. However, most health insurance policies exclude accidents or injuries on the job. That means you could find yourself without any coverage at all in the case of a workplace accident. 

It goes beyond covering immediate medical costs, though. Serious injuries and long-term illnesses can leave you suffering for years. Health insurance does not cover periods of disability. Workers’ comp insurance, on the other hand, is designed to provide both short and long-term disability protection.

Work with Kickstand Insurance

At Kickstand, we work with clients across virtually all industries. From sole proprietors to C corporations, we help our clients find the perfect workers’ compensation insurance for their budgets and the number of employees. 

Our team of experts will guide you through the process, answer your questions, and ensure that you never overpay while still getting the coverage you need. Get in touch today for a free, no-obligation quote!

Mordechai Kamenetsky

Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.

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