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Ask SmallBizLady: Does a Sole Proprietor Need Workers’ Compensation Insurance?

Ask SmallBizLady: Does a Sole Proprietor Need Workers' Compensation Insurance? social imageThe short answer to the question of whether sole proprietors need workers’ compensation insurance is No and Yes. Sole proprietors or freelances with no employees are typically not required to purchase workers’ compensation insurance. Nonetheless, it may be beneficial for your enterprises to do so when you’re a sole proprietor, and you do work that could result in an injury.

For example, if you are a delivery driver, contractor, roofer, hairdresser, residence daycare provider, or replace professor, these are the kinds of businesses where you could be injured in the performance of your service. For these types of businesses, I propose you consider investing in workers’ compensation insurance to protect yourself. That road, if you’re injured make business, your workers’ comp programme can help pay for medical overheads and permutation wages while you recover.

The issue of whether you need workers’ compensation insurance is complex, though. Now are things you should keep in mind.

3 Factors when Deciding Whether to Purchase Workers’ Compensation Insurance

There are several regards before deciding whether or not to purchase workers’ compensation insurance. If you’re a sole proprietor, here are three things that should factor into your decision.

1. Your Client May Require It

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While you may be legally excluded from purchasing workers’ compensation insurance, “owners corporations” could require you as an independent contractor to have your own workers’ compensation plan on yourself.

Clients can require you to have your own workers’ compensation coverage as a acces to limit their liability. Some business have faced workers’ comp claims from independent contractors who were injured while on their assets, accommodating a service. Now, as a prudence, many corporate clients have begun to require any contractors they hire to carry their own workers’ compensation insurance coverage.

2. Watch Your Legal Requirements

The IRS is very strict about who you can claim as a 1099 independent contractor and who must be a W2 employee. Every state has its own workers’ compensation principles more. Some states will examine subcontractors as your employees and require you to have workers’ compensation insurance for them.

3. Don’t Misclassify Your Workers

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Don’t think just because you’re not hiring a worker full-time that you won’t have to pay employment taxes, give them a W-2, or “re particularly concerned about” works’ comp. If any of your subcontractors don’t give the services they provide to you to the general public, there’s a strong chance they could be legally considered your employee.

Also, if one of your subcontractors is injured while working for you, and the territory determines that the worker genuinely should have been categorized as an employee, it could result in substantial penalizes. Business proprietors can face a number of penalties for hiring subcontractors who are actually performing as employees. You may need to require any subcontractor to have proof of workers’ compensation insurance to protect your business. But even that might not save you. Even if your subcontractors have their own coverage, your nation may still determine that they are technically your employees, which means you’re responsible for covering them with craftsmen’ comp.

Get Professional Advice

Meet with an attorney or HR consultant to review your job descriptions before hiring any contractors to determine if the workers you need will be contractors or employees of your fellowship to determine your the responsibilities and if you need to purchase workers’ compensation insurance.

Do you have a burning business question? Send it to support @melindaemerson. com, and we’ll get it up.

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