Do LLC Owners Need Workers' Comp? Owners, First Employees and Construction

Workers' compensation insurance pays for medical care and lost wages when an employee is hurt on the job. Whether your LLC has to carry it depends on three things: whether anyone besides the owners works for you, what kind of work the business does, and which state the work happens in. Each state sets its own rules, and the U.S. Department of Labor lists every state workers' compensation office if you want the exact rule for yours.

Owners are a special case

Workers' comp laws are written around employees. LLC owners are often not counted as employees, so an owner who works alone may be outside the requirement. The details vary. Some states leave owners out unless they opt in, and others count owners unless they file a form to exclude themselves.

Two things change that. How the LLC is taxed can matter, because an owner who takes a salary through payroll can look like an employee for some purposes. And the industry can matter, which is the construction case below. Because each state draws these lines itself, the only reliable answer for your LLC is your state agency's own page.

When you hire your first employee

Hiring is the usual trigger. In most states coverage is required once you have an employee, and some states only require it after a set number. Part-time workers generally count toward the requirement. Correctly classified independent contractors generally do not, but classification depends on how much control you have over the work, not on the label in the contract.

Plan to have coverage in place before the employee starts, not after the first payroll. If the hire is in a state where your LLC has not registered before, workers' comp is a third task alongside the two in our guide to hiring an employee in another state: entity registration with the Secretary of State and payroll tax registration with the state agencies. Our list of penalties for not registering, by state, shows what is at stake if you skip the state registration.

Construction and contracting

Construction is where the general rules bend most. Many states apply stricter requirements to construction work, and some extend them to owners or to smaller crews than they would in other industries. A single-member LLC doing contracting work can need coverage, or a formal exemption certificate, when an office-based LLC of the same size would not.

There is also a practical requirement that has nothing to do with the statute. General contractors and many clients ask subcontractors for a certificate of insurance (a one-page proof from your insurer that your policy is active) before they let them on site. If you cannot produce one, some will withhold payment or charge you for coverage under their own policy. Check both your state's construction rules and what your contracts require.

The state-fund states, and Texas

In four states, workers' comp goes through a state agency rather than a private insurer's quote.

Ohio. The Bureau of Workers' Compensation describes itself as the exclusive provider of workers' compensation insurance in Ohio.

North Dakota. Workforce Safety & Insurance states that North Dakota law does not allow private insurers to underwrite workers' compensation in the state.

Washington. Labor & Industries states that private workers' comp coverage is not allowed. You buy coverage from L&I or qualify as a certified self-insured employer.

Wyoming. Businesses that work in Wyoming or hire a Wyoming resident register with the Department of Workforce Services. The department decides whether coverage under the state's workers' compensation fund is required. Owners, sole proprietors and contractors who need an exemption letter register too, even if coverage turns out to be optional.

Texas is different in the other direction. The Texas Department of Insurance says private employers can choose to carry workers' compensation, but it is not required in most cases. Employers who go without it, called non-subscribers, must report that to the state.

Getting covered

Outside the four state-fund states, workers' comp is bought from a private insurer. If you are hiring, or you do construction or contracting work, get a quote before the work starts so the policy is in place on day one.

Common questions

Does my LLC protect me if an employee is hurt and I have no coverage? Not from the workers' comp requirement itself. The LLC separates business debts from your personal assets, but a state can still penalize the business for operating without required coverage, and the employee's claim does not go away.

Do I need workers' comp for a contractor? Usually not, if the person is correctly classified as an independent contractor. If they are really an employee under your state's test, they count, whatever the contract says.

Is workers' comp the same as general liability insurance? No. General liability covers injuries and damage to other people, such as customers. Workers' comp covers your own employees. Many small businesses need both, and they are separate policies.

Do I need a policy in every state where I have an employee? Coverage generally has to apply in each state where your employees work. A policy written for one state may not cover work in another, so tell your insurer or state fund every state involved before the work starts.

Bottom line

An owner working alone is usually outside the requirement, but check whether your state counts owners unless they opt out, and treat construction as its own case. The first employee is the usual trigger. Confirm your state's rule with its own agency, and have coverage in place before anyone starts work.

This guide describes general workers' compensation rules for LLC owners as of 2026. Coverage requirements, owner exemptions and employee thresholds are set by each state and change. This is not legal or insurance advice. Confirm your obligations with your state's workers' compensation agency or a licensed professional. Some links on this page are affiliate links.