When you decided to go into business and considered all of the
options and benefits associated with the different types of ownership,
it probably never crossed your mind that your choice may in fact affect
the amount in premium that you pay for Workers' Compensation Insurance
coverage. Not only does your type of operation and number of employees
affect your premium, business ownership also has a financial impact.
Whether
or not you as the business owner will be included, excluded, or not
eligible for coverage will depend primarily on the type of legal
structure that you are currently operating under. Here is a quick
overview of whether your earnings as an owner may be included for
premium purposes based on some common entity types:
Individual:
Individually owned 100% by proprietor. Not eligible/excluded from
coverage under the Ca Workers' Compensation Insurance system, therefore
earnings will not be included for premium purposes. May elect however to
be included for coverage.
Partnership: Each general partner is assumed to own equal shares. General Partners
can choose to be excluded from coverage under the CA Workers'
Compensation Insurance System. The earnings of all General Partners who
choose to be included for coverage will be picked up at the Partner
minimum, not to exceed the Partner maximum, as set annually by the
Workers Compensation Insurance Rating Bureau (WCIRB). The
minimum/maximums for 2012 are $ 40,300.00 and $ 104,000.00 respectfully.
Partners that are non-working and not paid are not eligible for
coverage.
Limited Liability Company: Each member is assumed to own equal shares. Managing members
may choose to be included for coverage under the CA Workers'
Compensation Insurance System. The earnings of all managing-members who
choose to be included for coverage will be picked up at the Officer
minimum/maximum. All working and paid members will be picked up at their
actual compensation rates. Managing members that are non working and
not paid are not eligible for coverage.
Corporation:
Voting shares determine percentage of ownership. All officers and Board
of Director Members while providing services for pay for a quasi-public
or private corporation shall be included for coverage and such earnings
will be limited to the Officer Minimum/Maximum, however when the
officers and directors hold all shares in a private corporation, they
may elect to be excluded from coverage. All working and paid corporate
officers that do not hold stock will be picked up at the officer
minimum/maximum. Any officers that are non working and not paid are not
eligible for coverage.
The rules concerning ownership are very
complex and can have a very large financial impact on your business.
Knowing which questions to ask you Insurance Broker may save you
thousands of dollars in additional premium resulting from changes in
ownership not disclosed to your Carrier due to outdated information
contained in your Brokers files or because you failed to notify your
broker or Carrier of any subsequent changes in ownership.
Arm
yourself with useful information and save yourself thousands of dollars
in premium! Additional information can be found in the Experience Rating
Plan, which is part of the California Code of Regulations or contact
your Insurance Broker. Also, consider a separate disability insurance
policy for income protection for business owners; it may save you
hundreds or thousands of dollars in Workers' Compensation premium
annually.
