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Workers Compensation Video About Sole Proprietors

Valuable information about workers compensaton and sole proprietors.

This video's packed full of helpful information about workers compensation insurance for any business owner operating as a sole proprietor. We'll talk about the sole proprietor as a business entity and how they should be shown as a named insured on the policy. We'll talk about the special treatment sole proprietors receive in a workers compensation policy. We'll tell you if sole proprietors are included or not within workers comp coverage and when they are, how a policy is rated and how workers comp premium is effected.

Video Outline:
  • Workers Compensation: The Sole Proprietor

  • The Sole Proprietor and Workers Compensation.
    • What it means to the business owner.

  • 23,000,000 Sole Proprietorship Entities.

  • Special Treatment for Sole Proprietors.

  • How to name a Sole Proprietorship on a Workers Comp Policy.

  • What a Sole Proprietor needs to know about a workers compensation policy.

  • Two things Sole Proprietors need to remember.

Video Transcription:

A Sole Proprietor and Workers Compensation; What it means to the business owner.

Hi I'm Randy Sieberg and in this edition of Work Comp Consultants Video Network we're going to begin our series on workers compensation entities.

Today we'll talk about the Sole Proprietor and Workers Compensation insurance.

According to the US Census It's estimated there are more than 23,000,000 proprietorships operating across this country.

A sole proprietor is a type of business entity that's owned by one individual. The owner receives all receipts and or profits from the business and they are held individually responsible for all the losses and debts. In a sole proprietorship there is no difference between the individual owner and the business

The sole proprietor is one form of business entity that gets special treatment in a workers compensation policy.

Workers comp insurance is a state specific product. That means each state has it's own set of rules, statutes and methods that it's adopted for dealing with different business entities. These rules specifically address how a business owner, acting as a sole proprietor, is rated and or included within coverage on a policy.

The name of a sole proprietorship business can take several forms. It may be simply shown as the name of the individual owner such as "John Doe." Or the owner may choose to use a trade name or fictitious business name, such as "John's Mowing Service." The business may then be shown as "John Doe dba, or doing business as, John's Mowing Service."

Regardless the naming convention chosen for use, when it's a sole proprietor, there's no distinction between the individual owner and the business!

Here are a few things about workers comp you need to know if you're acting as a sole proprietor:
  • In most states a sole proprietor is excluded by statute from the workers comp act.
  • In most states a sole proprietor may elect to include themselves within the workers comp act.
  • If included, there is generally a state specific form that must be filled out and filed with the state authorities or the insurance company providing coverage.
While the workers comp policy for a sole proprietor will cover its employees, it may, or may not provide coverage for the owner.

If you are a sole proprietor and have elected to be included in coverage you'll be treated differently for rating purposes than your employees. Most states have specific guidelines and assign a "rating payroll" to be used for the sole proprietor owner. This "rating payroll" may be a flat fixed amount or it may be a banded bracket amount. Regardless the actual amount of compensation a sole prop may earn or pay themselves, it's this mandated number that must be used to rate the policy.

For example in Georgia $42,800 is the flat amount used to rate for a sole proprietor. In Illinois itís $51,000. In Florida itís $40,700. These numbers can change and many are adjusted annually.

It's important to understand that regardless the amount of compensation the owner, sole proprietor actually earns, it's the "rating payroll" assigned by the state that's used to calculate the premium for the sole proprietor who's included in coverage.

Remember two things:
  • In most states sole props must elect to be included in coverage otherwise they are not;
  • If included, special rating rules apply as to how premium is charged.
You can learn more about sole proprietors and workers compensation insurance and even look up the "rating payroll" at our website, WorkCompConsultant.com

I hope this information has been helpful!

And Thanks for watching!

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