Corporations, especially those with limited numbers of shareholders like S corporations, frequently have owners participate in day-to-day activities. Labor laws that establish requirements for businesses typically focus on the treatment of the firm's employees. Workers' compensation is an insurance protection that protects employees against losses from workplace injuries.
State by State
Laws establishing who must carry workers' compensation insurance vary from state to state. Some states exempt businesses with less than a specified number of employees from obtaining coverage, while others require any business with a non-owner employee to carry it.
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Businesses typically do not need to carry workers' compensation coverage for any employees who are shareholders. Owners of an S corporation who do not work in the business do not qualify as employees and would not be eligible for coverage. Some states include employee-owners when counting the number of employees but do not require the company to provide coverage to the owner.
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