NJ Workers' Compensation - Who Must Insure?

[Tax Sleuth]

The rules for NJ workers' compensation insurance regarding who must insure read as follows and are from the State of New Jersey Department Of Labor and Workforce Development website.


Who Must Insure?


The following employing entities must have workers' compensation insurance in effect:

Corporations – All corporations operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, including corporate officers, perform services for the corporation for prior, current or anticipated financial consideration *.


Partnerships/LLC's – All partnerships and limited liability companies (LLC's) operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding partners or members of the LLC, perform services for the partnership or LLC, for prior, current or anticipated financial consideration*.


Sole Proprietorship – All sole proprietorships operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding the principal owner, performs services for the business for prior, current or anticipated financial consideration*.

* Financial consideration means any remuneration for services and includes cash or other remuneration in lieu of cash such as products, services, shares of or options to buy corporate stock, meals or lodging, etc.


How is employing entities above defined in relation to the following scenario? If a single member LLC is now being treated as an S Corporation for tax purposes in NJ but remains an LLC as the legal entity in NJ, is the owner required to pay for workers' compensation insurance just for himself?

[Tax Sleuth]

NJ Workers' Compensation

I researched my above questions and wanted to share the answer. The answer is simply the employing entity in NJ is the LLC since this is the way the business was registered. The owner is not required to pay for workers' compensation insurance just for himself despite the fact that the business is now being taxed as an S Corporation.

[Gary2]

I researched my above questions and wanted to share the answer. The answer is simply the employing entity in NJ is the LLC since this is the way the business was registered. The owner is not required to pay for workers' compensation insurance just for himself despite the fact that the business is now being taxed as an S Corporation.

Thanks for getting back to us with the results of your research. I appreciate the extra effort.

Your result is consistent with the principle that being taxed as an S Corp is not the same as being an S Corp; at the state level, an LLC is first and foremost an LLC, before getting into the taxation. What makes these questions difficult is that we can't always count on states being that consistent.