Ohio workers' compensation for an LLC: BWC rules and owner coverage
Ohio is a monopolistic workers' compensation state: an Ohio LLC with even one employee must buy coverage from the Ohio Bureau of Workers' Compensation (BWC) unless it qualifies to self-insure. Members of an LLC taxed as a sole proprietorship or partnership are not covered automatically but can elect coverage on themselves.
Is Ohio a monopolistic workers' compensation state?
Yes. BWC describes Ohio as one of four monopolistic workers' compensation states, with an exclusive state fund run by a board of directors appointed by the governor and regulated by the legislature. In most states a business buys workers' comp from a private insurance company. In Ohio, private employers pay premiums into the state insurance fund instead (ORC 4123.35(A)).
The one alternative is self-insurance. ORC 4123.35 lets the Administrator grant self-insuring status to employers that qualify, and those employers pay assessments to support the system. In practice, self-insurance is for large, established employers. A new LLC will be a state-fund employer.
What this means for you: there is no shopping for a workers' comp carrier. You apply to BWC, BWC sets your premium using its classifications and rates, and BWC handles claims. Insurance agents may still offer related coverage, so ask yours what, if anything, the state fund policy leaves out for your type of work.
Who must carry Ohio workers' comp coverage?
ORC 4123.01 defines an employer to include every person, firm, and private corporation that has one or more employees regularly in the same business under any contract of hire, written or oral. BWC's own form puts it plainly: all employers with one or more employees must carry workers' compensation coverage.
The instructions to BWC's Application for Ohio Workers' Compensation Coverage (U-3) list who needs a policy:
- Any employer with employees whose hiring contract was completed in Ohio.
- Any employer with employees whose main supervising office is in Ohio.
- Corporations with more than one owner or officer. Those officers are statutory employees, subject to minimum and maximum payroll reporting unless they meet the criteria for exclusion.
- Independent contractors and subcontractors that have employees of their own.
- Domestic household employers that pay a worker at least $160 in a calendar quarter.
- Sole proprietors, partners, and an individual incorporated as a corporation without employees, if they want coverage for themselves.
An LLC is not exempt because of its structure. If the company has even one employee on payroll, plan on a BWC policy from the first day that person works.
Owners with no employees sometimes need a policy anyway, because a general contractor or commercial client asks for a BWC certificate before they will hire you. The U-3 has a No Employee Questionnaire for exactly that case: it asks why you want the policy so BWC can underwrite it properly. Hiring also triggers state tax registrations; see our guide to Ohio employer withholding registration.
Does an LLC owner need workers' comp in Ohio?
It depends on how the LLC is classified. BWC's U-3 instructions sort LLCs into three types, and coverage for the owners follows from that:
| BWC classification | What it means | Owner coverage |
|---|---|---|
| LLC acting as a sole proprietor | One member, disregarded for federal tax purposes | Elective. The member may choose coverage. |
| LLC acting as a partnership | Two or more members, taxed as a partnership unless it elected otherwise on IRS Form 8832 | Elective. Members may choose coverage. |
| LLC acting as a corporation | Has elected to be taxed as a corporation | Ask BWC how its corporate-officer rules apply to your members |
Ohio Administrative Code 4123-17-07, cited on the U-3, lists the people who qualify for elective coverage: sole proprietors, partners, LLCs acting as a sole proprietor or partnership, family farm corporate officers, ordained or associate ministers, and an individual incorporated as a corporation.
BWC's warning on its elective coverage form is direct: if you choose not to cover yourself and you are injured at work, BWC will not provide coverage, and other insurance may not cover your work-related disability or medical bills. For an owner doing physical work, that is a real risk to weigh. Our guides to the Ohio single-member LLC and Ohio LLC vs. S corp explain the tax classifications behind these categories.
How elective coverage for LLC members is priced
Elective coverage is not a flat fee. It is priced like any other payroll, using a reportable wage for the owner and the rate for the work the owner does.
- BWC sets a minimum and maximum reportable wage based on the statewide average weekly wage (SAWW), calculated each year by the Ohio Department of Job and Family Services.
- The minimum is 50% of the SAWW. The maximum is 150% of the SAWW.
- An owner who earns between the two reports actual net income: Schedule C for a sole proprietor, or the Form 1065 Schedule K-1 for a partner, including draws.
- Job duties and the business's operations set the classification and the premium rate.
BWC's own U-3 instructions give an example. A sole proprietor roofer who added coverage July 1, 2020, received no discounts, and earned under the minimum reportable payroll for the year was charged on a reportable wage of $25,480 at a rate of 0.099625, for an annual premium of $2,538.45. Your numbers will differ by year, class, and discounts; the example shows how the math works, not what you will pay.
Adding or cancelling elective coverage later
If you did not elect coverage on the original application, you can add it later with BWC's Form U-3S. Coverage starts on the date BWC receives the completed application. It stays in place, and renews each July, until you cancel it in writing. To cancel back to the original effective date, BWC must receive the request within 45 days of the first invoice that included elective coverage.
How to apply for Ohio BWC coverage (Form U-3)
New employers apply on the Application for Ohio Workers' Compensation Coverage, Form U-3. It comes with a $120 non-refundable application fee, and BWC returns applications that arrive without it.
| Method | How it works |
|---|---|
| Online | At bwc.ohio.gov. Pay the $120 by card or bank account. You can save your progress for up to 15 days. Coverage starts when the application and fee are submitted successfully. |
| Send the signed application with a check or money order for $120, payable to Ohio Bureau of Workers' Compensation, to P.O. Box 15698, Columbus, OH 43215-0698. Coverage starts when BWC receives it. | |
| In person | Drop the application and fee off at a BWC service office. |
What the application asks for
- The legal business name, limited to 40 characters, and any trade names.
- The business's federal EIN or Social Security number. Our EIN filing service can get the EIN first.
- Entity type, plus the charter number, formation date, and state of formation from the Secretary of State's record.
- A primary business address. A P.O. box is not permitted.
- A detailed description of operations, including equipment and materials, which BWC uses to assign classifications.
- Estimated 12-month Ohio payroll for each type of operation, the number of employees in each, and the date you first hired or plan to hire.
- For each owner electing coverage: name, home address, Social Security number, title, and job duties.
ORC 4123.35 directs BWC to verify with the Secretary of State that every corporation and organization applying for coverage exists. If your LLC is new, file the articles first; our business formation service handles that filing.
What happens if you hire before you have coverage?
Starting late costs money. BWC's U-3 instructions say a no-coverage penalty is calculated from your first hire date through the effective date of the policy. BWC estimates it using your 12-month payroll estimate and the classification for your employees, then adjusts it if you provide actual payroll.
And because coverage begins only when BWC receives the application and fee, there is no backdating. An employee hurt the week before you applied was injured while you had no policy. Apply before the first person starts work. If you are not sure whether someone is an employee or a contractor, settle that question with your accountant or attorney before you rely on the answer.
Subcontractors and the general contractor's exposure
Contractors should read this part twice. ORC 4123.35 makes a private employer that contracts with a subcontractor liable for the subcontractor's unpaid premium on the part of the subcontractor's payroll that is for work done under that contract.
- Ask every subcontractor with employees for a current BWC certificate of coverage before work starts.
- Check that the name on the certificate matches the company you are contracting with.
- Recheck at each July renewal on longer jobs.
- Keep copies with the subcontract.
Homeowners hiring contractors get similar advice on the U-3 itself: verify that the contractor has its own active coverage. Our guide to starting a contracting business in Ohio covers the other registrations a trade business needs.
Keeping your BWC policy in step with changes to the LLC
A BWC policy is tied to a specific business and ownership group. When the LLC changes, the policy needs to hear about it. BWC's U-3 instructions point to two forms for existing policies:
- Notification of Policy Update (U-117): used to update ownership details and signatures on an existing policy, including when a family member with an active policy continues the operations.
- Notification of Business Purchase, Merger, or Sale (U-118): used when a business is bought, sold, or merged, to update the policy and collect the needed signatures.
Buying a business has a workers' comp angle that buyers miss. BWC's instructions refer to Ohio Administrative Code 4123-17-02 for when a new owner is a successor that must notify BWC, and say BWC may need payroll records from the previous employer going back up to five years. Ask the seller for those records, and for the seller's BWC policy number, before closing.
To cover an additional entity under one policy, the U-3 instructions say it must have the same ownership group. Two LLCs with different owners need separate policies.
Keep the state record current too. If the LLC's name changes, the articles are amended with the Secretary of State; our Ohio amendment filing service handles that. Then update BWC, your tax accounts, and your bank so every record shows the same legal name.
Employees outside Ohio, BWC mail, and your statutory agent
An Ohio policy is built around Ohio work. BWC's U-3 instructions say Ohio employers with employees working outside the state may need coverage in the other state for that exposure, and they point to the Notice of Election to Obtain Coverage from Other States for Employees Working Outside of Ohio (U-131). Talk to BWC before you send crews across the state line.
Policy mail, invoices, and certificates go to the mailing address on your BWC policy. Your Ohio statutory agent is a different channel: it receives lawsuits and other legal process against the company. If an injured worker or anyone else sues the LLC, the papers go to the agent. With us, service of process notifies every authorized contact, escalates to a phone call if nobody acknowledges it, and the original is kept for seven years.
We do not sell insurance or give legal or tax advice. Talk to BWC about classifications and coverage, and talk to your accountant about how owner coverage interacts with the way your LLC is taxed.
Ohio workers' comp questions for LLC owners
Can I buy Ohio workers' comp from a private insurance company?
No, Ohio workers' comp is not sold by private insurers because Ohio is one of four monopolistic states with an exclusive state fund. Private employers pay premiums to the Ohio Bureau of Workers' Compensation under ORC 4123.35. The only alternative is self-insurance, which BWC grants to employers that qualify, generally large and established ones.
How much does it cost to apply for Ohio BWC workers' comp coverage?
The Ohio BWC application fee is $120, and it is non-refundable. BWC's Form U-3 instructions say applications without it are returned unprocessed, which delays coverage. The fee is separate from your premium, which BWC calculates from your estimated payroll and the classification of your work. Annual premiums of $250 or less are billed as one payment.
Does a single-member LLC with no employees need Ohio workers' comp?
No, Ohio does not require workers' comp for a single-member LLC with no employees, but the member can elect coverage. BWC treats a disregarded single-member LLC as an LLC acting as a sole proprietor, which qualifies for elective coverage. Some clients and general contractors ask for a BWC certificate before you work, which is one reason owners elect it.
How is the BWC premium figured for an LLC member who elects workers' comp?
BWC prices an electing member's workers' comp on a reportable wage between 50% and 150% of the statewide average weekly wage, times the class rate. Members earning between those limits report actual net income from Schedule C or the K-1, including draws. Classification depends on job duties, so a roofer pays more than an office owner.
When does Ohio workers' comp coverage start?
Ohio workers' comp coverage starts on the date BWC receives your completed application with the $120 fee, or when an online application and payment are submitted successfully. There is no backdating. If you hired earlier, BWC calculates a no-coverage penalty from the first hire date through the policy's effective date. Apply before anyone starts work.
When does an Ohio BWC workers' comp policy renew?
Private employers' Ohio BWC workers' comp policies renew every July 1 and continue until you cancel in writing. Under ORC 4123.35, estimated annual premium for the coming policy year is paid in June. After the year, you report actual payroll and BWC adjusts the premium up or down. Elective owner coverage also renews each July.
What is the Ohio BWC no-coverage penalty?
The Ohio BWC no-coverage penalty charges for the time you had employees without a workers' comp policy, from first hire to the policy's effective date. BWC estimates it from your 12-month payroll estimate and employee classifications on the U-3, then adjusts it if you provide actual payroll records. Applying before hiring avoids it.
How do I cancel elective workers' comp coverage on myself in Ohio?
Cancel elective Ohio workers' comp coverage in writing using BWC Form U-3S, Section B. Coverage continues and is billed until BWC receives the written request. To cancel back to the original effective date, BWC must receive it within 45 days of the first invoice that included the elective coverage. After cancelling, BWC will not pay benefits for your work injuries.
Am I liable for a subcontractor's unpaid Ohio workers' comp premiums?
Yes, you can be liable for a subcontractor's unpaid Ohio workers' comp premium on the payroll for work done under your contract. ORC 4123.35 places that liability on the private employer that hired the subcontractor. Collect a current BWC certificate of coverage from every subcontractor with employees before work starts, and recheck it at each July renewal.
Does my Ohio workers' comp policy cover employees working in another state?
Not necessarily, because an Ohio BWC policy is built around Ohio work, and employees working outside Ohio may need coverage in that state. BWC's U-3 instructions point employers with out-of-state employees to Form U-131, the Notice of Election to Obtain Coverage from Other States. Ask BWC before sending crews or staff to work across the state line.
Related Ohio guides
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