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Author Topic: Exclusion of Officers, Members of LLC, General Partners, etc.  (Read 30274 times)
 
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The valetudinarian
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« on: July 13, 2008, 07:50:50 PM »

CALIFORNIA ONLY

Here is a summary of the rules regarding the Exclusion of Proprietors of the following types of entities.

Exclusion of Executive Officers of Corporations
Executive Officers of corporations may be excluded subject to the following criteria:
  • The Officers and/or Directors must hold all the stock of the corporation (i.e. a closely-held, or privately-held corporation).
  • Any Officer or Director requesting to be excluded must own stock.
     
Exclusion of Members in a Limited Liability Company
Only Managing Members who are empowered to run the day-to-day operations may be excluded.

Exclusion of Partners of a General Partnership
Only General Partners may be excluded.  Limited Partners may not be excluded, and will be charged premium on any wages they earn if they work for a Limited Partnership.

Exclusion of Sole Proprietors
Sole Proprietors are usually excluded from Workers Compensation Policies.  The policy may specifically include them by endorsement.
Relatives residing in the home of a Sole Proprietor are excluded unless specifically named by endorsement.

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California Labor Code (§ 3351) governs the inclusion or exclusion of these individuals.


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« Last Edit: August 31, 2016, 06:10:06 PM by beancounter » Logged
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« Reply #1 on: July 14, 2008, 10:43:38 AM »

Good summary "v" - thank you!  Wink

What about situations involving a husband and wife: because California is a community property State, is a husband and wife considered to be a Sole Proprietor; and can the spouse of an Officer be excluded?
« Last Edit: July 14, 2008, 10:45:46 AM by auditor1 » Logged

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« Reply #2 on: July 14, 2008, 01:36:41 PM »

A husband and wife entity may be written as an individual. However, if The husband OR wife exclusively own a separate business, theses two entities cannot be combined for Experience Modification purposes.

A spouse of an officer may be excluded as long as the parameters at  You must login to view links.
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Please do not let the fact that California is a community property State lead you to false conclusions. The USRP rules do not consider this situation in the rules. For instance. the combinability of Corporations would be based on stock holdings not the common law standards.
« Last Edit: July 14, 2008, 01:51:09 PM by The valetudinarian » Logged
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« Reply #3 on: July 14, 2008, 05:03:27 PM »

Quote
What about situations involving a husband and wife: because California is a community property State, is a husband and wife considered to be a Sole Proprietor; and can the spouse of an Officer be excluded?

The most common scenario is the assertion of, say, the President, that his wife should be excluded from coverage because of Community Property laws.  His rationale is that, for example, if the marriage dissolves, each spouse would get half of the stock - even if the stock certificate shows only the President's name as the stockholder.

But, as Val says, the Community Property Laws don't confer ownership status on a spouse who, although an Officer or Director, doesn't own stock; or on a spouse who owns stock, but isn't an Officer or Director.  Generally, owners have decision-making authority and personal liability for debts, etc. while non-owners do not.

For questions of coverage, only owners can be excluded; for experience rating questions, ownership determines whether two or more entities are combinable.  (Then, of course, there are instances where combinability determines classification).
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« Reply #4 on: January 16, 2009, 12:43:31 PM »

Exclusion of Sole Proprietors
Sole Proprietors are usually excluded from Workers Compensation Policies.  The policy may specifically include them by endorsement.
Relatives residing in the home of a Sole Proprietor are excluded unless specifically named by endorsement.

I seem to remember that State Fund includes all relatives, residing or not, unless endorsed to exclude...isn't that correct?
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« Reply #5 on: January 16, 2009, 07:22:52 PM »

Back in my test auditor days at the Rating Bureau...we were told that the State Fund operates differently than private carriers regarding relatives:

Private carriers exclude owners and their residing relatives automatically, unless they are specifically endorsed to be included on the policy (although I don't think underwriters ever endorse owners or their residing relatives to cover them - they don't want the 24-hour exposure).

The State Fund, however, automatically includes residing relatives of sole proprietors unless the policyholder requests to have them excluded by endorsement.  They pick up extra premium by doing so, and many of their customers aren't aware that they can ask to exclude their residing relatives.  I think they generate more additional premium for residing relatives than they lose in claims for them.

On a side note: SCIF will also cover the owner if requested by the policyholder (even if there are no employees).  So, employers that hire independant contractors who are sole proprietors with no employees of their own, can still obtain evidence of coverage to establish their independent status.  Wink
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« Reply #6 on: August 30, 2012, 11:37:28 AM »

Here's a good summary from You must login to view links.
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SCIF
(Q&A #12), and the You must login to view links.
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« Reply #7 on: September 11, 2012, 07:26:36 PM »

CALIFORNIA ONLY

Here is a summary of the rules regarding the Exclusion of Proprietors of the following types of entities.

Exclusion of Executive Officers of Corporations
Executive Officers of corporations may be excluded subject to the following criteria:
  • The Officers and/or Directors must hold all the stock of the corporation (i.e. a closely-held, or privately-held corporation).
  • Any Officer or Director requesting to be excluded must own stock.
     

Exclusion of Members in a Limited Liability Company
Only Managing Members who are empowered to run the day-to-day operations may be excluded.

Exclusion of Partners of a General Partnership
Only General Partners may be excluded.  Limited Partners may not be excluded, and will be charged premium on any wages they earn if they work for a Limited Partnership.

Exclusion of Sole Proprietors
Sole Proprietors are usually excluded from Workers Compensation Policies.  The policy may specifically include them by endorsement.
Relatives residing in the home of a Sole Proprietor are excluded unless specifically named by endorsement.

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California Labor Code (§ 3351) governs the inclusion or exclusion of these individuals.






Thank you

In a California LLC which is closely held by two members One being the CEO and the other being the manager,

1. can the manager receive a standard salary payroll check through ADP every two weeks with deductions (FICA,State etc) rather than filing self-employed when tax time comes around?

2. In the above scenario does the manager become a standard employee in the eyes of the state or can the LLC choose not to have a workmen's comp policy if both officers choose to be excluded and no other employees are to be hired?

3. Can both managers have a 100% tax deduction for both of their and their spouses health insurance premiums?
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« Reply #8 on: September 17, 2012, 08:40:59 AM »

Quote
Thank you

In a California LLC which is closely held by two members One being the CEO and the other being the manager,

1. can the manager receive a standard salary payroll check through ADP every two weeks with deductions (FICA,State etc) rather than filing self-employed when tax time comes around?

2. In the above scenario does the manager become a standard employee in the eyes of the state or can the LLC choose not to have a workmen's comp policy if both officers choose to be excluded and no other employees are to be hired?

3. Can both managers have a 100% tax deduction for both of their and their spouses health insurance premiums?

Sorry, Mirage...this forum only addresses issues relating to Worker's Comp.  Your 1st and 3rd questions are better suited for a CPA or a tax attorney.  As for your second question, as Val says above in the original post:
Quote
Only Managing Members who are empowered to run the day-to-day operations may be excluded.
Exclusion for worker's comp in your scenario is only available for those who are managing members of the LLC.  Also, only a corporation is closely-held.

I hope that helps  Smiley
« Last Edit: January 15, 2013, 12:09:26 PM by AuditorBob, Reason: correct spelling » Logged

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« Reply #9 on: June 16, 2015, 04:39:39 PM »

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Here's
a summary of the issue regarding residing relatives.

Also, a You must login to view links.
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court case
which details the history of the September 15, 1967 opinion of then California Insurance Commissioner Roddis (Ruling 157) and summarizes the impact on the CA Code of Regulations – Title 10, Sections 2257 to 2269.2.
« Last Edit: June 16, 2015, 06:45:34 PM by beancounter, Reason: added link » Logged

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