Learn more about how health insurance works for LLCs.
As a small business owner, you may be wondering whether you can get small business health insurance through your LLC. The short answer is that while you usually cannot get small business health insurance through your LLC, you can still enroll in individual health insurance coverage for yourself.
You can generally deduct the cost of individual health insurance from your taxes as a self-employed LLC member, although this ultimately depends on several factors, including the tax classification of the LLC and for whom the deduction is being taken out for.
Continue reading to learn about how health insurance works for LLCs.
What is an LLC?
A limited liability company, commonly abbreviated as LLC, is a business structure with both “pass-through” taxation and legal liability separate from its owner.
- Like a sole proprietorship, an LLC has “pass-through taxation,” which means that the income and loss of the business is reported on the personal income tax form of the business owner. This means that an LLC does not constitute a separate entity for tax purposes, according to the IRS.
- According to LegalZoom, unlike a sole proprietorship, an LLC has separate legal liability (like a corporation). If a suit was filed against your LLC, then the LLC itself would be sued, not you as the individual. As a result, in most cases the plaintiff would only be entitled to recover the LLC’s business assets, not your personal property or assets.
The owners of an LLC are called members. Single-member LLCs are taxed as sole proprietorships, while multiple-member LLCs are taxed as partnerships.
An LLC can also decide to be taxed as a corporation or S corporation, and its members would then pay taxes like shareholders of a corporation or S corporation owners.
Can you get health insurance through your LLC?
You usually cannot get small business health insurance or a group plan through your LLC if you have no employees, although you can still get individual health insurance as an LLC owner or member.
If your LLC does not have employees besides yourself, you would most likely be a sole proprietor and could only enroll in individual health insurance, not small business health insurance.
However, sole proprietorships with one employee besides the business owner can usually qualify for group health coverage.
In other words, single-member LLCs would likely only qualify for individual health insurance instead of group health insurance.
Can an LLC deduct health insurance premiums?
Getting a health insurance LLC deduction depends on whether the deduction is being taken out for non-member employees or members of the LLC, as well as the legal and tax status of the LLC and whether the LLC is classified as a sole proprietorship, partnership, or corporation. According to LegalZoom:
- For non-member employees – An LLC can deduct the cost of medical insurance for all employees who are not members of the LLC. This deduction can also include the amount the LLC pays for employees to have qualified long-term health coverage.
- For the self-employed – Members of an LLC are considered self-employed if their LLC is a sole proprietorship or partnership. While self-employed business owners can deduct the cost of acquiring health insurance for themselves, a spouse, and qualified dependents, they may or may not be able to qualify for small business health insurance. For example, sole proprietors usually would not qualify for a group plan unless they have employees, but a sole proprietor could still enroll in an individual health insurance plan.
- For corporations – If shareholders of an LLC receive corporate tax treatment, they would not be considered eligible to receive health insurance from the business unless they are bona fide employees. If a corporation provides health insurance to non-employee shareholders, then the company could not take this deduction on their corporate tax return.
Overall, self-employed LLC members can usually deduct health insurance as a business expense.
eHealth can help you get health insurance for your LLC
With eHealth, you can shop for health insurance that fits the needs of your LLC. Whether you are a business owner with employees and are looking for small business health insurance, or are a sole proprietor seeking individual health insurance, eHealth makes it easy to find the right health plan for your cost and coverage preferences.
Visit eHealth.com or speak with one of our licensed health insurance agents today to find the optimal health care solution for your small business.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.