Although a sole proprietorship is the simplest way to structure a small business, you may be unsure how being a sole proprietor affects your health insurance options. If your sole proprietorship has employees, then you may be able to qualify for group health insurance. Keep reading to learn more about your options for health insurance as a sole proprietor.
The Small Business Administration defines a sole proprietorship as an unincorporated business owned and run by one individual, with no distinction between the business and the owner. The sole proprietor is entitled to all profits and is personally responsible for all of the business’s debts, losses, and liabilities.
Since the sole proprietorship and its owner are considered identical, a sole proprietor can generally be defined as a small business when it comes to qualifying for a small business health insurance plan; however, if you have no employees but yourself, then your sole proprietorship will likely not qualify you for a group plan.
Like other small business owners, sole proprietors do have the ability to hire employees. As per the IRS, any time a sole proprietor hires an employee other than an independent contractor, the sole proprietorship will need to obtain an Employer Identification Number (EIN). When working without employees, the sole proprietor’s Social Security number identifies the company for tax purposes.
No, sole proprietors usually do not qualify for group insurance, unless the sole proprietorship includes at least one full-time equivalent employee.
To qualify for a group insurance plan, your sole proprietorship would need to have one common-law, or full-time equivalent employee beyond yourself, your spouse, or any independent contractors. Otherwise, without one qualified employee, the sole proprietor can only get individual health insurance from the health insurance marketplace or a licensed insurance agent.
According to the IRS, under common-law rules, anyone who performs services for your business is considered to be your employee (instead of a contract worker) if you control both what must be done and how something must be done.
Based on the business’s degree of control and oversight, the IRS mentions three general considerations to find out if the person providing a service is an employee or an independent contractor.
In addition to being registered as a business based on your state’s regulations, you do need to have at least one employee in order to qualify for small business health insurance. You must also contribute to paying for employees’ monthly premiums as a business owner.
As per the employer mandate in the Affordable Care Act (ACA):
Whether or not you have employees as a sole proprietor, you can find both individual and group health insurance plans that fit your budget and preferences by visiting eHealth.com.
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.