The success of a company is, in many ways, tied to the health of its employees and owners. Following the COVID-19 pandemic, the world is more aware than ever that if people are not healthy, society cannot function. That is why acquiring quality health insurance for a business is critical.
However, the process of establishing a health plan may seem too complex for small businesses. Health insurance is a nuanced field on its own, even before it is applied to various business niches. An LLC, for example, sits at a unique crossroads, embodying multiple traits of a corporation without itself being incorporated.
To provide adequate protection for their business, owners should familiarize themselves with the options for health insurance and the ways to get it. Here is an overview of how to get health insurance for LLC owners, including some common difficulties and important definitions.
What Is an LLC, and How Are They Insured?
Before acquiring health insurance, understand whether your business is properly labeled and qualifies as an LLC. An LLC, or limited liability company, is a specific type of business structure that combines the pass-through taxation model of a sole proprietorship or partnership with the limited liability of a larger corporation.
This structure represents the best of both worlds for many small business owners, as it allows them the freedom necessary for an operation of their size but does not leave them legally liable for the company’s debts.
LLCs are flexible in their construction, subject to fewer regulations, and capable of being organized under various management structures. This makes insuring an LLC complicated.
Providing health insurance for a single-member company would necessarily be different than offering coverage for a company with hundreds of employees. Luckily, there are insurance options that fit each business model.
How To Get Health Insurance For LLCs?
If an LLC is a business structure that takes advantage of the best of both worlds, it also inherits its complications. When a traditional corporation provides health insurance, it offers group health coverage for employees.
However, the type of health insurance required can be confusing since an LLC is not a traditional corporation—and the proprietors or partners can be both owners and core employees. LLCs not only have to deal with how to insure their employees but also their owners.
In general, LLC owners will either abide by a group health insurance model, an individual health insurance model, a health insurance exchange, or an alternative reimbursement arrangement. Which is right for a specific LLC owner depends on their business structure and how the owner filed when registering the business.
An LLC owner who filed as a non-member employee will likely need to get individual health insurance. A group health insurance plan will not cover an employee who is not a member. This allows freedom in finding the right coverage, but individual health insurance plans are often not the most cost-effective option.
An LLC owner who filed as self-employed will be eligible to receive group health insurance just like any other employee in the company. This type of insurance coverage works via collaborative payment and might be tax deductible.
However, even if the LLC owner did not register as self-employed, they might be able to get group health insurance if they are part of a partnership. If the owner is self-employed, they will shop for plans from an insurance provider or broker. But if the owner is a partner, they should work through an accountant or tax advisor to find the right option.
Choosing a health reimbursement arrangement is becoming more popular with small businesses. Under this option, an insurance company reimburses all medical expenses tax-free, with the initial payments managed by the LLC. Health reimbursement agreements apply to individual and group plans.
LLC Health Insurance and Taxation
LLC owners should consider their taxes when deciding which health plan is right for the company. As established, LLCs can come in various shapes and sizes, meaning that one company will be taxed differently. How the business is taxed will impact what health plan is best.
If the owner is the sole member of the LLC, the company will be taxed as a sole proprietorship or self-employed, which means that insurance premiums will not be tax deductible. LLCs with multiple business owners are taxed as partnerships, with profits and losses processed through their tax returns.
Get Health Insurance for Your LLC from the Experts
The LLC business structure and health insurance complexities can make finding the right health plan intimidating. That is why working with professionals with experience insuring LLCs and other small business arrangements is critical.
The professionals at Burton & Company can help your LLC navigate the process of acquiring health insurance that suits your business structure. Contact Burton & Company to discuss LLC health insurance and the multiple options.
