I Own an LLC in Arizona: Do I Need Comp?

If your Arizona LLC has any employees, yes, it needs workers compensation; whether the members themselves are covered turns on how much of the LLC each one owns. In Arizona a member who owns less than 50 percent is a covered employee automatically, while a member who owns 50 percent or more is left out unless the insurer adds them by endorsement.

Who this is for: Arizona LLC owners, whether a single-member LLC with no staff, a multi-member LLC, or an LLC running a payroll of W-2 employees.

The short version

Any employee means a policy is required (A.R.S. section 23-961), from the first regularly employed worker, with no headcount minimum.
Members under 50 percent are covered by default. Arizona treats a member who owns less than half of the LLC as a covered employee automatically.
Members at 50 percent or more are out by default. A member who owns half or more is not a covered employee unless they elect in through a carrier endorsement.
Election runs through the insurer, not the state. There is no state exemption certificate; inclusion or exclusion is handled on your policy by endorsement.
Employees always get covered from day one once the LLC has any regularly employed worker.

How Arizona treats LLC members

This is the part owners get wrong. Arizona does not use a single rule for every member; it draws a line at 50 percent ownership. A member who owns less than half is automatically an employee, so their own on-the-job injuries are covered without doing anything. A member who owns half or more is not an employee by default, and if that owner wants their own injuries covered, the insurer has to accept them onto the policy by endorsement, at the carrier's discretion. Because the split is by ownership share, a two-member LLC split evenly leaves both members out by default, while a minority member in a manager-owned LLC is covered automatically.

What applies to your LLC

Your LLC setup	Is comp required?	What owners and staff should know
Single-member, no employees	No	One 100 percent owner is out by default; you may still buy a policy for contract demands
Two members at 50/50, no other staff	Usually no	Both are 50 percent owners, so both are out unless each elects in by endorsement
Manager owns 80 percent, minority member owns 20 percent	Yes, for the minority member	The 20 percent member is a covered employee automatically; the majority owner is out unless elected in
LLC with any non-owner employees	Yes	Employees covered from day one; members follow the 50 percent rule

Covered by default, or electing in

Because the rule keys off ownership, the first thing to check is each member's percentage. A member under 50 percent who wants to stay off the policy generally cannot simply opt out the way owners can in some states, because Arizona already treats them as an employee. A member at 50 percent or more who does hands-on work often asks the insurer to add them by endorsement so a job-site injury is paid by comp, using an assumed wage the statute sets between a floor and the state maximum. The limited liability in an LLC shields your personal assets from many business debts, but it does not by itself answer an injured employee, which is exactly what comp is built to handle.

A Scottsdale example

Illustrative, not a quote. A two-member cleaning LLC in Scottsdale, owned 50/50, hires its first regular employee. That hire makes a policy mandatory, and the new worker is covered from day one. The two members each own half, so they are out of coverage unless each asks the insurer to endorse them onto the policy; one member who cleans alongside the crew elects in, and the other, who only handles the books, stays out. When a property manager asks for proof of coverage before a contract, the LLC produces a certificate the same day. See our workers comp for cleaning businesses page.

Real questions Arizona owners ask

Does my Arizona LLC need workers comp?

If the LLC has any employees, yes, from the first regularly employed worker. Whether the members themselves are covered depends on ownership share: under 50 percent is covered by default, 50 percent or more is not.

Are LLC members covered by default in Arizona?

Only if they own less than 50 percent. A member under half is a covered employee automatically, while a member who owns 50 percent or more is left out unless the insurer adds them by endorsement.

How does a 50 percent LLC owner get covered in Arizona?

By electing in through a carrier endorsement, at the insurer's discretion. There is no state exemption certificate; inclusion for a majority member is handled on the policy, using an assumed wage the statute sets.

My LLC has two equal members and no staff. Do we need a policy?

Usually not by state law, because both are 50 percent owners who are out by default and there is no other employee. You may still buy one, and either member can elect in to cover their own injuries.

Does my single-member LLC need workers comp in Arizona?

Not by state law if you have no employees, since a sole member owning 100 percent is out by default. Many single-member LLCs still buy a policy when a client or general contractor requires proof of coverage.

Do I have to cover employees even if the members are out?

Yes. The member rules only decide whether the owners are on the policy. Any non-owner employee must be covered from their first day once the LLC has a regularly employed worker.

Can a minority member opt out of coverage in Arizona?

Generally no. Arizona treats a member under 50 percent as a covered employee, so they are included rather than opting out. The election path exists for 50 percent owners who want to be added in.

Why Arizona owners choose Morrow

We shop the right market for you. Arizona has no state fund, so you buy workers comp from private insurers on the open market, and we compare several to find your best rate. If your work is hard to place and no insurer will take you, a guaranteed state backstop (the NCCI-run assigned risk plan) will still cover you.
We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.

Related Arizona guides

Every Arizona business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.

This guide is general information, not legal advice. Arizona rules and penalty amounts can change, so verify current requirements with the Industrial Commission of Arizona or a licensed advisor before you rely on them. Last updated: July 2026.