In Arizona, an LLC member or shareholder active in the company who owns under 50% counts as an employee. An owner at 50% or above becomes one only if the carrier accepts a written application by endorsement, on an assumed wage of at least $600 a month. A sole proprietor on contract to another business may waive coverage on a form signed with that business's carrier.
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Most Arizona LLC owner workers comp questions come down to two facts: how much of the company the person owns, and whether they work in it. Arizona Revised Statutes 23-901 answers both inside its definition of an employee. A member or shareholder on the job who holds less than 50% is an employee, the same as the crew. At 50% or above, the default flips, and that owner sits outside the policy unless the carrier agrees in writing to bring them in. The statute says working shareholder, not officer, so a title alone settles nothing. Confirm each owner's status with the carrier in writing before a renewal.
| Owner | Starting Point | How That Can Change |
|---|---|---|
| Working LLC member or shareholder under 50% | An employee | The owner endorsement rule doesn't apply below the line |
| LLC member or shareholder at 50% or more | Not an employee | May be deemed one if the carrier accepts a written application by endorsement |
| Working partner, or sole proprietor of their own business | Not an employee | May be brought in by endorsement in the same way |
| Sole proprietor taken on as an independent contractor | Depends on the working relationship | May sign a waiver with the hiring business's carrier |
An owner at or above the line who wants workers comp benefits through the company has to ask for them. The statute's wording is precise: the owner may be deemed an employee upon the carrier's written acceptance, by endorsement, of an application. Acceptance is the carrier's decision, so sending a request is not the same as being on the policy.
Once the carrier accepts, Arizona assumes a monthly wage for that owner of no less than $600. Ask the carrier what figure it will report for you and how it is used for premium and for benefits.
Partners who work in the partnership and sole proprietors who run their own business are treated much like majority owners. Neither starts as an employee, and each may come onto the policy through the same written application and endorsement, at the carrier's discretion. Electing in gives the owner benefits on their own policy. The waiver below deals with a different relationship: a sole proprietor and a business that hires them as an independent contractor.
Arizona Revised Statutes 23-961 gives a sole proprietor doing work for a business as an independent contractor the option to waive workers comp from that business. The waiver is a form signed and dated by two parties: the sole proprietor and the hiring business's carrier.
The effect on the hiring side is set out in Arizona Revised Statutes 23-902(E). A business that uses a sole proprietor who has waived under 23-961 is not liable for workers comp coverage or premium for that sole proprietor. That is why a general contractor's carrier may ask for the signed form before the job starts.
The waiver speaks to one person. Under Arizona Revised Statutes 23-902(A), an employer subject to the law includes anyone who regularly employs workers in the same business, and regular employment includes work for only part of the year. An Arizona independent contractor agreement for workers comp is a different document, with its own written terms.
Illustrative scenario
A tile setter in Tucson works alone as a sole proprietor and takes a bathroom job from a general contractor. The contractor's carrier asks for the waiver, and the tile setter and that carrier both sign and date it. Partway through, the tile setter brings on a cousin to haul material for a few weeks. The waiver says nothing about the cousin, and part-year help can still be regular employment, so the tile setter would need coverage for that helper sorted out with a carrier, and the general contractor may ask for proof.
Some owners with no employees buy a policy anyway, often because a general contractor asks for one. A law approved June 22, 2026 adds Arizona Revised Statutes 23-911, with rules for these zero estimated exposure policies. It applies to policies and certificates entered into or prepared on or after July 1, 2027.
For a general contractor, a certificate on one of these policies records that the sub attested to having no employees; it may say nothing about helpers added later. The subcontractor insurance checklist for GCs lists what to collect, and the guide to uninsured sub charges explains the audit side.
The license side runs on its own track. Anyone applying for an ROC license attests to following the workers comp law, and gives a policy number if the law requires them to carry it (Arizona Revised Statutes 32-1122(B)(1)(i)). See license board workers comp proof.
Under Arizona Revised Statutes 23-906, an employee may turn down workers comp in writing before getting hurt. It says nothing about officers or owners, so it is not a route for an owner to step on or off the policy.
Assuming a Majority Owner Is on the Policy
A common mistake is to assume an owner at or above 50% has benefits because the company carries workers comp. Without the carrier's written acceptance by endorsement, that owner is not deemed an employee, and an injury may fall outside the policy. The reverse slip happens too: leaving a working member below the line off the payroll report. Confirm each owner with the carrier.
Owner status and sub waivers tend to surface at the premium audit. Section 23-961 has a second rule that matters here: a carrier can't collect premium on people it claims are employees under the contractor or control tests until it has made written audit findings. If an audit bill adds payroll for an owner or a sub, ask for those findings. The guide on what happens at a premium audit sets out how to contest the bill.
List every owner with entity type, share held, the work they do and whether the carrier has accepted them by endorsement. The Arizona contractor workers comp rules page covers the statutory employer rule, and Arizona general contractor workers comp explains how builders' payroll is rated.
The rules don't line up across states. California lets certain officers, partners and managing members waive under ownership tests, explained on the California workers comp owner waiver page. Nevada lets officers and LLC managers reject industrial insurance by notice, as Nevada LLC owner workers comp explains. The workers comp rules by state page compares all three.
With the owner list in hand, get an Arizona contractor workers comp quote with each owner's status noted, and a licensed broker reviews it with you. Confirm every owner choice with the carrier before it goes on the policy. More owner, audit and state rules are collected in the workers comp guides.
Send your trade, state and payroll, and a broker reviews the request. If you would rather talk first, leave a number.
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No. A member with 50% or more joins the policy as an employee only once the carrier accepts a written application by endorsement, and acceptance is at its discretion. Paying premium for your crew doesn't bring you in. Ask the carrier for its owner application and keep the endorsement with your policy once it issues.
Under Arizona's definition, yes. A member who works in the business and owns less than 50% is an employee, so his pay typically belongs on the payroll report like anyone else's. If he later buys enough to reach 50%, his status changes, so tell the carrier whenever shares move.
Arizona assumes a wage of at least $600 a month for an owner the carrier accepts by endorsement. Ask the carrier what figure it will report for you, so the premium you pay and the audit that follows tell the same story.
Arizona has more than one route. A sole proprietor taking the job as an independent contractor has a waiver option, signed with the general contractor's carrier, which relieves that contractor of coverage and premium for the sole proprietor. An owner may also ask a carrier for a policy and acceptance by endorsement. Confirm with the general contractor and its carrier which route they expect.
For policies and certificates from July 1, 2027, the applicant attests to having no employees and zero estimated exposure. A business that later hires owes its insurer written notice within 60 days, with estimated payroll and class codes for the new hire.
No. Arizona's sole proprietor waiver is signed by the sole proprietor and the hiring business's carrier, and it speaks to the sole proprietor alone. Anyone you regularly employ, including help for part of the year, brings the usual employer duties. If you add a helper, talk to a carrier about a policy before the first day of work.
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Reviewed by David Gleason, Principal, on .
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Arizona owner rules read straight from the statute, so each owner knows where they stand.
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