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Jul 19
Changes to Treatment of Single-Member Limited Liability Companies

​​For Workers Comp in CT, in accordance with Memorandum No. 2019-02 from the WC Commission, Single-Member limited liability companies (LLCs) are not required to elect coverage.  They will be automatically included under the WC policy covering the LLC unless they opt out.  Form 6B should be completed if the Single-Member LLC member wants to be excluded, directions on how to use the Election of WC Coverage or Opting Out are available.  ​

This change came about due to one WC case Gould vs. City of Stamford, 331 Conn. 289 (2019).  Here's the shortened version (you can certainly read the original decision from 2016 and the 2019 final decision of the appeal).

Mr. Gould was a part time employee of the City of Stamford as a park police officer.  In 2013, he was injured in his course of employment for the city.  During the same time frame, he also operated a single-member LLC from which he didn't take a regular salary, but withdrew profits upon which he did not withhold taxes, he reported them to for the purpose of taxes as earnings.  His WC claim for the city was accepted and honored. 

He petitioned the WC Commission for concurrent benefits for his earnings from his single-member LLC for this injury.  This was denied by the WC Commission on the basis that he was not an employee of the single-member LLC, and among other things, he controlled the means and methods of the services he performed for the LLC and he treated the LLC like a sole proprietorship for tax purposes.  Also, he had not elected to include himself for WC benefits by filing form 75 (required prior to this change effected in 2019).

Mr. Gould appealed the WC Commission's decision to the WC Review Board.  The decision of the WC Commission was reversed by the Review Board.  During the appeal, it was noted by the Review Board that in the LLC distributing profits to Mr. Gould instead of paying him an hourly rate, it did not maintain the appropriate corporate formalities.  The LLC was Mr. Gould's “alter ego" and therefore, its status as an LLC must be disregarded.  The review board concluded that a single-member LLC is not required to elect coverage for its member, rather that the member may be covered automatically as an employee.  They also concluded that in this case the employer-employee relationship existed between the LLC and Mr. Gould as he was subject to the hazards of the LLC's business.

So we have Memorandum 2019-02.  

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