If you run your business as a sole proprietor with no employees, there's a good chance you've never had to think about workers' compensation at all — and in most states, that's because the law doesn't require it. But "most states" isn't "all states," and the exceptions matter.
The General Rule
Workers' compensation laws are built around the employer-employee relationship. A sole proprietorship has no legal separation between the owner and the business, so most states simply don't reach a sole proprietor working alone — there's no "employee" for the law to require coverage on. In states that work this way, a sole proprietor with no employees is automatically excluded from the mandatory-coverage requirement. No form, no filing, nothing to do.
New York works exactly this way: under Workers' Compensation Law §54(8), a self-employed person is "deemed to be excluded from coverage... unless he or she elects to be covered." Georgia's rule runs the same direction — sole proprietors and partners are excluded by default and can opt in by notifying their carrier in writing if they want coverage.
Where It Gets More Complicated
Florida is the clearest example of a state where the default flips based on industry. Outside of construction, a sole proprietor in Florida is automatically excluded, just like in New York or Georgia. But inside the construction industry, the default reverses entirely: a sole proprietor is automatically classified as a covered employee, and has to affirmatively file a "Notice of Election to be Exempt" with the Florida Department of Financial Services if they want to opt out.
California adds a different kind of wrinkle. Sole proprietors with no employees generally aren't required to carry coverage on themselves — but several specific contractor license classifications (originally just C-39 roofing, expanded by SB 216 to also include C-8 concrete, C-20 HVAC, C-22 asbestos abatement, and D-49 tree service, effective July 1, 2023) are required to carry workers' comp regardless of whether they have any employees at all. A broader expansion to sweep in all CSLB license classifications was originally set for January 1, 2026, but has been delayed to January 1, 2028 by SB 1455 — so if you hold one of these specific licenses in California, don't assume the general sole-proprietor rule applies to you.
And Then There's Texas
Texas approaches the entire question differently. It's a "non-subscriber" state, meaning workers' compensation coverage is elective, not mandatory, for most private employers in the first place — the state doesn't require most businesses to carry a policy at all. If a Texas business does elect to carry coverage, sole proprietors and partners are automatically included as covered persons under that policy by default (Texas Labor Code §406.097), and have to be specifically excluded by an endorsement if they don't want to be covered. Choosing not to subscribe to workers' comp in Texas comes with a real tradeoff, though: non-subscribing employers lose several standard legal defenses — contributory negligence, assumption of risk, and the fellow-servant rule — in a lawsuit brought by an injured worker.
What This Means for You
Three questions determine where you stand: What state are you in? What industry are you in? And does your state's rule change once you have even one employee? That last question matters even if the answer to the first two puts you in "automatically excluded" territory — hiring your first employee typically triggers a separate, mandatory coverage requirement for that employee, regardless of your own exemption status.
Check our state-by-state pages for what we've verified in your state, or get in touch if you want help figuring out your specific situation — including whether voluntary coverage on yourself makes sense even if it isn't required.