WHY THE SOLE PROPRIETOR IN THE FLORIDA
CONSTRUCTION INDUSTRY MIGHT FORM A CORPORATION: TO CONTINUE TO ELECT WORKERS
COMP INSURANCE EXEMPTION
Copyright 2003 by James W. Martin, Esq.
Published in
The Florida Bar News Feb. 1, 2004
A stock certificate, minutes electing officers, articles
of incorporation, and other legal forms are being signed by construction
contractors all over Florida. The Florida Division of Workers'
Compensation sent a notice to
130,000 individuals in the
construction industry informing them of a new law taking effect on January 1,
2004. The law allows only officers of a corporation or limited liability company
(LLC) to
elect to be exempt from workers' compensation laws in Florida. The notice
stated that sole proprietors in the construction industry who had elected to be
exempt from workers comp laws would lose their exemption unless they incorporate
and file an application for re-issuance of their exemption. Since most
contractors do not know how to form a corporation, prepare minutes, elect
officers, issue stock certificates, and draft legal forms, it is important that
they seek legal advice if they want to remain exempt from workers' comp.
For legal
assistance in forming a Florida corporation from James W. Martin, P.A., please
complete the Request Lawyer Form by clicking here and then fax it to (727)
823-3479 with a copy of your driver's license, occupational license,
contractor's license, and existing workers' comp exemption.
Benefit; Premium. While the worker's comp laws are beneficial to employees
since they provide medical benefits and disability income payments if employees
are injured on the job, the premiums for workers compensation insurance in the
construction industry have become so high that many sole proprietors are unable
to pay them. For those sole proprietors in the construction industry who
choose to waive the benefits of worker's comp, it appears that forming a
corporation (or LLC) is a way to stay in business without obtaining workers comp
insurance.
Subcontractors. Of course, this assumes
that the sole proprietor is the only employee of the new entity. If there
are other employees, or if there are other independent contractors who are sole
proprietors or partners, then the contractor probably needs to obtain workers
comp insurance coverage on them unless they also form a new entity. Thus,
the sole proprietor contractor who uses others as subcontractors might need to
form his or her own corporation and require that the subs form their own
corporations in order to avoid having to obtain workers comp insurance coverage
on them.
Chain Reaction. Thus, the new state law has
created a chain reaction that requires all sole proprietors in the construction
industry to form a corporation or LLC in order to continue to be exempt from
workers' comp.
Deadline. The state notice suggested incorporating and filing the
exemption re-issuance application by November 30, 2003, but it is likely
that the state will accept filings after that date and before January 1, 2004, due to the fact that the law does
not take effect until 2004. Sole proprietors in the construction industry,
such as carpenters, installers, plumbers, cabinetmakers, etc., should seek legal advice and
take the time to set up their new entities in a thoughtful, legal and logical
manner, yet in as simple a structure as possible.
Florida Corporation or LLC. In Florida, it
is possible for one person to be the sole incorporator, director, and officer of
the corporation. A corporation rather
than an LLC is usually preferred. A corporation must file a separate tax return,
unlike a single-member LLC, but corporate officers have long been allowed to
file an exemption from workers compensation, whereas members of an LLC only
recently (October 2003) became allowed to file an exemption, so the corporate
entity will usually be preferred over a limited liability company.
Articles, Bylaws, Minutes and Stock Certificate.
As part of the incorporation process, the contractor's lawyer should prepare
articles of incorporation, bylaws, minutes of organizational meeting, stock
certificates and minute book. The lawyer can also assist in filing the
renewal application for worker's comp exemption.
Licenses and Insurance. When the
corporation is formed, the contractor must obtain an occupational license in the
name of the corporation. The contractor must also obtain revised licenses
and insurance to show the corporation's name instead of the individual
contractor's name.
Accountant. The contractor should also
engage an accountant to assist in obtaining an IRS tax ID number for the
corporation, apply for S election, set up corporate accounting books, set up
corporate bank accounts, prepare tax returns, etc.
Workers' Compensation Exemption Renewal.
After the corporation is formed, the contractor must file a renewed application
for exemption from workers' comp along with copies of the contractor's stock
certificate and occupational license.
Annual Report and Annual Minutes. Once
formed, the corporation must file an annual report (UBR) with the Florida
Department of State with an annual filing fee of $150 and must hold at least one
meeting a year, called the annual meeting. The corporation may be
dissolved or disregarded if the contractor fails to do these two things every
year.
Services Provided by This Law Office. James
W. Martin, P.A. prepares simple, streamlined incorporation documents, including
articles of incorporation, bylaws, minutes, stock certificate, and minute book,
for sole proprietors who elect to continue their workers' comp exemption by
forming a Florida corporation and filing the renewal application for exemption
from workman's comp. The
contractor will be responsible for obtaining and paying for licenses, liability
insurance, etc., in the corporate name.
James W. Martin, P.A. also prepares minutes of annual
meetings for sole proprietors who have incorporated to maintain their workers
comp exemption. The contractor will be
responsible for paying the annual Uniform Business Report fee of $150 and all
other costs of being incorporated.
To seek legal
assistance in forming a Florida corporation from James W. Martin, P.A., please
complete the Request Lawyer Form by clicking here and then fax it to (727)
823-3479 with a copy of your driver's license, occupational license,
contractor's license, and existing workers' comp exemption.
Click here for a copy of the 9/03 state notice (PDF).
For the Florida workers'
compensation law definitions of construction industry and employees, click here
(PDF)
Click here for link to 11/12/03 article in St. Petersburg Times
Click here for link to Florida
Division of Workers' Comp
Click here for Artists in the Construction Industry: Workers Comp Coverage v.
10% Corporate Officer Shareholder Exemption (PDF)
The contractor might know workers' compensation by the following
additional names: workers' comp, worker's compensation, worker's comp, workers
compensation, workers comp, worker compensation, worker comp, workman's
compensation, workman's comp, workmans compensation, workmans comp, workmen's
compensation, workmens comp, workmen compensation, and workmen comp.
Last updated: 12/17/03
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