Under Arizona workers compensation law, which of the following contractors is exempt from carrying workers compensation insurance?
Correct Answer
D) Sole proprietor with no employees
Sole proprietors with no employees are exempt from Arizona workers compensation requirements.
Why This Is the Correct Answer
A sole proprietor with no employees is exempt from Arizona workers' compensation requirements. Arizona law defines coverage obligations based on the existence of employees; a sole proprietor working alone has no employees and therefore falls outside the mandatory coverage mandate.
Why the Other Options Are Wrong
Option A: Partnership with 2 partners and 1 employee
A partnership with 2 partners and 1 employee is not exempt. The presence of even one employee triggers the mandatory workers' compensation coverage requirement in Arizona, regardless of the business structure.
Option B: Corporation with only the owner-officer working
A corporation with only the owner-officer working is not automatically exempt in Arizona. Corporate officers are generally considered employees of the corporation, meaning the corporation has an employee (the officer) and must carry coverage unless the officer specifically opts out through a formal exclusion process.
Option C: LLC with 2 members and no other employees
An LLC with 2 members and no other employees is not universally exempt. Unlike sole proprietors, LLC members can be treated as employees depending on how the LLC is structured and managed, and coverage obligations may still apply. Arizona law does not grant a blanket exemption to multi-member LLCs the way it does for sole proprietors with no employees.
Memory Technique
Think 'Solo = No Go for coverage.' A sole proprietor with NO employees has no one to protect but themselves, so the law does not force coverage. Add anyone else (an employee, a partner's hired hand) and the exemption disappears.
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