Minnesota
Workers' Comp Exemption
One part-time employee can trigger Minnesota coverage. Sole proprietors and partners are generally outside mandatory personal coverage and may elect in. A qualifying officer of a closely held corporation and a qualifying manager of a small LLC can be excluded when the statute’s ownership and payroll-hour conditions are met. Owner elections and terminations are documented with the insurer and named on the policy endorsement. Construction businesses also have zero-estimated-exposure and wrap-up requirements that took effect January 1, 2026.
Entity types analyzed
- Sole proprietor
- LLC member
- Partner
- Corporate officer
Minnesota is not a threshold-shopping state: there is generally no minimum number of employees before workers’ compensation is required. The owner analysis instead turns on whether a person falls within a specific statutory exclusion—such as a sole proprietor, partner, qualifying closely held corporate officer, or qualifying LLC manager—and whether the business later changes facts that made the exclusion possible.
One part-time employee can trigger Minnesota coverage. Sole proprietors and partners are generally outside mandatory personal coverage and may elect in. A qualifying officer of a closely held corporation and a qualifying manager of a small LLC can be excluded when the statute’s ownership and payroll-hour conditions are met. Owner elections and terminations are documented with the insurer and named on the policy endorsement. Construction businesses also have zero-estimated-exposure and wrap-up requirements that took effect January 1, 2026.
Owner treatment at a glance
Sole proprietorA sole proprietor is excluded from mandatory personal coverage, but the owner may elect to be covered. The business must still cover employees who are not otherwise excluded.
LLC memberMinnesota does not give every LLC member a blanket exclusion. A manager of an LLC with 10 or fewer members, less than 22,880 hours of payroll in the preceding year, and at least a 25% membership interest is among the statutory exclusions. Other LLC-member exclusions depend on narrower statutory conditions.
PartnerA partner is excluded from mandatory personal coverage and may elect to be covered through the insurer. Partnership employees remain subject to the ordinary one-worker rule unless another exclusion applies.
Corporate officerA qualifying executive officer of a closely held corporation may be excluded where the corporation has the statutory payroll-hour limit and the officer owns at least 25% of the stock. The owner can elect coverage, and elections/terminations are handled by written notice to the insurer and policy endorsement.
Minnesota starts with one employee—there is no small-employer head-count cushion
Minnesota DLI states that there is no minimum employee count before the workers’ compensation requirement applies. An employer with one part-time employee generally must secure coverage unless that worker fits a statutory exclusion. That makes ‘we only hired one person’ an especially risky assumption in this state.
The rule also means that owner exclusions should be analyzed separately from employee coverage. A business can have a founder who is outside mandatory personal coverage and still need a policy immediately when the first ordinary employee begins work.
Build the file around worker status, not payroll size alone: list each person performing services, identify any §176.041 exclusion with its supporting facts, and insure everyone else who is an employee.
Sole proprietors and partners are excluded owners, while corporations and LLCs have narrower tests
Minnesota’s statute excludes a sole proprietor and a partner from mandatory personal coverage. Those owners may elect coverage for themselves, but their choice does not affect the employer’s responsibility for employees. This is an elective-in model rather than a state-issued exemption certificate.
Corporations and LLCs require more facts. A qualifying executive officer of a closely held corporation can fall within the statutory owner exclusion only when the corporation meets the payroll-hour limitation and the officer meets the ownership requirement. A qualifying LLC manager has a parallel but not identical rule involving LLC size, payroll hours, management status, and ownership interest.
Do not convert the corporate/LLC provisions into ‘all owners are exempt.’ The statute has additional, narrower exclusions for certain relatives and LLC members, and those provisions need their own facts rather than a broad owner label.
For the common officer/manager exclusion, 25% ownership is only part of the test
The common closely held corporation rule requires more than being an officer. The corporation must be within the statute’s payroll conditions and the executive officer must own at least 25% of the stock. Minnesota’s LLC manager provision likewise uses at least a 25% membership interest, a 10-or-fewer-member company, and the prior-year payroll-hour limit.
Because the test includes prior-year payroll hours, eligibility can change even if ownership does not. A company that grows materially can leave the factual lane in which the owner was previously excluded. The same is true when an LLC adds members or a manager’s ownership falls below the statutory percentage.
Keep the cap table, manager/officer record, and prior-year payroll-hour calculation with the coverage file. Those documents explain the exclusion better than a certificate request from a customer ever could.
Owner elections and terminations are insurer notices with a receipt-based effective date
Section 176.041 provides an elective-coverage mechanism for owners who are otherwise outside mandatory personal coverage. The election or termination notice is given in writing to the insurer, and the policy is endorsed to identify the person whose coverage is being added or ended.
The timing rule is precise: coverage or termination takes effect the day after the insurer receives the notice, unless the notice specifies a later date. An election of coverage continues while a policy or renewal policy of the same insurer remains in effect. A carrier change is therefore a sensible point to obtain fresh confirmation rather than assuming the old endorsement migrated automatically.
This procedure is another reason to avoid calling Minnesota an exemption-certificate state. The operational record lives with the insurer/policy, and the statute makes receipt and endorsement important.
Construction businesses have zero-exposure and wrap-up rules effective January 1, 2026
Minnesota adopted additional requirements for employers providing building construction or improvement services that use zero-estimated-exposure policies. DLI says that beginning January 1, 2026, a contractor with such a policy must disclose it in writing to the entity it contracts with and provide a copy of the policy; recipients have record-retention duties described by DLI.
The same 2026 changes also authorize qualifying owner- or contractor-controlled wrap-up programs under specified project conditions. These provisions do not create a new owner exemption. They regulate how certain construction insurance arrangements are disclosed and structured, which is a different issue from whether a founder is personally excluded under §176.041.
For a construction owner, keep the two files separate: owner-status support under §176.041, and project/policy proof under the zero-exposure or wrap-up rules. Mixing them can lead a general contractor to receive the wrong document.
Growth can end an owner exclusion even before the owner changes jobs
Minnesota’s owner exclusions are fact-dependent. For a closely held corporation or LLC manager, prior-year payroll hours, ownership percentage, number of LLC members, and role can matter. A fast-growing company should therefore re-test the exclusion during annual payroll review and after equity transactions rather than treating the original status as permanent.
The first ordinary employee is another immediate reset because Minnesota has no small-employer threshold. In construction, a new project using a zero-estimated-exposure or wrap-up policy creates a separate documentation event even if the owner exclusion itself has not changed.
A practical Minnesota calendar should flag: first hire, year-end payroll-hour calculation, ownership/member changes, insurer change, and any construction project using special policy arrangements. Those triggers map directly to the facts the current sources make important.
Minnesota owner checklist
- Assume one employee can trigger Minnesota coverage; there is no general small-employer minimum.
- Document why an owner fits a specific §176.041 exclusion instead of relying on an owner label.
- For a closely held corporate officer or LLC manager, verify the 25% ownership rule plus the payroll/entity conditions.
- Use written insurer notice and a named endorsement for elective owner coverage or termination.
- For building construction/improvement work, apply the January 1, 2026 zero-exposure/wrap-up documentation rules separately from owner status.
- Re-test after year-end payroll growth, ownership/member changes, first hire, carrier change, or project-policy changes.
Filing reference
Coverage ruleMinnesota has no minimum employee count. An employer with one part-time employee generally must provide workers' compensation unless a specific statutory exclusion applies.
Construction ruleThere is no separate construction employee-count threshold, but building construction and improvement work has additional 2026 rules for zero-estimated-exposure policies and approved wrap-up programs effective January 1, 2026.
Form / electionNo universal owner-exemption certificate; qualifying owner inclusion or termination is handled by written notice to the insurer and named policy endorsement under Minn. Stat. §176.041
RenewalAn owner election of coverage under §176.041 continues while a policy or renewal policy of the same insurer remains in effect. A termination election is also made by written notice to the insurer.
Effective periodFor elections or terminations under §176.041, the change is effective the day after the insurer receives the written notice, or on a later date stated in the notice.
Responsible agency
Minnesota Department of Labor and Industry
Official source library
These are the state-agency, statutory, or state-board materials used for this guide. The page was last source-checked on 2026-08-26.