South Carolina
Workers' Comp Exemption

Four regular employees is the main starting point, but the statute also contains a payroll exemption

South Carolina Code §42-1-150 defines covered private employment to include businesses in which four or more employees are regularly employed in the same business or establishment. A small business should therefore track actual regular employment rather than waiting for five workers or importing another state’s threshold.

Section 42-1-360 also lists employments outside the title, including a provision for an employer with fewer than four employees or a prior-calendar-year total annual payroll below $3,000 regardless of the number of persons employed during that period. Because that payroll language is statutory and unusually specific, it should be verified against current facts rather than paraphrased into a broad small-business exemption.

Owner elections do not replace this employer-level analysis. First decide whether the employment is within the Act; then decide whether a particular owner is personally included or rejects coverage.

Sole proprietors and partners have an elective-in path, not a Form 5 rejection path

South Carolina’s definition provisions allow an actively engaged sole proprietor or partner to elect to be included as an employee under the business workers’ compensation coverage if the insurer is notified. The owner then receives employee benefits and assumes employee responsibilities under the Act.

That is the reverse of a corporate officer using Form 5 to reject personal coverage. A proprietor who is already outside personal coverage does not need to file a corporate rejection form merely to prove ownership, and a partner should not sign Form 5 unless the person actually fits the corporate-officer category stated on the form.

If a proprietor incorporates, revisit the analysis immediately. The same individual may move from an elective-in owner position to a corporate-officer position in which a personal rejection document is available.

Form 5 is a notarized corporate-officer rejection with a controlled effective date

The South Carolina Workers’ Compensation Commission lists Form 5 as the Corporate Officer Notice to Reject and states that there is no filing fee. The form is expressly addressed to the employer and the employer’s insurance carrier and requires the officer’s notarized signature.

The form’s timing is also explicit: the stated effective date may be no sooner than the day following the date the officer signs. Commission Regulation 67-402 requires the officer to complete and file Form 5 with the employer’s insurance carrier and to notify the employer by providing a copy through the permitted method.

That record is personal to the officer. It does not establish that the corporation has fewer than four employees, satisfies a payroll exemption, or has no responsibility for other workers. Keep the company’s coverage proof alongside the officer’s rejection.

Form 5 has narrow boundaries for owner type, timing, and duration

The current Commission form list and Form 5 identify the rejection for a corporate officer. They do not present a general LLC-member rejection form as the equivalent of Form 5. An LLC should therefore confirm its member treatment with the Commission or carrier instead of converting corporate-officer language into an unsupported LLC rule.

An LLC with workers should first determine whether the business meets South Carolina’s employer coverage rules and then ask the Commission or carrier how a working member is treated under the current policy and statute. The answer may turn on facts not captured by a generic ownership percentage.

If the Commission does not publish an equivalent LLC-member filing, the practical answer is to preserve that uncertainty and confirm the member’s treatment before changing coverage. Corporate officers, LLC members, partners, and sole proprietors do not have to fit symmetrical filing paths.

Neither the current Form 5 nor the regulation cited here states a universal annual renewal deadline for the corporate-officer rejection. That does not mean an old form should be used forever without review. The officer role, corporate entity, policy, and ownership facts can change even when the form itself has no printed expiration date.

At policy renewal, confirm that the carrier still recognizes the rejection and that the named person remains a corporate officer of the same employer. If the company converts to an LLC or the officer becomes an ordinary employee, obtain current guidance rather than assuming Form 5 follows the person into the new role.

For customer proof, pair Form 5 with current policy/coverage documentation when the business has employees. The form proves the officer’s election; the policy proves the employer has met its separate obligation.

South Carolina’s useful reset events are employee count, prior-year payroll, entity form, and policy change

A South Carolina small business should review the coverage question when it reaches four regular employees and again when the prior-year payroll facts relevant to §42-1-360 change. Those are employer-level events and should not be hidden behind an owner rejection form.

Entity conversion is a second reset. A sole proprietor or partner who elected personal coverage under the insurer-facing inclusion rule may become a corporate officer after incorporation, where Form 5 presents a different choice. Conversely, a corporation converting to LLC should not carry Form 5 forward as if it were an LLC document.

Finally, review at carrier or policy change. The Commission’s rules make the insurance carrier part of the Form 5 process, so current carrier records matter when a later audit or contract review asks whether the officer was actually rejected from coverage.

What failing to insure actually costs in South Carolina

South Carolina layers several separate penalty tracks rather than running everything through one number, and the Commission can move quickly to a stop-work order once it's involved.

Under S.C. Code § 42-5-40, an uninsured employer can be fined $1 per employee for each day without coverage, with a floor of $10 and a ceiling of $100 per day. The Commission can also fine an uninsured employer up to $10,000 per violation under its general fines-and-penalties authority, and a willful failure to carry insurance can bring misdemeanor charges with up to 30 days in jail.

The Commission can issue a stop-work order halting all business operations, and separately, an uninsured employer can face a penalty ranging from $750 to $1,000 per year of noncompliance. A professional employer organization's client company that refuses to cover its nonassigned employees can be fined $1,000 per day, per uninsured employee.

• Daily penalty: $1/employee/day, floor $10, ceiling $100 (§ 42-5-40)
• General Commission fine: up to $10,000 per violation; willful failure can be a misdemeanor with up to 30 days in jail
• Separate annual penalty for uninsured status: $750–$1,000 per year of noncompliance
• PEO client companies: up to $1,000/day per uninsured nonassigned employee