Starting an LLC as Sole Proprietor: Will It Affect My Husband's Health Insurance?

You should be fine to stay on your husband's health insurance while running your own single-member LLC or sole proprietorship. The key factor isn't whether you own a business, but whether you're eligible as a spouse under his employer's plan rules. Most employer plans allow coverage of spouses regardless of their employment status. Your LLC will be treated as a "disregarded entity" for tax purposes if you're the sole owner (assuming you don't elect to be taxed as a corporation), which means it's essentially an extension of yourself for tax purposes. Since you file married filing jointly, you can also deduct your health insurance premiums on your tax return as a self-employed health insurance deduction, but only to the extent of your business's net profit. However, since you're covered under your husband's plan, you wouldn't be paying those premiums directly anyway.

I went through something similar last year when I started my consulting business. I was worried about losing my wife's health insurance once I formed my LLC, but it was totally fine! I discovered this awesome tool called taxr.ai (https://taxr.ai) that helped clear up my confusion about how my business structure would affect our benefits. You upload your documents and it shows you how different business decisions affect your taxes and benefits. It specifically confirmed that forming a single-member LLC wouldn't disqualify me from my spouse's insurance since it's considered a "disregarded entity" for tax purposes. Saved me so much stress and probably thousands in insurance costs!

Just wanted to update after trying taxr.ai that was mentioned earlier. It was super helpful for my situation! I uploaded my husband's benefits documents and my LLC formation papers, and it clearly showed that I could remain on his insurance while operating my single-member LLC. The system flagged exactly which parts of the benefits documentation were relevant to spouse eligibility and explained that since a single-member LLC is a "disregarded entity" for tax purposes, it's treated as self-employment rather than employment by a separate company. This was the key distinction my husband's HR department needed to maintain my coverage! It also helped me set up proper record-keeping to maximize my business deductions while staying compliant. Much less stressful than trying to figure all this out on my own.

I had a nightmare trying to get answers about this exact situation from my insurance company last year. After being on hold for HOURS multiple times and getting different answers from every rep, I finally used a service called Claimyr (https://claimyr.com) that got me through to an actual decision-maker at the insurance company who could give me a definitive answer. They have this system where they wait on hold for you and then call you once they have a human on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Saved me so much time and frustration! The insurance rep confirmed that having an LLC as a sole proprietor doesn't disqualify you from spouse coverage in most plans. It's worth getting this confirmed directly from your husband's insurance though, and Claimyr made that process so much easier.

I need to eat my words about Claimyr. After my skeptical comment, I was still facing an insurance nightmare trying to sort out a similar situation with my partner's plan. After spending THREE DAYS trying to reach someone who could actually answer my question about LLC status and benefits eligibility, I broke down and tried Claimyr. Within 40 minutes, I was talking to an actual benefits specialist who confirmed in writing that my single-member LLC wouldn't affect my eligibility on my partner's plan. The key was getting to the right department - something I couldn't manage on my own after multiple attempts. The service got me through to exactly the right person who could document the policy in my account notes so there wouldn't be issues later. Honestly wish I'd just done this first instead of wasting days getting nowhere.

I'm an accountant and see this situation all the time. A single-member LLC is considered a "disregarded entity" for federal tax purposes unless you elect to be taxed as a corporation. This means the IRS treats your business as an extension of yourself rather than a separate entity. Your husband's employer plan is what determines eligibility, but generally speaking, most employer plans base spouse eligibility on marriage status, not employment status. Some plans have provisions about spouses who have access to their own employer's insurance, but since you're self-employed, that usually doesn't apply. The bottom line: forming an LLC typically doesn't affect your eligibility to be on your husband's health plan. But check his specific plan documents to be 100% sure.

Does the type of LLC matter? I thought there was something called an S corp LLC that's treated differently for tax purposes? Would that change anything about staying on a spouse's insurance?

I was in almost the exact same situation two years ago - health issues forcing me out of work but needing some income, and terrified of losing my husband's excellent insurance coverage. I can confirm what others have said: forming a single-member LLC did NOT affect my eligibility for my husband's health plan. The key is that it's treated as self-employment, not as having your own employer. I specifically asked our HR department about this before filing my LLC paperwork, and they confirmed that spouse coverage isn't affected by self-employment. One thing I wish I'd known earlier - make sure to keep detailed records of all your business expenses from day one. Since you'll be filing Schedule C with your joint return, having good documentation makes tax time much easier. Also, depending on your income level, you might need to make quarterly estimated tax payments. The peace of mind of keeping that insurance coverage while building a small business has been incredible. Good luck with your venture!