Understanding the ACA’s Common Ownership Rules

September 18, 2025

Why Small Businesses Should Care

Imagine you own two companies:

  • A landscaping business with 35 employees

  • A nursery with 20 employees

Neither business looks large enough to trigger the Affordable Care Act (ACA) employer mandate. But here’s the catch: under IRS “common ownership” rules, those businesses may be combined. Together, they have 55 employees, making you an Applicable Large Employer (ALE) — and subject to the ACA’s coverage requirements and penalties.

That’s why understanding these rules matters for any business owner, no matter the size of a single entity.

Where the Rules Come From

The ACA didn’t invent new rules for ownership. Instead, it borrowed from existing IRS rules in the tax code:

  • §414(b) & (c) — Control Groups
    When the same owners or entities control multiple businesses, they may be treated as one.

  • §414(m) — Affiliated Service Groups
    Applies when related entities (like professional firms or management companies) provide services together.

  • §414(o) — IRS Catch-All
    Allows the IRS to prevent employers from structuring ownership to avoid the rules.

In plain terms: if businesses are tied together by ownership or control, they may be treated as one employer for ACA purposes.

Why It Gets Complicated

There isn’t a single “bright-line” rule like “50% ownership always counts.” Instead, the IRS looks at structure, relationships, and control. A few tricky areas include:

  • Different business types: Sole proprietorships, partnerships, S-Corps, C-Corps, and LLCs (which can elect to file as any of these) each interact differently with the rules. The same ownership percentage might trigger aggregation in one structure but not in another.

  • Multiple entities: A dentist owns both a dental practice and a management company. Even with separate tax IDs, they may be combined.

  • Family ownership: A husband owns a landscaping company, while his wife owns a nursery. Because of family attribution rules, the IRS may treat them as one.

  • Shared services: Several law firms share employees through one admin company. That could create an affiliated service group.

In short: different ownership structures can lead to different aggregation outcomes — and it’s rarely obvious without a detailed review.

Ownership Percentages and Control

While there’s no single universal threshold, percentages do matter:

  • Parent-subsidiary groups: More than 80% ownership usually means businesses are combined.

  • Brother-sister groups: When the same five or fewer individuals own at least 80% of each company and have more than 50% effective control, the businesses may be aggregated.

  • Attribution rules: Family members’ ownership interests can be added together. For example, a husband’s 30% ownership and a wife’s 30% ownership may be treated as one 60% stake.

In practice:

  • If one person owns 100% of two businesses, aggregation is straightforward.

  • If an owner holds 40% of one business and 45% of another, it gets trickier — especially if family members or partners hold the rest.

Impact on Employers

If your businesses are aggregated under the common ownership rules, it can affect:

  • Employer Size
    Pushing you over the 50 full-time equivalent (FTE) threshold.

  • Reporting Obligations
    Triggering the need to file Forms 1094-C and 1095-C each year.

  • Penalties
    Exposure to ACA penalties under §4980H if health coverage isn’t offered to eligible full-time employees.

A Practical Self-Check

Before calling in a professional, ask yourself:

  • Do you own all or part of more than one business?

  • Do you share ownership with family members across multiple entities?

  • Do your businesses provide services to each other or share employees?

  • Do you have separate LLCs, partnerships, or corporations that are connected through ownership?

If you answered “yes” to any of these, the common ownership rules may apply.

What Employers Need to Know

  1. Aggregation is real: Even a 20-person company may be swept into ALE status if it’s tied to other businesses.

  2. No universal percentage applies: The rules vary depending on ownership type, structure, and attribution.

  3. Penalties can apply across the group: If the combined group fails to comply, all members may share in the consequences.

The Bottom Line

The Bottom Line

The ACA’s common ownership rules are among the most technical — and confusing — parts of compliance. Even experienced agents and advisors often consult tax professionals when evaluating ownership structures.

Percentages matter, but they aren’t the whole story. Ownership, control, and family relationships all play a role. Getting this right is critical — not only for the ALE determination under the ACA but also for compliance with other laws, including COBRA and Medicare Secondary Payer rules.

We are not attorneys or tax advisors, and this article is for informational purposes only. If you own all or part of one or more businesses — regardless of size — it’s a good idea to consult a tax advisor or attorney to determine whether the common ownership rules apply.

The safest course for employers:

  • Don’t assume you’re exempt just because one business has fewer than 50 employees.

  • Consult professionals to review ownership structures.

  • Work with a knowledgeable agent who can help flag potential issues.

Getting this wrong can be costly. Getting it right keeps your business compliant — and penalty-free.

3 Key Takeaways

  • Separate businesses may be treated as one employer under IRS rules.

  • Ownership percentages, family ties, and shared services all play a role.

  • Professional guidance is essential — don’t rely on assumptions.