treecutterjr
ArboristSite Operative
So if something happens and 1 of your "less than 5 guys" gets critically injured/ hurt who pays for those hospital bills?
Door Knocking/Sales and One liners.
- Thread starter Ben Musha
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mike515
ArboristSite Operative
There are a number of variables involved. If you hire another company....they are working for someone else and you send out a 1099 at the end of the year. But that means they have their own insurance and are acting as legitimate sub-contractors. When you get audited on your GL policy, they will ask for the names of sub-contractors and proof of insurance. If they are not legit and don't have insurance, any claim may come back on you. The next thing is....I don't know if it varies from state to state but in my state...if you have one employee, you have to carry work comp. Someone just starting out in this business in my state will not be able to get coverage from anyone so they have to go to the "pool". The "pool" exists because the law says you have to have coverage but nobody wants you because of a lack of history and potential exposure so the state requires all insurance carriers to basically take their turn in the "pool". Whoever is up next in line in the pool has to cover you but at much higher premiums. So that is where you end up with 20-30% or more. Theoretically, once you're established and have had a track record of no claims, you may be able to get out of the pool but if you have justified claims....probably not. Also, the more claims paid, the higher your premium. This is also true with your unemployment insurance to the state. You will have an opportunity to challenge claims on both work comp and unemployment and, if the claims aren't legit (obviously lots of guys will say almost anything to get benefits) you should fight them tooth and nail because your premiums will go up otherwise. Insurance is it's own ball of wax and you should try to be as well versed in the intricacies as your agent is. I know that the last time I switched carriers, I was talking to the new agency about my policies and they actually told me I should come to work for them selling insurance because they thought I knew more about it than some of their agents. It's your money and your business. You must know this stuff.
Here in Wisconsin if a homeowner hires an uninsured contractor the homeowner is liable for medical expenses if anyone is hurt on the job site. If more people new about this these fly night guys would have a lot harder time robbing work from the legit company's doing it right.
treecutterjr
ArboristSite Operative
I wanted to see if he would say that 
I worked for a woman once that told me it happened to her. She hired a contractor to cut down a tree. The climber falls out of the tree and breaks his neck (doesn't die, just breaks neck). Contractor doesn't have insurance so the climber sues the homeowners insurance along with the contractor.
I worked for a woman once that told me it happened to her. She hired a contractor to cut down a tree. The climber falls out of the tree and breaks his neck (doesn't die, just breaks neck). Contractor doesn't have insurance so the climber sues the homeowners insurance along with the contractor.Griff93
ArboristSite Operative
We have the less than 5 employee's no workman's comp requirement here in Alabama as well. I only have a couple of employees. Most of the tree services around here are 4 man crews or less unless they are really big outfits. It's also extremely expensive in this area. I've gotten quotes at 55% of payroll. I flat out can't afford it and trying to pass on the cost to my customers prices me out of the market in this area. I'm already a bit higher than others due to paying my guys correctly (not 1099). I don't like it, I want to have workman's comp. I just simply can't afford it.
treecutterjr
ArboristSite Operative
So seriously, how does that work. Like if you have a serious injury accident is it just common for the homeowners insurance to cover it? Or is there some other method?
Griff93
ArboristSite Operative
I've actually talked to an attorney about it. It sucks but basically it falls on the homeowners insurance and the business itself. I don't want a customer to have a claim. I don't want to loose all my business assets either. The last time I checked the annual premium for my three employees was about $36,000. That's right $36,000 per year in workman's comp insurance premiums. That doesn't cover me at all either. I kinda wish everybody was required to have workman's comp as it would level the field somewhat.
So you have 1 employee and he gets hurt on the job and you don't have worker's comp. What's he going to do? Sue your company and probably sue you personally. Think of insurance as protection against the unknown.
mike515
ArboristSite Operative
That's pretty crazy! I think I'm paying 17-18% of payroll. I don't remember off the top of my head but it's somewhere in that range. One thing you might what to talk to the attorney about is incorporating the business but keeping all of the equipment in your name and leasing it to the business. I'm sure there is a way to protect most of the assets that way and you can probably find a tax break in there somewhere too. If you do that, there may also be a way to line your other policies up to protect you from a lawsuit. Or you could just legitimately contract the labor and require them to provide proof on insurance, pay their own taxes, etc. But that gets you walking another fine line if they are driving your trucks, wearing your uniform, having their hours dictated by you, etc. It doesn't mean they can't do any of those things but the IRS isn't definitive on the subject. They offer guidelines to be considered. But if they have their own insurance, that's a pretty big indicator of self-employment instead of employee.
Single_Shooter
ArboristSite Member
It would be just like hiring temps from a service...I only provide the work and the uniforms they have to wear while working....they provide their own insurance and such??? That would be an idea...hiring through a temp service for seasonal labor....if they would have anyone who could actually do this work...lol
Griff93
ArboristSite Operative
We also had that discussion. My tree service is incorporated. Unless I'm proven to be personally negligent in my state they can't come after me personally. The problem with this is you have to be careful to maintain a separate entity. If you don't they can pierce the corporate vale even if you aren't personally negligent. Apparently owning all of the equipment and leasing it back to the company makes it where your corporate vale can be pierced. I don't want to lose my house over something that happens at work. I'd rather lose all of my company assets than lose that and my personal assets. I'd rather not lose any of them at all. I'd find a way to buy WC at 18% of payroll. I just plain can't afford it at the rates I've been quoted. I've gotten about 7 or 8 quotes so it's not just one agent that is way to high on it. I've never had a claim.
mike515
ArboristSite Operative
What if you also rent equipment to other companies or people? That makes it a legitimate separate business. Spend a few thousand bucks on some small power equipment....maybe some mowers, saws, one of those tiny chippers that a homeowner would buy, a couple of tillers, etc. Meet people by appointment and rent the stuff out. But it sounds like things vary from state to state because in my state, my earlier scenario is done all the time.
The people technically work for the temp agency, so they are covered by the temp agency's insurance (which you are paying for in the rate).
Why would you pay the agency rate for labour. Their people are going to be fully insured plus you have to pay the agency profit. No nut left for you.
The court rulings up here essentially are "If it looks like a duck and quacks like a duck, then it's a duck". So if the people look like employees, are treated like employees, then they are employees.
We have had many employers try and hide behind the 'contractor' shield. The courts and Cdn Revenue Agency have kicked that one to the curb.
Single_Shooter
ArboristSite Member
Missouri is like Griff stated. A buddy of mine has a construction business. He leases trucks then leases them to his company. He also gets a salary from the company as a project manager. He also has his business licensed out of Arizona where he owns part of a home with his Dad so that is his business address. Has Arizona tags on the trucks as well. Don't know how he does it but his dad is LOADED so he can afford the high dollar business attorney...I'm sure his dad knows the ins n outs of it all.
I just need to get into it and see what it will all cost me. I would rather do it right than half-ass it forever. Just one big injury and lawsuit and you're out of business and possibly out of your home. It's a scary thought for me...I have 2 homes and both are paid for so I have a lot to lose.
And as far as Temps go they are employees of the temp agency...not who they are working for. You can send one back at lunch and get a different one by the afternoon if you need. So their WC insurance lies with the agency unless they can show negligence but that is a whole different animal than WC insurance.
I just need to get into it and see what it will all cost me. I would rather do it right than half-ass it forever. Just one big injury and lawsuit and you're out of business and possibly out of your home. It's a scary thought for me...I have 2 homes and both are paid for so I have a lot to lose.
And as far as Temps go they are employees of the temp agency...not who they are working for. You can send one back at lunch and get a different one by the afternoon if you need. So their WC insurance lies with the agency unless they can show negligence but that is a whole different animal than WC insurance.
mckeetree
Addicted to ArboristSite
Lot of BS in this thread.
Even a low priced business attorney will know how to do most of that stuff.
BuckmasterStumpGrinding
ArboristSite Operative
1. Any scam will work until challenged in court.
2. The IRS sued Microsoft several times in the 90s over the subcontractor status of its employees. Review the case law if you have any questions about the status of a subcontractor. You will realize quickly that you will be considered an employer if challenged in court.
3. Pick your subcontractors wisely because you can become liable for them just like a homeowner if challenged in court.
4. Setting up a corporation is not all it takes to be considered a corporation. To get the protections of a corporation it has to be ran like a corporation. Go to your local SBA or community college and find a mentor to guide you and become an officer of your corporations board of directors. If you do not have a professional business manager guiding you, your corporation will be considered a facade if challenged in court.
2. The IRS sued Microsoft several times in the 90s over the subcontractor status of its employees. Review the case law if you have any questions about the status of a subcontractor. You will realize quickly that you will be considered an employer if challenged in court.
3. Pick your subcontractors wisely because you can become liable for them just like a homeowner if challenged in court.
4. Setting up a corporation is not all it takes to be considered a corporation. To get the protections of a corporation it has to be ran like a corporation. Go to your local SBA or community college and find a mentor to guide you and become an officer of your corporations board of directors. If you do not have a professional business manager guiding you, your corporation will be considered a facade if challenged in court.
mike515
ArboristSite Operative
All of this is true and I hope I didn't come across as implying you should do anything illegal or unethical. I was just tossing out ideas. I have no idea what the different state laws require but you should absolutely be on the right side of the law if anyone ever questions your operation. Honestly...I'm pretty surprised by any state not requiring work comp...even if it is only a handful of employees.
BuckmasterStumpGrinding
ArboristSite Operative
Having a company to hold most of your assets and a separate company to conduct business under is considered running a shell company and won't hold up in court. If they are really two companies in two different lines of business they might hold up, but I wouldn't count on it. A lawyer will most likely prove they are both alter egos of the main shareholders and it will be you on the line without a corporate veil. The main purpose I see in shell companies is to discourage lawsuits. It cost more time and money for a lawyer to tie all your businesses to you. If a problem big enough to scare you comes along you will not be protected unless you settle before the person gets a lawyer. I think it is a better idea to save your money and try not to get sued.
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