LLC or other?

My husband set up a LLC several years ago. He had someone logging with him at the time and he made the other person a 2% owner of the logging operation. Both of them signed an officer exclusion form for workers compensation and it was file with the state of Vermont. The LLC protected our personal assets and the officer exclusion made it offcial that workers compensation was offered, but both declined the coverage. When the two were logging together a K-1 was prepared by the accountant at the end of the year for tax report of income or loss to prepare our personal income taxes.

Fast forward several years….the 2% owner decides to go into the carpentry business and my husband stays logging. My husband is now 100% owner of the LLC. We no longer need the K-1 because the logging business is fully owned by my husband and we just prepare the schedule C for taxes at the end of the year.

You can form a LLC by yourself ~ we had an attorney do all the paperwork. Talk to your insurance agent about the insurance issues. Attorneys often do not know everything about the insurance industry-we get calls from attorneys to explain insurance coverages all the time!

Clear as mud…right?

Disclaimer, make your own decisions about all this business…but –

I agree with Carl’s perception and have had the same experiences over the last thirty years. We include a “hold harmless” clause for the landowner’s sake when we deal with a landowner that insist on a contract or management agreement. If this doesn’t satisfy them we have a one word answer – “next”!

In Va. 78% of all logging is a matter of a logger and landowner shaking hands, and the work starts. No forester involved, no insurance payments, no contracts.

This is not entirely a good thing because it usually leads to poor management activities or high grading and clear cutting. We don’t do either one of those silvicultural practices and our work is designed and intended to be restorative from the onset, with that being the objective first and income for the landowner and practitioner second.

There is a disconnect between all these “cost” of operation that contribute to the pressure to be harder on the natural resource or more extractive to pay for these extra cost. The greater the cost of operation, particularly cost beyond the actual cost of doing the work has to be paid somehow and in the case of logging it will have to come from the resource base, forest or woods. In other words any extra cost make it harder to be sustainable in your attempts for man to age the forest.

I’m not logging, or man-aging trees right now, but I am starting to rough up a re-start business plan myself, so this is an interesting thread. I was very frustrated with the insurance aspect of my business when I was logging, since the insurance I carried basically exempted coverage of almost anything that would actually happen on the job. And that is basically the definition of insurance from an insurance provider’s point of view: you manage risk, and you profit from risk, so you make sure that you are not likely to have to pay for more risk than the premiums you take in. The whole concept was infuriating for me, but I carried insurance anyway, because I was trying to not shut any doors to access to jobs.

That brings me to “Next…” I think that its important for start-up people to evaluate if they can stay busy in this business, or any business. Jason and Carl are able to say “Next!” if they are getting pushed by a landowner, but they have been doing this for years and obviously are well-known, respected, and in relatively high demand. A newcomer has to evaluate whether they have the same access to replacement work.

I understand that you might say that if you can’t do the job on your terms, in ways and with terms that respect the highly-skilled service you are performing, you shouldn’t do it at all. That’s in a perfect world. Or in a world such as Jason’s or Carl’s where they’ve been at it for a long time and have proven themselves. If you’re new to this, you may have to make some concessions, or at least evaluate how you are going to stay busy for the next couple years (or more) while you get your name out there.

That said, I’m curious to see your contract too, if you’re willing, Carl. I wrote detailed contracts as well, and I’m interested in what other peoples’ look like. I was told that any contract is not ultimately legally binding in the case of a lawsuit. Its more about establishing a common understanding between the landowner and the operator, which will eliminate most disagreements during the course of the job and provides a common ground to come back to if issues come up. I like the concept of how Carl and Jason do business and I think we should all strive for it.

I just know that in my case I needed to be a little flexible sometimes, too, just so that I could build up my business and reach a point where I could say “Next!”

Itsaunders, I understand your insurance frustrations, because I get the same response from the kitchen table from my husband! He isn’t a horse logger, which probably the first reason I shouldn’t have posted. I have the horses for a hobby.

My two cents on the liability coverage. It covers bodily injury and property damage you are deemed negligent for. Does a forester, mill representative, environmentalist, hunter, snowmobiler, newspaper/magazine reporter or salesperson ever enter onto the property that you are currently logging? Is there a possiblity that you could mistakenly cut beyond the boundaries designed for your contract? Could you be reponsible for a fire that burns additional forest land? Do you load or unload logs from an owned or non-owned vehicle? If you answered NO to all the questions then there probably isn’t a need for the coverage. [HTML]Stepping off my insurance stool.[/HTML]

We have a contract completed before each and every job start. The current project is for an attorney in Brandon, VT. He laughed when we asked for a signed contract his exact words were “Contracts are not worth the paper they are written on.” We didn’t walk way from this project because of that remark….because he is right. We have done three other logging projects for him and he likes my husbands work.

So it seems your are damned if you do and damned if you don’t.

Again Carl and I have similar situations. I also am a forester in Virginia and provide much more than contract harvesting services.

I agree that the point of the contract is to be sure the landowner understands what is going to happen. The pay scale is probably of some interest to most landowners and that is where our contract is unique.

I also could post/attach a word version of ours if anyone is interested. Like Carl’s it is a conglomeration of other contracts and some wording of our own. I say ours because most of the guys in the Healing Harvest Forestry Coalition use a version of one.

If one is negligent and causes injury to anyone or damage to any property you may get sued, but the approach based on honesty, open communication through the contract and doing what you say you are going to do – will work.

We have a contract if the landowner asks for one and also understand what the process is about from the beginning. Spending time with the landowner explaining the work first usually takes care of all that and sometimes they want a contract too. If so we give them one, if we think they are honest and understand what we are doing then we don’t bother.

Luke is also right about being a long time proven practitioner, with a list of references all over the state – it helps to get more work than you can do. This is good because one may chose where one wants to work for multiple reason’s.

But just like the existing condition of the forest, the greatest influence is the human aspect.

If you work with good people that have good woods, you will do OK.

We still have the liability clause, and have all apprentices sign similar waviers and use the equine liability notice on our property too.

I agree though, anyone that thinks more of their dogs than they do my horses or their woods, probably isn’t going to be the best client.

All this information is my personal information and not an official position of HHFF.

This could be a long thread….