Co-op logging job business organization

Mark,

We do something like that down here, sometimes. I guess some would call it Community Based Sustainable Forestry. It could be seen as a fair sharing of the sharecropping approach to buying timber.

We break the work down into pro rated values and everyone does their part and gets paid by the thousand usually. There are infinite variations on the rates all mostly determined by the value of the products or services. I add services because sometimes you can get hourly work for various components of the work or the whole job.

An example or some considerations.

Stumpage, or the landowner share of logs harvested is around 30% of the proceeds of the sale of raw logs. On a worst first basis we may have an average log value of 300 per m (thousand board feet on international ruler).

300 per thousand for raw logs delivered sucks, but this is an example…and sometimes worst first doesn’t bring that much…

So you pay the landowner a hundred and you get 200 for the logger (s).

That could be 50.00 per m for felling, bucking, skid trail clearing.
50.00 per m for skidding
20.00 for loading
50.00 for hauling
30.00 for misc. expenses, seen as in common: lunch, sawgas, hay grain, truck fuel, chains, wedges and management, etc. There has to be a site boss or senior person and that is usually who does the procurement or gets the job.

This is just a rough example of how some family and extended family and community based systems work. Everyone is a private contractor doing their part and getting paid by what they do. They work for themselves using their own tools and are seen as sub contractors by the law. I know it is harder in other places, especially some states up north. That is just an example of how some do this work in the Appalachians. I wouldn’t exactly call it a co-op. I have never known one of those that really helped everyone fairly. We think of it as ecological capitalism.

The prices can run all over the board. Each site has it’s own yields within the principles of restorative forestry and it really helps when you are in great woods that haven’t been harvested in 50 years, plus on good growing sites.

You will have come up with a fair split and share based on your own natural resource capital values. Everyone being independent helps, but it is not easy to pull off among all groups of people. Everyone has to work well together and be good at what they are doing, because the total produced pays everyone. Yet it is not production logging, but improvement forestry because you leave more than you take.

Just some thoughts from the southland.

Best Regards,

Most of the large woodland owners in Coos County require a certificate of insurance before they sign a contract. They require general liability, fairly high auto and often, worker’s comp. A person working with you on your contract has to be covered by a worker’s comp policy no matter what you call him. At least that is how it has been for me lately.

That doesn’t mean it will be this way in Andover. There is a set of guidelines for determining who is an independent contractor published by the NH DOL. It is worth a look.

I think coop projects are a great idea, and I would be the first to volunteer as teamster or chopper if there was something nearby. I’ve certainly done my share of it. But the challenge is that it’s 2011. If someone gets hurt badly – incapacitated – no matter what was agreed upon beforehand, it will wind up with insurance company lawyers, and ultimately the courts will decide who is or is not an independent contractor and who is or is not liable for the injury.

There is a local group of mechanical loggers who have joined their operations. I have not contacted them yet, but I know a few of them, and I think their model is probably a good way to go.

The County Forester told me that some of the time they work on their own, but as they began to cooperate on larger jobs, they found that they needed to form a formal partnership.

This is not an easy process, as each individual must account for their share of the assets, and the resulting income tax work is more complicated.

Obviously I have also been giving some thought to this. In the short term we have chosen to fly under the radar. The liability insurance is a good idea though, as when one operator has it, but others don’t then that one has increased exposure. It almost seems as though the first step would be for all operators to have individual commercial liability policies.

However that doesn’t address the Workman’s Comp, and as we have found out, everyone thinks they have found a way around it, but at least according to my insurance agent and those at the VT Agency of Employment and Training, if it isn’t a formal partnership then whomever is handling the money is the one in charge, and therefore is the employer.

One other way that I have thought this through would be to have separate areas where individuals work on their own section, with their own landing, marketing, and income stream. This doesn’t actually address the idea that several operators cooperating can augment each others’ production, thus making it desirable to work together to begin with.

Another option has to do with creating a legal entity that actually employs a broad group of regular, or rotating operators, paying hourly rates, covering liability insurance, and workman’s comp. This has been something I have talked over with some business people because of the lead-in to cooperative marketing, consistent forestry practices, and increased functionality of animal-powered timber harvest. This could also be a medium to integrate novices into a draft-animal powered forestry initiative.

Yada yada yada……. I ramble :o.

Gotta go work on something that I can actually affect….. my wood pile.:p

Carl

A true cooperative is a legal entity, for taxes & other legal issues. L.L.P.s’ (Limited Liability Partnerships) are also a true legal entity. They are often used by white-collar professionals but have applicability in our world as well. A good friend of mine had a tree service set up with a partner and used the L.L.P.

They can be, as can most entity classifications, somewhat cumbersome and do not lend themselves well to “an everybody chippin’ in on the job” on occasion.

Even though the merits & downsides of utilizing a sub-contractor model have been pounded to death on this site, they do work very well when attention is paid to the details.

I and many of my peers have used this system in the past to take on very large projects or when everyone had something to offer that would make the operation perform at a higher level & quality than otherwise would have been the case if tackled solo.

My peers were(are) competitors, but first & foremost we were/are fast friends who share the same ideals, attention to detail, and stewardship ethic as one another.

The typical way we run one of these jobs is as follows: One of us picks up the lead, visits with the potential customer, discusses the logistics with said customer. Going into this we know what our other peers have available for resources and what they need (vs want) to mobilize and use those. After meeting with the landowner(customer) we start calling our peers and see who is available and verbally negotiate what they would need for the job. Eventually this will get written down, depending on the relationship you have with one another will dictate to what degree of detail you get into.

The primary person who puts this together becomes the main/prime contractor. The supporting peers are subs. THIS IS PERFECTLY LEGAL AND WILL HOLD UP IF INITIATED PROPERLY The key is, and what the legal folks will look at, is that the sub is indeed a legitimate independent contractor. That means that they are and act as a completely independent business. There can be no traceable sharing of resources (tools, fuel, transportation, etc) that has not been,or can be, compensated for on paper. In other words, be able to delineate very clearly who is doing what, what they are responsible for, and what is the payment method. Lump sum payments are definetely more preferable than trickling money out over time; just as any other business would be paid for their services at the end of the job.

Business is the key word. Each contributor to the effort truly needs to be a verifiable business. Most are going to be filed as a sole proprietor, which is fine. That said, you need to keep impeccable records, books, etc.., have adequate business liability insurance, and look and act as a legitimate business ( have a recorded business name) because you are. If you are not, then you are a major unacceptable liability for the cooperative effort set up in this fashion.

In my State (Colorado) a business owner, regardless of entity classification, does not need to carry work comp on themselves. If one of the contributors shows up with a non-family “helper” than they absolutely do.

Your insurance company should have waivers available to you for “your” subs to sign stating that they are independent contractors, not employees, and collect certificates of insurance from them. They may recommend that you have their insurance companies list your company as additional insured for the duration of the project. This is usually $100-200 at most. It provides you (and the other subs) an extra level of security should the sub do something very stupid…

This model works well. I, as well as many of friends/peers, have used it sucessfully for many years. There has to be a primary contractor (you) who, in essence, is the “woods boss” and ends up taking on all administrative and project management activities.

I have used this for almost every operational aspect of forestry that exists in my region and it works very well, builds relationships, and allows a “cooperative” atmosphere to pull off some really neat projects.

The only catch is that you have to be very detail oriented and everyone participating has to be a “real”, verifiable, business entity.

This allows for much more flexibility, using additional resources as a job dictates, than having a full-blown co-op or LLP for every project, regardless of size.

Taylor you are absolutely right it is a shame but the insurance company’s have done this to make sure there bets are hedged ! And as with everything else our generation has been led by the nose and every body has been told that this is the way to protect them selfs, And we like sheep fall for it ! And the only way you are going to stop it is too with hold there money till they give in but nobody is willing to do the hard thing and grope together to do this !

I do not know the answer but I am sure sick of not being able to do as I please with my own business. People are not hungry enough yet , they have to get to the point were enough is enough. Right now here in WI it is hard to do , to hire someone as a sub contractor in the woods. There is not enough money in what we do to hire someone and it is hard to find people who are committed enough to by there own insurance and get there own gear. Some things need to change in a big way and fast or we are all done … or at least on a serious level as far as logging with draft horses goes. If we can not grow because we do not have the work that is our problem but if we can not grow because of the laws and government … well that is more than a problem it is a crime. I would love to expand and grow , I have young guys that want to work but I can not afford to hire them.
A contract or waver between two men should hold up , it should not be the business of and attorney or politician to say if it should or should not. We have the work , we have a better way , we have the man power to do the jobs … so who can tell us we can not ? Taylor Johnson

The way it is set up if they want to give you grief they can if they want to find something wrong they will. On almost any job things go on that could make them say , ” well he was acting as your employee for this reason or that reason ” . Unless someone is a full functioning self employed logger it is hard to turn him into a sub if they start to dig into the situation. When my Cousin lost his arm it was 2 years in court but they did it .
What we have to do is not say how can we operate with in the law? but ask is the law they want us under lawful or not? All self employed people have to tell these politicians and there lobbyist to get bent.
They recently told us at a meeting that a man and his truck , chain saws , and other cutting gear could not be considered independent contractors. So now there trying to say that even if he has his own insurance , equipment , comes and goes as he pleases he is not to be considered an independent contractor. There reasoning was that he did not have enough invested…. now they get to decide how much a man needs to invest …. This is not a free country any more and most of the laws are to give tyrants power over us not to protect or help us . We have to figure out how to get our God given rights back under our Constitution . We let them do this to us , they do not have the right to.
Well now I am going to skid logs and I am running late …. I will be back to help solve the worlds problems tonight . 🙂 . Taylor Johnson