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American
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Discussion Starter #1
I am currently expanding my business operations to include recycling drywall into a soil amendment by grinding the new construction trimmings into a granular powder. It will be sold to local farmers.
In order to have the room I needed for this operation I have purchased the family farm from my dad. I will now have the room I need to have a grinding area and temporary storage for the gypsum which is the product produced by this process.
What this means is I potentially have three businesses on my hands. My drywall scraps removal business that I have owned and operated for ten years and that is already incorporated. A drywall recycling business and the farm which will have 56 tillable acres. The farm is currently a row crop operation that I intend to convert to landscape products at some time in the near future.
My accountant has advised me that in order to limit my liabilities and the chances of losing all three companies at once in the event of a lawsuit. That I should incorporate the three companies individually.
The farm would lease the space to the recycling company that is required. The construction clean-up company would pay a dump fee to the recycling company. The recycling company will be the permit holder for the recycling operation and sell the end product to the farmers. The farm would be operated independently.
Now my question: My concerns are the costs of keeping all these companies separated. Would I need to pay separate workman’s comp for each of these companies? What about insurance costs? Would a general liability policy cover all three? But then if I do that how would it protect the farm from a lawsuit that say for instance the recycling company suffers. As of now my original company only has the 2 full time employees, consisting of my wife and me. However I can see the need for hiring additional employees in the near future. Getting the property purchased, closing costs and other expenses has left me cash poor temporally so hiring an attorney at this time is not an option. That situation will be remedied in the near future by the savings that will occur when I discontinue paying to dump the drywall at the land fill. My problem however is that I need to decide now about starting theses other companies because if I am going to do this I will need to file the incorporation papers ASAP. In addition to the incorporation paper work I will need Fed. ID numbers and all other related work that goes along with this. Separate bank accounts, Company name availability searches and such.
So I am hoping to get some preliminary advice and should I need to involve an attorney at some point I will do so then.
I have been thru the incorporation process before. I have computer software that I used to set up my existing company and it is easy to use. So I will be going that route again.
My question about the workmen’s comp insurance is my main issue at this time. It would be a very costly proposition to be required to carry the same coverage on my wife and myself three times. Any advise would be appreciated.
 

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In this state (FL), up to 3 corporate officers can be exempt from WC. You may want to explore this.
You probably want to set up separate corp's to eliminate any crossover in the event of a lawsuit although it's all going to come back to you anyway. It just keeps the lawyers busy. If you get really big, the are advantages to an umbrella co. I doubt if I ever get there but ol'#2 works for one. They own a bank, two phone co's, land businesses, construction co's and God only knows what else, they all fall under an umbrella corp.
 

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You are going to hear some advice here, but my advice would be to call your accountant and discuss this with him/her. If you don't have one, the first thing on your list should be to get one. The second thing you will need is an attorney. Everybody in business should have access to both or you really are flying by the seat of your pants and putting yourself at a serious disadvantage.

The matter isn't whether you can afford them or not, they aren't an optional facet of doing business that you only get when you think you can afford them. You have to budget for them right from the start, like paying the rent or for tools or any other expenses you might have.
 

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American
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Discussion Starter #4 (Edited)
My understanding is if I or my wife were too be directly involved in any event that resulted in a lawsuit that all this goes out the window anyway. A suet would go directly against us personally and they always go for the deepest pockets. That would be us. When the separation of companies comes into play will be when we have employees. If an employee s actions result in a lawsuit only the company that employees that person is held accountable. For instance an employee of the recycling business wrecks one of the company trucks resulting in a suit. The injured party can sue the recycling center and us but the farm being a separate company would be protected.
In any event what about the workmen's comp peace of the puzzle? Right now I am worried this would mean separate coverage for each company.
Here in Indiana we are not exempt unfortunately.
 

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Hey Lead Arrows,

Whatever happend to your situation. I have similar questions and am curious how it all turned out for you and what you decided to do?

tim
 

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I have a similar setup in terms of logistics and liability exposures. I own a single corporation that has a division devoted to sub-contract work for restoration contractors, a division for straight General Contracting for homeowner direct home imprvements, and finally a division dedicated to specialty demolition and project/site maintaining.
Each delivers a specific product with varying degrees of liability exposure to the corporation as a whole. Overall the three have combined to net close to $750,000 this year. Still the cost of separating each into individual stand alone firms is minute compared to the logistics of maintaining straight and comprehensive books and records. I have delayed the absolute division as the support and book keeping aparatus needed would be stiffling. I spend two to three hours at my desk each evening as it is.
Instead I have opted to set goals based upon time and company performance. Though there is a risk that a catastrophe could befall my small business and destroy it, it should be noted that my business comes to my company because of me. The corporation is the shell with which we do and perform business through. Catastrophe may cripple XYZ Inc. true. But my business will follow me to ABC Corp. as soon as I establish it when the dust clears.
My advice is ultimately to run fast and loose until time and finances warrant the division. Otherwise the operation may become to cumbersome and create a drag on your ability to grow as quickly as needed.
 

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I have been able to negotiate business liability as a single policy for multiple companies that I own interests in. My worker's comp policies are held separately because the nature of the work is very very different at the different LLCs (one is a C-Corp computer company; the other does historic restoration and building products as an LLC; a third provides consulting services only as an LLC; a fourth holds patents and trademarks only as an S Corp).

However, our workers comp policies are based on total payroll, so I don't think you and your wife will be triple - billed. But you are correct that there is a base cost that you'll be paying just to turn on minimum coverage.

I've also been able to get cross-company coverage for EDP ( electronic data processing) coverage - since we have a lot of computer systems, as well as BAPP coverage cross-company.

But, I'm guessing you'll need workers comp separately. Hopefully, one or two of your multiple companies will not be billed at such high rates as the third one or fourth one. Try to aggregate worker risk in one company (such as roofing work or sawmill work), so that the other companies can have dramatically lower rates. For example, our one company carries a contractor rider; the others do not, and that is what drives cost.

Sorry to ramble -- it took months for us to get things set up the way we wanted.

Please talk to your accountant about whether consolidated returns are required. If common interest (80% plus) is held in these multiple companies, you have different reporting obligations to the IRS that can help or hurt.

PS - when you get hit with a nuisance lawsuit as happens to many of us you'll feel better having those companies separated.
 

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American
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Discussion Starter #8 (Edited)
Well it's been a while and I thought I had email notice of posts on this thread but I must have it turned off. I'll fix that after this post.


Well a lot has happened sense I started this thread. I did INC the farm and Roy's Recycling and I did go over my options with my accountant.
Workmans comp issue was handled rather simply....I just don't get paid. LOL I mean I really don't take a pay check from the farm or Roy's at this time. My start up expenses have taken all of the profits and then some so far so it just isn't an issue yet.
I hope with in a year that will change...it had better or I'M in the tank.
The good news is I have all of the equipment I need to recycle the drywall except an air handling system and I have begun operations.
For now I just grind the drywall in the rain with the barn doors open and that controls the dust while letting fresh air in.
The local paper ran an article on my new business.

http://www.heraldbulletin.com/homenews/local_story_200174942.html

Had to fix link. Should work now.

post rule.:sad: had to go add junk posts so this would post. Sorry about junk posts but gessh.

The bad new is I had to get a zoning special use exemption and my attorney fees were close to 8 grand.:sad:

It will be worth it though as long as I don't go broke before I can catch up on my budget.
Fall sales of gypsum and harvesting of my corn crop should keep me a float till spring. I will need to broaden my client bass as soon as possible but I am optimistic for now.
I did get a visit from a local landscaper wanting two tri-axle loads of Gypsum a couple of days ago. That was a direct result of the article in the paper.
Well its late so I'M off for now. I will fix that email notice so I won't miss any replies and if there are any questions I will be happy to answer them when I'M not so tired.
Happy trails.
 
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