An employee must prove two things in order to qualify for benefits based on an occupational disease:

1. That the disease came from the work duties, and
2. That the type of work makes the employee more likely to get that disease than the general public.

The doctor’s opinion will likely carry the day on the first of those two. For example, if the doctor believes a worker’s carpal tunnel syndrome came from his computer data entry job, rather than some other cause (like a traumatic injury), the first test is proved. Another example is if the doctor says a hospital nurse’s contracting hepatitis B or MRSA came from exposure at her work, rather than from some other exposure.

The second test requires that the job duties make the worker more likely to get this disease than the general public. To meet this test, look to the doctor’s opinion and to scientific research. The doctor may be able to say that, over many years in practice, he has treated more computer data entry workers for carpal tunnel syndrome than the general public, so he believes the repetitive hand positions in this job predispose workers to the disease. There are also ergonomic studies about the link between certain jobs and particular health problems. For example, there are studies showing that dental hygienists are more likely to have neck pain than the general population. There are many studies linking full-time data entry to carpal tunnel syndrome.

Statistics can also help prove these cases. In the example above where a hospital nurse contracts hepatitis B or MRSA, statistics show that there are certain places where contracting these diseases is more likely. Hospitals are high on the list. While the general public may go to hospitals occasionally as a patient or visitor, hospital workers are there every day, increasing their risk.

What are some other conditions that may be occupational diseases? It is impossible to give a complete list, but here are a few common ones. Dental hygienists often have neck problems because of the position they have to hold while working on patients. Employees who do a lot of overhead work, like auto mechanics who work on vehicles that are on lifts, and some warehouse workers, are more likely to have difficulty with their shoulders. Carpet installers are prone to knee disorders (even with pads). Some assembly line jobs require repetitive motion that stresses particular joints.

For occupational diseases, Workers’ Comp law provides weekly compensation (2/3 of average weekly wage) while the employee must be out of work. Once the employee returns to work, permanent partial disability compensation can be calculated in various ways. If a worker is permanently disabled from the condition, lifetime weekly checks are available. Workers’ Comp also covers the employee’s medical care for the condition. Because proving an occupational disease can be technical, an employee or employer involved in an occupational disease case may want to consult the N.C. Industrial Commission’s website (www.ic.nc.gov) and/or consult an attorney for assistance. In my practice, I find that Workers’ Comp insurance companies are more likely to deny valid occupational disease claims than injury-by-accident claims. Because occupational disease cases are more complex to prove, insurance companies hope that the claimant will give up if they deny the claim initially. Do not be discouraged, as persistence will often be rewarded.

One is the Energy Efficient Mortgage (“EEM”), also called a “green mortgage.” This program began by Fannie Mae (backed by the U.S. Department of Housing and Urban Development) in 1979; however, Fannie Mae hasn’t done a good job making either lenders or consumers aware of it.

In a green mortgage, borrowers can add up to 15% of the home’s value to their mortgage amount and use that money for energy improvements. The green mortgage pays for energy upgrades during construction of a new home. It is also available to upgrade an existing home so that homeowners can save money on their energy costs. To be sure the mortgage stays affordable, there is a rule that spending on energy improvements must save the homeowner at least as much as the extra amount the purchase adds to the mortgage. For example, if the cost of upgrading a heating system adds $20 per month to the mortgage payment, it must save the homeowner at least $20 per month average on utility bills.

EEM borrowers get professional assistance deciding which energy improvements give the most “bang for the buck.” A trained energy inspector tours the home to score its existing energy efficiency, and to explain where the biggest energy losses happen. The inspector suggests which energy improvements will result in the most savings on energy costs.

There are two possible obstacles in getting an Energy Efficient Mortgage. One is that lenders may not be aware of the program, since Fannie Mae has not promoted it. The other is that there is some additional paperwork to be done. Since mortgages are already paper-intensive, some lenders may not be willing to do the additional paperwork for an Energy Efficient Mortgage. For more information on green mortgages, visit www.energystar.gov and search for “mortgages.”

Another useful mortgage product is the “reverse mortgage.” Instead of the homeowner sending the bank a check each month on their mortgage, the bank sends the homeowner a check each month. The amount of the loan balance owed against the home goes up incrementally with each payment sent to the homeowner, so a reverse mortgage “eats into” and eventually “eats up” the equity in the home.

The purpose of reverse mortgages is to allow a homeowner with limited income but a lot of home equity to turn that equity into monthly income. This is ideal for elderly persons with limited income but a house that is paid for, or for someone who becomes disabled but has a lot of equity in their home. The loan balance, which keeps growing with each check sent to the homeowner, will be paid in full when the homeowner dies or sells the home. If checks are paid to the homeowner long enough, of course, the mortgage balance will eliminate the homeowner’s equity. However, banks are careful in their calculations. The lender sets the amount of monthly payment they make to the homeowner at an amount that will not run out before the homeowner’s life expectancy. Many banks and lenders offer reversible mortgages. However, because they are not as common as regular mortgages, you may have to ask some questions to locate the person at the bank or lender who handles reverse mortgages.

Mediation is a very popular and successful type of ADR. In mediation, the parties and attorneys meet with a mediator to try to reach a settlement. The mediator does not make a decision like a judge. The mediator helps both sides recognize the strengths, weaknesses and risks in their case, and aids in communication. Because settlement is the goal, the parties have control in crafting the solution to their case, rather than having a decision handed to them. Depending on the type of case, court-mandated mediation settles about 70-75% of cases. Mediators can be free (e.g., the Orange County Child Custody Mediator, Judicial Settlement Conference in property division cases) or available at a nominal charge (e.g., the County Dispute Settlement Center). Mediators in some cases can be more expensive, e.g., $125-150/hour for attorney mediators for superior court or workers’ comp cases.

Arbitration is another form of ADR. In arbitration, the lawyers and parties hold a “mini-trial” before the arbitrator, who serves like a judge. Arbitration can be binding (final) or non-binding (subject to further hearing or appeal). The “mini-trial” is shorter and less formal than a regular trial. If the court orders arbitration, the arbitrator may be paid by the parties jointly, or by one party, depending on the case, at rates usually $125-150/hour. In district and superior court non-binding arbitration, if a party is unsatisfied with the decision, he/she can still demand a judge trial. If that happens, unfortunately, arbitration has only increased the parties’ expense, since their lawyers have to try the case twice. If the parties arbitrate because a contract requires it, arbitration with a private agency like the American Arbitration Association can be very expensive. By comparison, filing and court fees for using a courtroom trial are minimal since that system is funded with tax dollars. Thus, depending on the details of arbitration, it may or may not save expense compared to going to court.

With the parties’ consent, judges may allow trial procedures that save time and money. For example, the parties and the judge might agree on a time limit for each side to present evidence.

ADR is here to stay. With a few exceptions, ADR has proven beneficial to parties with legal disputes. With more cases being resolved in ADR, lawyers, judges and parties appreciate the benefit of less crowded court dockets, meaning they are able to hear sooner those cases that really do need a trial.

Where did the Workers’ Comp Act come from?

The N.C. Workers’ Comp Act was adopted in the 1930s to compensate employees who were injured by accident on the job or who contracted occupational disease. The purpose was “for industry to pay for its own wreckage,” in the words of a famous case. The legislature struck a balance between employers and employees. It gave employers the benefit of reduced expense on liability by (1) setting compensation rates at 2/3 of the employee’s average weekly wage instead of 100%, (2) excluding compensation for pain and suffering, and (3) making workers’ comp the “exclusive remedy” for employees, meaning that employees cannot usually sue their employers in court for workers’ comp injuries. It gave employees the benefits of (1) receiving disability benefits promptly in accepted cases, with those payments continuing weekly as the case goes on, (2) receiving medical care at no cost to the employee in accepted cases, and (3) eliminating the defense of contributory negligence. By comparison, in car wreck cases, the insurance company does not have to pay for lost income or medical bills until they settle at the end of the case. In addition, if the insurance company in a car wreck case can prove that the injured party contributed in any way to his own injuries (contributory negligence), the injured person recovers nothing. However, in a car wreck case, the claimant who proves his damages receives 100% of his lost income (rather than 2/3) and recovers for past and future pain and suffering.

What if the insurer denies the claim?

Unfortunately for the employee, denial means the employee receives no benefits (either weekly checks or medical care) until the case is settled or litigated. If it cannot be settled, the N.C. Industrial Commission will have a hearing to decide if the case is properly a workers’ comp case.

Whom does the Workers’ Comp Act provide benefits to?

An employee is entitled to benefits when she is injured by an accident (defined as an unexpected event or unusual circumstance) while on the job. It also applies to an employee who contracts a disease that is associated more with her type of work than with ordinary activities of the general public (e.g., keyboard operators who get carpal tunnel syndrome). In some cases, protection can extend beyond employees. In the construction industry, for instance, a general contractor’s workers’ comp insurance policy must cover subs’ employees, unless the sub has a policy of its own.

Which employers must carry workers’ comp insurance?

By statute, employers with three or more employees must carry workers’ comp insurance. This is true whether the employees are full-time or part-time. The owner does not have to count herself as an employee. However, if the business has workers’ comp insurance, the owner can choose to be covered by the policy.

Does Workers’ Comp provide medical coverage?

Yes, the employer’s workers’ comp insurance carrier must pay for the employee’s medical care for injury by accident or occupational disease. This is true whether the employee misses work or not. The employer can direct the employee to see a particular doctor. However, as the case proceeds, the employee has the right to be evaluated by a doctor he chooses.

Does the Act replace lost wages for time out of work while the employee is receiving medical care?

The Act provides temporary disability benefits as follows. The insurer pays the employee weekly checks equal to 2/3 of her average weekly wage while out of work on doctors’ orders. The first 7 days the employee misses work are the “waiting period” when no check issues. Checks issue each week thereafter. Once the employee has missed work 21 days, the insurer pays the “waiting period” check. If an employee can return to part-time work while healing, she receives a partial Workers’ Comp check and a part-time paycheck.

When medical care has finished, is there compensation for permanent disability?

Yes. The employee has options from which to choose. These include: (1) a calculation based on the medical disability rating, or (2) a “wage loss” approach to account for a lower post-injury wage. In addition, if both sides of the case agree, they can settle a case in full, without the right to re-open the case later, in exchange for an extra payment; this is called a “clincher agreement.”

Once the case is settled, can the employee re-open the case for more medical care or for additional compensation if his condition worsens?

This depends on how the case was settled. If the case was settled with a clincher agreement, it cannot be re-opened. If the case was settled without a clincher agreement, then the employee can usually re-open the case within two years of receiving his last check.

Must the employer allow the employee to return to work after the doctor releases the employee?

No, but the insurance company may face additional costs in the Workers’ Comp case if the employer does not offer work within the employee’s medical restrictions. It may extend the time that temporary weekly benefits are paid while the employee seeks other work. If the employee cannot find other work, this may result in additional permanent disability compensation. In some cases, there may be no choice about bringing the employee back to work, if the company does not have any jobs within the employee’s new medical restrictions.

Who decides disputed cases?

Disputed cases are decided by the Commissioners at the N.C. Industrial Commission. There are no jury trials in Workers’ Comp cases.

How are Workers’ Comp insurance rates set for employers?

Insurance rates are based on several factors. These include size of payroll, number of employees, and type of work the employer does. Of course, rates are higher in industries where injuries are more common, like construction. Since the economy began declining around 2001, insurance companies have seen their returns drop on money they had invested. Many insurers in the 1990s used their large investment returns to subsidize insurance premium rates in order to offer lower premiums and sell more policies. With those large investment returns gone, some insurers are raising their premiums instead. Since there are no juries in Workers’ Comp cases, premiums are not affected by jury verdicts.

Federal and state laws provide privacy protection for computer use. However, these laws do not apply to employers who monitor computer equipment the employer owns.Lawsuits have challenged employer monitoring of workplace computer use. Courts have consistently found in favor of employers, ruling that employees do not have a “reasonable expectation of privacy” in the computer equipment owned by the employer, even when the employees have password-protected accounts.Employers have good reasons to monitor computer use, apart from any desire to be “Big Brother.”These reasons include:

• Backing up data and email files in case of a system failure
• Preventing viruses from employees installing software on their own
• Protecting the confidentiality of trade secrets
• Preventing situations where co-workers can hold the company liable for sexual harassment or discrimination
• Tracking system capacity and correcting network problems
• Making sure an employee isn’t spending all day surfing the web

Employers have been sued by employees for claims like sexual harassment and hostile environment. For example, if an employee visits websites of pornography or hate groups at work, it can offend co-workers. In one case, an employee viewed pornography at work, thinking his screen could not be seen since it faced away from other desks, but at a certain time of day his screen reflected clearly in a nearby window. A co-worker may feel the employer knew or should have known about the offending use, but didn’t stop it. Monitoring can deter inappropriate website visits, and can allow the employer to discipline the offending employee and solve the problem quickly.Many employers have policies about computer use in an employee handbook. An employer must follow whatever written policies it has. Some handbooks forbid any personal use of workplace computers; others permit limited personal use of work computers.

Unless a written policy says otherwise, employers do not have to tell employees when their activities are being monitored, and there is no way to tell from looking at the employee’s computer. Although some software programs claim to alert the employee when their activities are being monitored, they can give a false sense of security since tech-savvy employers can get around these programs.Some employers only review individual employees’ files and web visits when there is an indication of a problem. Other employers check employees’ computer use randomly. Still others actually review everything. Keep in mind that deleted email messages and files may still be in the system, although they appear to be gone.

Reasonableness is often the key to whether an employee’s personal use of the employer’s computer causes a problem. Most employers don’t mind if an employee occasionally checks the sales at a department store, or sends an email confirming carpool arrangements. Most employers mind if an employee visits offensive websites or sends threatening emails. Most employers mind if the employee spends an inordinate amount of time surfing the net, or working on personal projects or side businesses.

In short, employees should not assume that their personal use of their employer’s computer is in any way private. Assume that whatever you write, surf or store can be viewed by your employer, because legally it can.

A: Yes. A standard or form contract is a valuable tool for a small business owner. Having a standard contract with customers or clients prevents misunderstandings and protects the business owner.

With the magic of computers, a business can even make its “fill in the blank” contract look customized and special for each customer. This can be helpful in marketing. Some business owners don’t label it as a “contract,” if that word would be intimidating to customers. Some business owners put the contract provisions in a brochure or flyer format that also describes and promotes their business, to combine marketing and contract efforts. Companies who use estimates can add terms and conditions, with a special section for the customer to sign so as to turn the estimate into a contract if the customer wants to go ahead with the work.

One important way a contract helps the business person is to describe what work is to be done for the customer, what the payment arrangements are, and when payment is expected. This avoids later misunderstandings.Contracts also protect you if a customer does not pay.

You should make sure your contract includes two important things:

1. Be sure it reads that interest at a certain percentage accrues on unpaid balances after 30 days. Having an interest provision (usually 18% per year or less) will allow you to collect a higher rate of interest than the judgment rate (currently 8% per year) between the time the balance is due and the time any judgment is entered in court. Once a judgment is entered, you will be limited to the judgment rate of interest from then on.
2. Be sure the contract reads that the customer will be responsible for attorney’s fees if you must take legal action to collect unpaid balances. If you do not have a written attorney’s fee provision, you cannot recover your attorney’s fees if you have to sue for collection. You may only need an attorney’s fee provision once every few years, but the time that you do, you will be glad you took the time to put it into your contracts. Otherwise, what you pay an attorney to collect the account comes out of what is already owed to you.

If you are making a warranty on your work, your customers will appreciate your including it in the contract. Because you will be bound by that warranty, think carefully about whether you want to make a warranty and what it is before you put it in your contract.

Depending on your type of business, your contract may need more specialized provisions. These might include indemnification (where another party agrees to reimburse you for any claims against you) or ownership of intellectual property rights (like who owns the computer code from the programming work you do for your client). A lawyer can help you decide if you need specialized provisions. A form contract designed for your business needs is a one-time effort that will benefit you with every customer you serve.

If an asset has a POD feature but you do not list a beneficiary, it will pass through your estate. By comparison, assets left to a beneficiary through an estate cannot be distributed to him or her until after the “creditor claim period” ends. That is usually at least 120 days after the date of death, depending on when the estate is opened and the newspaper notice to creditors is published.

Naming a beneficiary on POD assets also saves money. While Clerk of Court fees for probating a North Carolina estate are not outrageous (particularly when compared to other states), why pay more money in Clerk fees than you have to? If you own a retirement account but don’t list a beneficiary, when those funds pass through your estate, the Clerk of Court will collect a fee of four dollars per thousand. In an estate I worked on recently, a retired gentleman passed away with a retirement account of $250,000. He didn’t name a beneficiary, so the funds went through his estate. The Clerk took a $1000 fee on it. That expense could have been avoided if the gentlemen had listed his beneficiary by name on the POD form.

Another advantage of naming a beneficiary when you can is that it protects those assets from estate creditors. Because those assets pay outside of the estate, estate creditors cannot reach them.There is one time you should not use a POD beneficiary feature. You should never, ever list a minor child by name on the POD beneficiary form. Because minors cannot legally own property, listing a minor child on a beneficiary form means that the Court will have to appoint a guardian to receive the funds for the minor, and the Clerk will take a fee each year. Similarly, never name as a beneficiary a disabled adult who depends on means-tested government assistance. Leaving money outright to such a disabled adult can disqualify them for helpful government programs. To safely leave funds to minor children or disabled adults, you’ll need to set up a trust to receive and manage the benefits, and name the trust on the POD beneficiary form.

Except for those limited circumstances, name the person, people or charity you want to receive your POD asset on the beneficiary designation form. If you don’t know if an asset has a POD feature, ask. Make good use of every POD asset you have, and your loved ones will be glad you did.

Do you have a standard contract, or standard terms on your estimate/invoice forms? They should include wording like this: “Interest at 18% per year accrues on balances unpaid more than 30 days. If we must take legal action to collect, customer will be liable for our attorney’s fees.” You can name an interest rate lower than 18% if you prefer. These sentences will allow you to do two important things. First, they allow you to begin collecting interest early, instead of waiting until after a judgment is entered. Second, if you have to sue to collect, they allow you to recover your attorney’s fees.Are your workers who get 1099s truly independent contractors, or are they really W-2 employees in disguise? The IRS cares about this because they receive employer withholding contributions on W-2 employees, but not on independent contractors paid with 1099s. Back taxes and penalties can result if an employer should be withholding taxes, but does not. The IRS has a number of factors to decide whether a worker is an employee or an independent contractor. For example, if you set your worker’s hours, control how he gets the job done, provide the tools he uses, and he works only for you, he is probably an employee. By comparison, if the person you hire works for various other employers too, has special skills, has his own tools, and has control over how he gets the job done, he is probably an independent contractor. Some factors can be more important than others in certain cases. If in doubt, consult your attorney or accountant.

Do you want your employees to sign non-compete agreements? In North Carolina, non-competes are valid only when:They are signed by a new employee as part of being hired, orFor an existing employee, the employee is paid something extra of value in exchange for signing the agreement, like a lump sum payment or a bonus she would not otherwise have received. It is not enough to tell an existing employee that she must sign the non-compete in order to keep her job, nor is it enough to give her a nominal sum of money.

Non-competes must be reasonable in duration and in how wide a geographic area they cover. This is a “pass-fail” test. If the court finds a non-compete is unreasonable, they will strike it down; they will not rewrite it to make it reasonable.Have you thought about succession planning? As baby boomer business owners get older, many are thinking about how to turn the reins over to a new generation. This may involve business planning and estate planning. It is easier to transition a corporation or an LLC to the next generation than it is a sole proprietorship. You may want to develop a plan to transfer ownership incrementally. That way you retain the controlling interest until you are sure they have gained the experience needed to be successful.

Remember that you, your attorney, and your accountant are a team. Relying upon the experience and expertise of your attorney and your accountant can prevent many expensive and time-consuming problems for your business.

First, are you selling or buying only assets, or the whole business? A buyer usually prefers to purchase just the assets in the seller’s business, so that she does not assume the selling company’s debts. A seller typically prefers an “entity sale,” meaning the sale of the company itself, its stock, its debts and its assets. This relieves the seller of future responsibility on the company’s debts, as the buyer takes them as part of the deal. Of course, the price can be set fairly either way. It is just a matter of doing math to adjust for whether debt is included or excluded.

Second, the seller should consider any personal guarantees he made on loans that are to be taken by the buyer. The seller is still on the hook to the bank for the personal guarantee, even after the business or asset is sold. It is important that the loan be paid off from closing, or that the buyer get his own loan to replace the seller’s loan and its guarantee. Otherwise, the seller remains at risk; if the buyer defaults on payments, the seller who signed a guarantee may have to pay off the loan for an asset he no longer owns. On the flip side, if a buyer simply takes over making payments on a vehicle loan in the seller’s name, when the loan is paid off (which could be years later), the bank will send the title to the seller unless other arrangements are made. That poses a risk to the buyer.

Third, will the price be paid in one lump sum at closing, or will part of it be financed by the seller? If you are a seller providing financing, you will want adequate security for payment. That may include a security interest in business assets, but even better is a deed of trust against the buyer’s real estate, particularly his home. If the buyer pledges his home as collateral for the debt, there is more motivation to pay than if only the business assets are pledged.

Fourth, does the buyer need a non-compete agreement from the seller? Buyers do not want to risk that, after paying good money for a business, the seller sets up shop under another name a few blocks away. Sellers may be selling because they are retiring or moving away. However, a non-compete is still a good idea in case the seller’s plans change. If a seller is retiring or moving away, signing the non-compete will not hurt her.Fifth, what is needed for a successful transition? For some businesses, simply having the seller available for phone or email consultation for a few weeks will be sufficient. For others, it will be important that the seller be physically present at the business for a period of time to facilitate transition.

Give careful thought to details ahead of time, and have proper documentation for your agreement. This will help assure a successful transaction, whether you are the buyer or the seller.

Many businesses benefit from forming a corporation or limited liability company. The decision usually turns on two factors: (1) limiting liability and (2) tax planning. A business may decide to incorporate or to form a limited liability company (L.L.C.) for these reasons.

First this article will address corporations. Incorporating a business properly limits the personal liability of the business owners. If there is a claim against the business — for example, if a customer is injured or if a customer/vendor claims the business didn’t fulfill its contract — the most the owners of a properly formed corporation can lose is their investment in the business. By comparison, owners of unincorporated businesses (sole proprietors and partners) can lose their personal assets (residence, car, personal savings, etc.) in addition to losing their investment in the business. Incorporating properly avoids that big risk.

To obtain the desired limit on personal liability, the corporation must be set up and maintained properly. If it isn’t, a judge will let a claimant “pierce the corporate veil” and still reach the owners’ personal assets. In order to find a proper corporation, a judge will require the following:

1. Proper paperwork to set up the corporation, e.g., Articles, Bylaws, and Organizational Minutes. A lawyer can assure this is done properly.
2. Proper ongoing paperwork, e.g., annual meeting minutes.
3. Corporate funds kept separate from personal funds, and a paper trail to show when and why funds have gone from owner to business or from business to owner.
4. Adequate “capitalization,” which requires some explanation.

Adequate capitalization means having enough resources between corporate assets and insurance to cover most claims that could reasonably be expected against the business. Good insurance coverage for the risks inherent in a particular type of business will go a long way to meeting a judge’s requirements for adequate capitalization. Some types of businesses are more likely to have large claims and therefore need more resources to be adequately capitalized than other types of businesses. The idea is that an owner cannot create a corporation that is a mere “shell” and still escape personal liability.

Tax planning is the other factor in deciding whether to incorporate. An accountant can compare tax rates with or without incorporating. An accountant can help a business owner decide whether he can reduce payroll taxes by taking some profits from the business as “dividends” rather than as salary; dividends are available to owners of corporations, but not to sole proprietors or partners. Many businesses have a tax savings when they incorporate. If the business will become a corporation, an accountant can advise owners whether they will be better off tax-wise being a “C” corporation or an “S” corporation. The difference is how the corporation is taxed. A C corporation pays its own taxes, whereas an S corporation passes profits and losses through to the tax returns of the individual owners (called “pass-through taxation”). Pass-through taxation can often save small business owners some tax expense.

A Limited Liability Company (or LLC for short) is another option for setting up a business. An LLC is a mixture of the rules and benefits of corporations and partnerships. It is like a corporation in that it allows owners (called “members” rather than “shareholders”) to limit their liability to the amount they have invested in the business, so that owners’ personal assets are not at risk. Like a Subchapter S corporation and like a partnership, an LLC can give the owners “pass-through” taxation, meaning that the businesses’ profits and losses are taxed at the owners’ personal rates rather than at a (usually) higher corporate tax rate. Since not everyone can meet the rules for qualifying as a Subchapter S corporation (e.g., limits on the number of shareholders, requirement that S corporation shareholders be U.S. citizens), an LLC will allow those business owners to end up with a similar type of business structure.

An LLC is like a partnership in that there is flexibility to divide profits between owners many different ways. For instance, equal owners in a corporation must divide profits equally, but equal owners in an LLC or partnership may agree to divide the profits so that some owners receive more or less than others, for example, where one owner has devoted more time to the business than another.

It is important that an LLC be set up properly. This involves filing Articles of Organization with the Secretary of State, and having an Operating Agreement that accurately reflects how the LLC will be managed.

Depending on the nature of your business, an accountant may be able to recommend whether an LLC or a corporation gives you tax advantages. That may be the deciding factor whether to form an LLC or a corporation. An LLC can be preferable in some circumstances for the following reasons: (1) A judgment creditor of a member can only access money that would be distributed to the member, and cannot take ownership of the member’s share (whereas a judgment creditor of a corporate shareholder can take the shareholder’s shares), (2) It is easier for an LLC to distribute profits some way other than ownership interest percentages (e.g., 50/50 owners who agree to a 60/40 division of profits for some reason), or (3) One cannot qualify as an S Corporation, but one desires pass-through taxation (e.g., if one owner is not an American citizen). Remember that corporations have existed for many decades, so there is certainty in the rules such as how corporations are taxed, and what rights owners have among themselves. LLCs have only been around since the 1990s. There are some unsettled issues about LLC taxation and about their owners’ responsibilities as to each other, which can be a disadvantage. That uncertainty may or may not outweigh the advantages of an LLC, depending on the other circumstances present.

Each business client’s needs are unique. Attorneys and accountants can help you decide which type of business organization is best for your business.