Any Suggestions - Old Workers Comp Audit - Small-Business-Forum.net

Blessed · 10-15-2008, 03:39 PM

My husband and I had a business for 15 months with another individual. Our insurance agent was an idiot and had us buy workers comp together. The other guy had a claim on the insurance, ran up a bill, got paid by workers comp and etc... He also cleared $120,000 from the business that year. We cleared about $25,000. After we had closed the business our "payroll" - everyone worked as an independent contractor - was audited and the workers comp company hit us with a bill for $4000 that we didn't receive until after it had gone to collections. Our ex-partner is the reason the bill is so high so he is supposed to be paying it and has been sending checks for $100/month. I guess he and the collection agency had worked out a $500/month payment plan.

The long and short of this is that the collection agency wants at least $500 a month or they are going to sue us - we aren't in a position where we can deal with the bill right now, probably after tax time we would be able to pay about half of it - but that isn't right now. My question is - if we are sending them $100 a month (which I could do... I guess) can they really sue us?

Anybody have any ideas? I'm checking into our state laws as well - I think the company is just trying to intimidate us.

BillR · 10-15-2008, 05:32 PM

If they sue you it will be in small claims court more than likely. It wouldn't pay to take you anywhere else for a pretty small amount (in terms of what courts deal with). And even if you went there the judge is pretty likely to hear your story and agree you are providing a good faith attempt to pay the debt.

Also, even if they do sue you that doesn't mean anything because you have already acknowledged (I assume) the debt is valid. Taking you to court doesn't get them ANYWHERE. They'd still have to win in court, THEN file/docket the win, then file a lien, etc, against your property and for what? You'd still be paying them the same amount as you are now. It literally gets them no where.

Also, you may want to point out that your lawyer (check this out so it's legit and you're not just saying it) has advised you that falsely threatening to sue someone is tantamount to harrassment and you want a copy of the filing they have completed so far.

I'd call them and point this out. Then tell them if they do file you are going to be filing to extensions for as long as possible until your former partner can be located and you can counter-sue him for the debt. That will drag this out for YEARS and they know this.

That should be enough to get them to back off.

Damn jackasses....

KristineS · 10-15-2008, 10:01 PM

Wow, sorry to hear about this. That's stinks.

I would think, if you were in a partnership, you're liable for the debt, even if it was your partner that caused it. If your partner is making a payments on the debt, and that's all he can do, I don't think there is anything the collection people can do.

I do know you can request that all their contact with you be in writing and that they don't call you. I'm not sure what your rights are if your former partner is paying on the debt.

Evan · 10-21-2008, 04:35 AM

What legal entity was this former business? It sounds like a partnership, but most people say "partner" even if it was a corporation. I'm inclined to believe it was a corporation based on having worker's compensation insurance if it was just the three of you, unless your state law mandates it for shareholder-employees.

Do you have a copy of the contract you signed with the insurer? That may also be helpful to review as well.

Blessed · 10-21-2008, 05:42 AM

Hi Evan - it was a Sole Proprietorship - so the partner is effectively insulated against any lawsuits and by law I have the whole burden of responsibility.

After we learned some more about the laws I refused to have workers comp insurance together with ANYONE....

It was a foolish business agreement we let ourselves be talked into - that is why I'm willing to acknowledge responsibility for the bill - it just means that this other guy might get to take us for a few more dollars. But from what I've been able to figure out - the collection agency is breaking the law by trying to intimidate us.

Evan · 10-23-2008, 03:35 AM

If you did have some type of business agreement -- written or not, you would have had a partnership. Of course it doesn't help your case if you treated him as an "employee". A lot of business entities run on a "handshake" without any agreement. Partnerships sometimes lack the written paperwork. LLCs sometimes lack the operating agreement, similar to the partnership agreement. And for small corporations, some type of shareholder agreement can be helpful. As you're well aware, everything goes wonderfully...until it doesn't, and then it's too late.

Specifics of your case I'm not certain of, but I'm sure an attorney would be of some assistance if you think its worth it. Otherwise, you'll almost certainly be responsible for footing the bill.

10-15-2008, 03:39 PM	#1 (permalink)
Blessed Member Needs New Keyboard Join Date: Aug 2008 Location: Midwest USA Posts: 214 Reputation: 11	Any Suggestions - Old Workers Comp Audit My husband and I had a business for 15 months with another individual. Our insurance agent was an idiot and had us buy workers comp together. The other guy had a claim on the insurance, ran up a bill, got paid by workers comp and etc... He also cleared $120,000 from the business that year. We cleared about $25,000. After we had closed the business our "payroll" - everyone worked as an independent contractor - was audited and the workers comp company hit us with a bill for $4000 that we didn't receive until after it had gone to collections. Our ex-partner is the reason the bill is so high so he is supposed to be paying it and has been sending checks for $100/month. I guess he and the collection agency had worked out a $500/month payment plan. The long and short of this is that the collection agency wants at least $500 a month or they are going to sue us - we aren't in a position where we can deal with the bill right now, probably after tax time we would be able to pay about half of it - but that isn't right now. My question is - if we are sending them $100 a month (which I could do... I guess) can they really sue us? Anybody have any ideas? I'm checking into our state laws as well - I think the company is just trying to intimidate us. __________________ I'm Blessed! http://crazydogslife.blogspot.com http://afrugalhousewife.com

10-15-2008, 05:32 PM	#2 (permalink)
BillR Member Needs New Keyboard Join Date: Sep 2008 Location: MN Posts: 106 Reputation: 11	If they sue you it will be in small claims court more than likely. It wouldn't pay to take you anywhere else for a pretty small amount (in terms of what courts deal with). And even if you went there the judge is pretty likely to hear your story and agree you are providing a good faith attempt to pay the debt. Also, even if they do sue you that doesn't mean anything because you have already acknowledged (I assume) the debt is valid. Taking you to court doesn't get them ANYWHERE. They'd still have to win in court, THEN file/docket the win, then file a lien, etc, against your property and for what? You'd still be paying them the same amount as you are now. It literally gets them no where. Also, you may want to point out that your lawyer (check this out so it's legit and you're not just saying it) has advised you that falsely threatening to sue someone is tantamount to harrassment and you want a copy of the filing they have completed so far. I'd call them and point this out. Then tell them if they do file you are going to be filing to extensions for as long as possible until your former partner can be located and you can counter-sue him for the debt. That will drag this out for YEARS and they know this. That should be enough to get them to back off. Damn jackasses.... Last edited by BillR; 10-15-2008 at 05:35 PM.

10-15-2008, 10:01 PM	#3 (permalink)
KristineS Queen of the Forum Join Date: Aug 2008 Location: Traverse City, MI Posts: 1,291 Reputation: 22	Wow, sorry to hear about this. That's stinks. I would think, if you were in a partnership, you're liable for the debt, even if it was your partner that caused it. If your partner is making a payments on the debt, and that's all he can do, I don't think there is anything the collection people can do. I do know you can request that all their contact with you be in writing and that they don't call you. I'm not sure what your rights are if your former partner is paying on the debt. __________________ Settling for More\| When I'm Thin\|A Frugal Housewife\| Outoor Bloggers Summit Blog\|Hunt Smart, Think Safety Blog

10-21-2008, 04:35 AM	#4 (permalink)
Evan Member Needs New Keyboard Join Date: Aug 2008 Location: Providence, RI Posts: 307 Reputation: 25	What legal entity was this former business? It sounds like a partnership, but most people say "partner" even if it was a corporation. I'm inclined to believe it was a corporation based on having worker's compensation insurance if it was just the three of you, unless your state law mandates it for shareholder-employees. Do you have a copy of the contract you signed with the insurer? That may also be helpful to review as well. __________________ Evan L.

10-21-2008, 05:42 AM	#5 (permalink)
Blessed Member Needs New Keyboard Join Date: Aug 2008 Location: Midwest USA Posts: 214 Reputation: 11	Hi Evan - it was a Sole Proprietorship - so the partner is effectively insulated against any lawsuits and by law I have the whole burden of responsibility. After we learned some more about the laws I refused to have workers comp insurance together with ANYONE.... It was a foolish business agreement we let ourselves be talked into - that is why I'm willing to acknowledge responsibility for the bill - it just means that this other guy might get to take us for a few more dollars. But from what I've been able to figure out - the collection agency is breaking the law by trying to intimidate us. __________________ I'm Blessed! http://crazydogslife.blogspot.com http://afrugalhousewife.com

10-23-2008, 03:35 AM	#6 (permalink)
Evan Member Needs New Keyboard Join Date: Aug 2008 Location: Providence, RI Posts: 307 Reputation: 25	If you did have some type of business agreement -- written or not, you would have had a partnership. Of course it doesn't help your case if you treated him as an "employee". A lot of business entities run on a "handshake" without any agreement. Partnerships sometimes lack the written paperwork. LLCs sometimes lack the operating agreement, similar to the partnership agreement. And for small corporations, some type of shareholder agreement can be helpful. As you're well aware, everything goes wonderfully...until it doesn't, and then it's too late. Specifics of your case I'm not certain of, but I'm sure an attorney would be of some assistance if you think its worth it. Otherwise, you'll almost certainly be responsible for footing the bill. __________________ Evan L.