Navigating Equine Medical, Loss of Use, and Mortality Insurance

by Staff Writers | Jun 11, 2024 | Equine Law

This is the first part of our comprehensive blog series on equine insurance. In this installment, we will delve into equine medical, loss of use, and mortality insurance, crucial aspects that ensure your horses receive the care they need when unexpected medical issues or tragic losses occur. As any horse owner knows, the equine industry demands unwavering dedication and extensive care. Unfortunately, accidents and emergencies can strike at any moment, making it essential to have the right insurance coverage. We’ll guide you through the various plans available and advise on combining them to fully protect your horse. Additionally, stay tuned for our next post, where we will explore equine owner liability policies, which safeguard you against damages your horses might cause to persons or property. Please note that we strongly advise contacting an experienced equine attorney and equine insurance team so they can help you find the best coverage for your horse.

Selecting the Right Equine Insurance

There are four main types of equine insurance policies, and it is up to you to decide what coverage best fits your situation. These decisions can seem daunting, but don’t worry; we are here to help you navigate which plan is right for your horse. It is also important to consult with an experienced equine law firm, so you know you’re fully covered. 

The four main insurance policy options for equine liability insurance are:

• Equine Mortality Insurance and Theft Insurance- Much like life insurance for humans, this policy covers the cost of your horse if they pass or get stolen. Valuation of your horse is dependent on a variety of factors. Age may prohibit the ability to obtain mortality insurance. 
• Major Medical and Surgical Insurance- Are you ready to pay out of pocket for all medical fees? Most people are not. This insurance covers or helps cover unforeseen medical or surgical care costs resulting from illnesses or accidents. 
• Accident, Sickness, and Disease Insurance (Stallion Infertility)- This policy is only available for breeding stallions. It compensates your stallion’s current value if they should lose the ability to breed. 
• Loss of Use Insurance- This equine insurance is only available for performance horses. It covers various permanent disabilities if your horse is unable to perform after an accident, injury, or sickness which does not result in total loss. 

Assessing How Your Horse is Valued

When seeking equine-related insurances as described above, assessing your horse’s value can be difficult, but generally, horses are valued at their original purchase price and may also include all of or portions of additional costs that went into purchasing the horse such as commissions and import fees.  Insurance companies use two main policies to decide how much your horse is worth. Some insurance policies are based on an agreed value, which is the amount you and the equine insurance company agree the horse is worth when the insurance policy begins. This agreed value is established before any unfortunate events occur and is the amount you will be paid if something were to happen to your horse. Alternatively, some insurance policies are based on fair market value, which is assessed at the time of your horse’s death and is based on what it is currently worth. However, factors such as training and breeding can increase your horse’s value in either situation, provided you have the proper paperwork. 

Consulting Clayborne & Wagner for Equine Insurance Policies and Coverage Disputes

Thinking about the what-ifs and worst-case scenarios can be painful for a horse owner, but accidents and illnesses do happen, and it’s essential to be prepared for them. Equine insurance policies are complex, and it’s okay if you do not understand the intricacies of them. That’s where we step in. Our team of expert equine attorneys will help you every step of the way and provide all the clarification and legal advice you need for your equine needs. Contact us today, and let us help you with your equine legal assistance needs.

Starting an Equine Business: Formation and Structure

by Staff Writers | Feb 26, 2024 | Equine Law

How to Start an Equine Business: Formation and Structure

Over the years, the equine industry has continued to grow, and as of 2023, it has reached an estimated $102bn in the US in 2023. The industry has provided a large economic impact in the work field, funding 1.7 million full-time jobs worldwide. Starting an equestrian business can be an extremely rewarding investment by growing a successful organization passionate about horses. Equestrian businesses require heavy attention to legal details and attentive planning, but with hard work and dedication, it is an achievable goal. 

The Different Types of Business Structures

The first step to starting an equine business is deciding which legal business structure best fits your situation. Factors that play into determining the best option for you depend on liability, number of owners, and tax considerations. Some major types of ownership are Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. 

Sole proprietorship is the most common type of business. They are run by a single owner who is responsible for all liability, losses, and profits. 

Advantages:

• In control of all important decisions
• Quick and easy setup
• Low fees and costs
• Most simple record-keeping
• Not double taxed

Disadvantages:

• All liability is on the individual
• Pays self-employment taxes
• Ceases when individual dies

General partnership is an arrangement between two or more individuals, and they are equally responsible for all liabilities, profits, debts, and taxes. 

Advantages:

• Easily formed
• Benefits from both individuals’ unique talents
• Not double taxed

Disadvantages:

• Books must balance between partners
• Liability is on both partners
• No tax-free benefits
• Ceases when one partner leaves or dies

Limited Liability Company (LLC) is the most flexible form of business with two or more members.

Advantages:

• Members have limited liability
• Flexibility in stock investing and profit sharing
• Less paperwork and fewer costs
• Not double taxed
• Personal property is separate from the business

Disadvantages:

• Needs more than two members to start
• State laws may limit the LLC
• Only “1 Person” on FSA payments
• Member pays self-employment tax on their portion of income
• Ceases when a member leaves or dies (Flexibility available via Operating Agreement)

Corporation: The most common type of corporation seen in the equine industry is an S Corporation, which has 100 or fewer shareholders. 

Advantages:

• Requires 1 stockholder
• Stockholders have limited liability
• Distributions are exempt from self-employment taxes
• Not double taxed

Disadvantages:

• Only one class of stock
• Limit of 100 shareholders
• Stockholder receives wages from corporations

Factors to Consider When Selecting Equine Business Structure 

Sole proprietorships are in full control of all important decision-making and are reliable for all liabilities. There is no legal filing required, but all profits are taxable at the individual level by the Internal Revenue Service and are to be reported on Schedule C or F as self-employment income. 

Individuals in General Partnerships are equally responsible for all liabilities, profits, debts, and taxes. All individuals also have an equal say in all decision-making. Partners must file separate individual 1065 tax forms with the agreed-upon split income.

IfLimited Liability Companies operate according to the rules of the LLC, they provide extra coverage of liability protection and have pliable options for transferring any land or business ownership. The LLC has the option to report taxes as either a partnership or a corporation and is formed when Articles of Organization are filed with the Secretary of State.

S corporation owners consist of those who are holders of the corporation’s common stock, and they are not liable for any actions of the corporation. Their earnings are taxed at the individual level, and all have to file a separate tax return on Form 11120-S. Their income is reported on corporate tax returns and is sent through the shareholders’ individual income tax returns. 

The Formation Process for an Equine Business

After you decide what business structure suits you best, you must register your company’s name with the Secretary of State office. Depending on the type of business, you will need to acquire licenses and permits. All equine business forms must be filed at the federal, state, and local levels. After submitting all required documents, your business must obtain a federal tax identification number from the Internal Revenue Service and register for both state and local taxes. Some examples of taxes that may apply to your business are sales taxes and employment taxes. It is important to protect your business from any injuries to the horses, riders, and any property damage. To do so, it is heavily suggested to get insurance covering the service(s) you offer such as liability, property, or equine insurance. Another way to protect your business is creating contracts and waivers to be reviewed by an attorney to ensure it complies with all laws available to you. Contracts and waivers vary by business and can include boarding contracts, lesson terms and agreements, and liability waivers and assumption of risk agreements. The last and most crucial step for equestrian business owners is tracking all income and expenses and having a detailed record book. If you struggle to stay organized or do not have the time and resources to keep an accurate record, it is recommended to hire a professional bookkeeper or use accounting software. Clayborne & Wagner Equine Law Division has experience in the equine accounting industry and can help provide referrals that best suit your company.

Seeking Legal Guidance When Starting Your Equine Business

With a passion for horses, the equestrian industry is the perfect place to start a business. Each of the four business structures possesses its own set of rewarding advantages, but all require proper legal compliance for success. When forming your equine business and getting it off the ground, it can be helpful to seek the legal guidance of an experienced equine law attorney to ensure the proper licenses and compliance. Clayborne and Wagner’s Equine Law Division offers 30-minute equine business consultations for a prepaid fee of $150.00. Request your consultation today: https://www.cswlawllp.com/equine-law-services/. 

The Legal Do’s and Don’ts of Commercial Property Leasing for Equine Businesses

by Staff Writers | Dec 21, 2023 | Equine Law

Preventing and Resolving Equine Sale Disputes 

by Staff Writers | Oct 17, 2023 | Equine Law

Equine sales transactions are a cornerstone of the equine industry, with buyers and sellers entering agreements to exchange horses for a wide variety of purposes. However, like any business transaction, equine sales can give rise to disputes, leading to financial loss, strained relationships, and even damaged reputations. The Equine Law Division at Clayborne and Wagner LLP recognizes the complexities of horse sales and agreements and aims to provide insights into preventing and effectively resolving equine sale disputes.

Drafting Solid Horse Sale Agreements

In order to effectively prevent disputes when selling your horse or purchasing a horse, it is critical that you have a solid horse sale/purchase agreement and bill of sale. It is the foundation of every successful equine transaction.  

• Clear and Detailed Contracts: Sale contracts and bills of sale should be meticulously drafted, outlining the specific terms and conditions of the transaction. These contracts should address the horse’s identification, health condition, intended use, purchase price, payment terms, and representations by both parties. Ensuring all details are accurately documented can prevent misunderstandings.
  
• Explicit Warranties and Representations: Sellers must provide honest and accurate information about the horse’s health, behavior, training, and history. Misrepresentations or omissions can lead to disputes if the horse’s actual condition or capabilities differ from what was represented in the contract.
  
• Veterinary Examination Clause: It is often recommended to include a clause allowing the buyer to have the horse examined by a veterinarian to assess the horse’s health objectively. This clause can prevent disputes if the horse’s condition is not as expected.

When drafting or receiving an equine sales contract, it is recommended that you consult with an equine law attorney to review the document prior to signing it. He or she can identify any missing or inaccurate information and ensure the terms and conditions accurately reflect your understanding of the transaction. 

Resolving Equine Sale Disputes Through Legal Action

While you can implement  a solid sales contract and bill of sale, disputes  can unfortunately still occur. When they do arise, there is a variety of legal strategies that can be taken depending on the specific case and dispute. 

• Mediation: During the sales process of a horse, mediation provides a non-adversarial method of resolving disputes. A neutral third party assists both the seller and buyer in finding a mutually agreeable solution. Mediation can potentially prevent costly, timely litigation.
  
• Arbitration: Some sale agreements include arbitration clauses, requiring parties to submit their disputes to a neutral arbitrator rather than a court. Typically, arbitration can be quicker and more flexible than litigation.
  
• Litigation: In cases where mediation and arbitration fail or are not viable options, litigation becomes necessary. During litigation, it is crucial to work with experienced equine attorneys who understand the intricacies of equine law and can present a compelling case in your favor.

Gathering Evidence for Protection During Equine Sales Disputes

If you find yourself in the middle of a horse sale dispute resulting in legal action, thorough and accurate documentation is necessary in building a strong case.

• Medical Records: Detailed veterinary reports, health certificates, and medical history of the horse can be instrumental in demonstrating the horse’s condition at the time of sale.
  
• Communication Records: Emails, text messages, and any written communication between the buyer and seller of the horse can help establish the terms and expectations of the sale and serve as evidence during litigation.
  
• Witness Statements: If disputes arise over representations or warranties, witness statements from horse trainers, equine veterinarians, or others involved in the transaction can provide valuable insights into the case.

Contact Clayborne & Wagner’s Equine Law Division to Resolve Your Equine Sale Dispute

In the unfortunate event that a dispute does arise during the equine sale process, you should seek legal counsel from an experienced equine attorney. At Clayborne and Wagner, Corinne Mitchell and her equine law team have the experience and legal expertise to navigate the intricacies of equine sale disputes. They will do everything in their power to protect your interests and seek justice. Contact our team today to schedule a legal consultation. 

The Importance of An Equine Bill of Sale

by Staff Writers | Sep 14, 2023 | Equine Law

For equine enthusiasts, horses are not just animals; they are prized companions and valuable assets. Consequently, any transaction involving a horse should be approached with the utmost care and precision, and that begins with the proper utilization of an equine bill of sale. Taking the time to properly draft a comprehensive equine bill of sale can help prevent any disputes or misunderstandings down the line, and it can ensure a smooth and successful transaction for all parties involved.

Understanding Equine Bill of Sale

What is an equine bill of sale exactly? It is a legal document that transfers the ownership of a horse from one party to another. An equine bill of sale typically serves several key functions:

• Proof of Ownership: First and foremost, an equine bill of sale establishes clear ownership of the horse. 
• Transfer of Title: It legally transfers the title of the horse from the seller to the buyer.
• Protecting Rights and Responsibilities: A horse bill of sale outlines the buyer’s and seller’s specific rights and responsibilities. Oftentimes, it will include important provisions regarding the sale, including warranties, conditions, and any other special terms.
• Record Keeping: It provides a clear, accurate record of the sale for future tax and registration purposes. 

Potential Mishaps and Pitfalls of Equine Bills of Sale

While equine bills of sale are legal documents, they can still result in issues and mishaps, similar to any other legal contract. The most common problems that can arise include:

• Inaccurate Information: A bill of sale may not always provide accurate information about the horse, which can result in disagreements over its identity, value, or the terms of the sale.
• Hidden Health Issues of Horse: It’s important for buyers to always pursue a veterinarian pre-purchase exam when deciding whether to purchase a horse. This ensures that any potential health issues with the horse are identified prior to closing a sale which buyers and sellers may use to alter original terms.Sometimes, sellers may not disclose accurate information about a horse’s health or may be unaware of certain health concerns, such as dental problems, lameness, or digestive issues.
• Ambiguous Terms: Ambiguous language in a horse bill of sale can cause disputes between parties, such as uncertainty around who is responsible for transporting the horse.
• Failure to Address Contingencies: Equine transactions often involve specific contingencies such as veterinary exams or trial periods. Without clear provisions specified in the bill of sale, these can lead to future disputes post-sale. 
• Lack of Warranty Provisions: If a horse is sold “as is” without any warranties, buyers may find themselves in a difficult position if the horse turns out to have undisclosed issues or health concerns.
• Failure to address control law and methods available to resolve disputes. 

Provisions to Consider in Horse Bill of Sale

When working with an equine attorney to draft an equine bill of sale, there is a variety of provisions to cover. Every bill of sale is unique and should include a detailed description of the horse, specifying its breed, age, and registration information. The price of the sale should be noted, as well as the method and timing of payment. If the horse is being sold for a specific purpose, such as show jumping or breeding, then specific warranties should be included. Always address potential contingencies and the terms for when a sale can be voided. Lastly, clearly define the responsibilities and liabilities of both parties regarding the horse’s care and transport. 

Why Equine Legal Expertise Matters

Due to the complex nature of equine bills of sale, consulting with an experienced equine attorney to draft and review them is important. Attorneys can customize the bill of sale to address the specific needs of both the buyer and the seller. They can also include robust warranty provisions and liability limitations to prevent the sale from falling through or ending in a dispute. If a dispute does arise during the horse sales process, an attorney can serve as a third party to help resolve it. Additionally, an attorney is knowledgeable in local, state, and federal laws and can ensure that the bill of sale is compliant. If there is any risk associated with the purchase or sale of the horse, he or she can help identify and resolve those risks. Lastly, at the end of the day, working with a professional to draft the equine bill of sale provides peace of mind for both parties and ensures the horse’s best interest.

Contact Clayborne & Wagner’s Equine Law Division for Legal Support with Equine Bills of Sale

Corinne Mitchell and her equine law team at Clayborne & Wagner LLP, headquartered in Belleville, Ill., have extensive experience in drafting and reviewing bills of sale. We will work diligently to ensure a seamless horse sale or purchase experience while protecting your best interests. We proudly serve equine litigation and transactional clients across the country. Contact us today for an equine law consultation. 

Legal Defense for Equine Veterinarians Facing Malpractice Lawsuit

by Staff Writers | Mar 23, 2023 | Equine Law