How do I calculate lost income if I’m self-employed?

If you’re in an accident, calculating for lost wages and loss of future earning potential is fairly easy if you're an employee working for someone else. If you're self-employed, however, the issue becomes more complex. Receiving damages when you're self-employed

Factors Used to Determine Lost Income

Self-employment can take many forms. Farmers, truck drivers, daycare providers, freelance writers, web designers, management consultants, and restaurant owners can all be self-employed, even though their business finances may look very different.

After an accident, calculating economic damages as a self-employed person requires considering several different factors, depending on what type of work you do. For example:

  • Lost income for the days you were unable to work
  • Loss of earning capacity or future income potential if you won’t be able to perform the same work in the future
  • Lost profits that can no longer be invested in the future of your business
  • Lost business opportunities due to your inability to market your goods or services because of your injuries
  • Loss of goodwill, or harm to your professional reputation, because you were unable to meet client demands in a timely fashion as the result of your injuries

It's not unusual for the lost wages portion of a personal injury settlement to be substantially higher for a self-employed person, since hourly earnings are only a small portion of a business owner's loss.

Documenting Your Economic Losses

Documentation is essential in any personal injury claim, but it’s particularly important when you're a self-employed business owner. You may need to provide:

  • Tax returns from past years
  • Financial statements from the current year
  • Copies of invoices or work orders from subcontractors you paid to fill in for you while you were injured
  • Proof of cancellation of projects you'd already lined up but couldn't complete due to your injuries
  • Letters from clients or potential clients clarifying what projects you may have completed if you hadn't been injured
  • Testimony from an economic loss expert regarding the value of lost opportunities in your particular industry

How Economic Losses Affect Pain and Suffering Compensation

Pain and suffering damages in a personal injury claim are intended to compensate you for both the physical pain and the emotional trauma of your injuries. Since there is no specific dollar value placed on pain and suffering, the most common method to calculate it is a multiplier of medical expenses based on the severity of your injuries. However, some attorneys recommend a per diem approach that assigns a dollar value to each day you suffered pain from your injuries.

In the per diem approach, the daily rate is often based on your estimated earnings from employment. As a self-employed person, your per diem rate may be higher than normal due to the complex nature of your economic losses.

Collecting Compensation If You’re Partially at Fault for the Accident

Louisiana uses the comparative negligence system when settling personal injury claims. If you were partially at fault for the accident, you're still entitled to compensation. However, your settlement will be reduced by your assigned percentage of fault.

For example, a self-employed accountant with an estimated economic loss of $50,000 due to severe car accident injuries would only be eligible to receive $30,000 (60%) if he was found to be 40% at fault for the accident.

Retaining Legal Representation

Personal injury law can be quite complex, especially when you're trying to prove economic losses as a self-employed person. Having an experienced attorney to advocate for your needs throughout the process is essential.

If you're self-employed and unable to work due to your injuries, you may feel as though legal representation is out of reach. However, personal injury attorneys work on a contingency fee basis, so your attorney will require no upfront payment and will accept a portion of the settlement you receive as payment for his services. With a contingency fee system, you're free to focus on your recovery while remaining confident that your attorney is advocating for the highest possible compensation.

Neblett, Beard & Arsenault is committed to helping Louisiana residents who've been injured due to the negligence of others resolve their personal injury claims. Call today to request a free, no-obligation case review

 

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