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Practice Tip: The Earning Capacity of Business Owners

By Chad L. Staller
October 29, 2007

The Small Business Administration reports that in 2005 more than 26 million small businesses were operating in the United States. Chances are that sooner or later any attorney practicing in the personal-injury arena will encounter a matter involving a small business proprietor or co-owner of a business. Personal-injury claims involving lost income to sole proprietors, small business owners, and other self-employed plaintiffs can be perplexing, since there is a tendency to confuse lost profits with lost earning capacity.

Recently, I was asked to analyze a damages claim in a product liability matter brought by the 50% shareholder of a family owned photo-imaging business. The plaintiff alleged that a defective heater in his home exposed him to carbon monoxide poisoning, leading to injuries that allegedly affected his ability to manage and operate his business effectively, which allegedly led to the demise of his photo business.

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