Article: Choosing the right entity type for your inspection business

[Aubri Devashrayee]

Hi, The Inspector's Journal Readers!

This is Aubri from InspectorPro Insurance.

The following is an excerpt from our article on choosing an entity type for your inspection business. We actually received quite a few requests to do an article on this topic, so hopefully this can be of some help!

Enjoy!

Aubri

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Whether you’re just now entering the home inspection industry or have been an inspector for years, establishing and maintaining your own business is no small feat. One of the most common questions we receive from new or growing inspection companies is what type of business entity they should create. In this article, we hope to help you decide which entity type is right for your inspection company by sharing insights from attorneys, accountants, and your fellow home inspectors.

Home Inspection Entity Types: A Quick Comparison

There are three major types of business entities that home inspectors may consider: sole proprietorships, corporations (C-Corps or S-Corps), and limited liability companies (LLCs).

Important Considerations

When choosing which entity type is right for your business, the home inspectors we interviewed recommend the following considerations:

Your growth plans.

Which entity type you choose impacts ownership, income distribution, and taxation, and of each of these factors can impact your growth potential. Thus, knowing where you’d like your home inspection company to be in the future will likely impact which entity type you choose.

For example, James Szczesny of  4 Seasons Home Inspections  in New Mexico has been a sole proprietorship, a limited liability company (LLC), and a corporation. With his certified public accountant (CPA), Szczesny’s strategy has been to adapt his business entity type as his company grows. As he’s generated more income, Szczesny has been more equipped to invest in the entity types that cost more to establish but provide larger tax breaks.

Alternatively, Nick Calero of  CR Pro Home Inspections  in Florida planned to start his inspection business as a one-man operation. If things went well, Calero intended to incorporate. After discussing his plans with multiple attorneys, Calero decided to begin his inspection career by creating an LLC.

“It all came down to what our future goals were going to be, how large we wanted to make the company, and…the steps that it would take to get there,” Calero said. “We felt that, as a small, one-person show, [an LLC] would be the best option for us [starting out].”

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[Les]

there are not enough words to express how disappointed I am with this article.  I really think you are out of your lane of expertise and no amount of anecdotal information  will make it valid information.  

The only exception is the paragraph where you quote Joe Ferry.  He is an atty and he is knowledgeable about the subtleties of legal advice.  Insurance companies and home inspectors are generally not lawyers.

My strong opinion is this:  Go to your attorney and/or tax person and get legitimate advice;  not legal zoom and "make money now blogs" 

[InspectorPro Insurance]

3 hours ago, Les said:

there are not enough words to express how disappointed I am with this article.  I really think you are out of your lane of expertise and no amount of anecdotal information  will make it valid information.  

The only exception is the paragraph where you quote Joe Ferry.  He is an atty and he is knowledgeable about the subtleties of legal advice.  Insurance companies and home inspectors are generally not lawyers.

My strong opinion is this:  Go to your attorney and/or tax person and get legitimate advice;  not legal zoom and "make money now blogs" 

I think your opinion is fair. We went back and forth for quite some time on whether to write the article because it's a topic that I'd label "risk management adjacent." What ultimately made us decide to do it was 1) the frequency with which inspectors ask us about it and 2) the number of inspectors who think that incorporating can replace other risk management tools, like insurance.

Our goal with the article was for it to be an introduction to the subject that helped start inspectors in the right direction with the guidance to do as you suggest: talk to your attorney and CPA to find the best fit. Hence the push for attorney and CPA calls throughout and in the final paragraphs:

"Choosing an entity type for your home inspection business can be difficult. However, with the right understanding, you, your attorney, and your accountant can make the right choice for your business.

"Whatever you decide, be sure to protect your company with E&O and GL insurance. To get coverage with us, take 10 minutes to xxxx (edit)  for a no-obligation quote."

As always, thanks for the feedback!

Edited February 20, 2020 by Les
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[Les]

I think your input is always good.  Just a difference of opinion between two different entities!   thanks for making all of us think.