Joined: 01/30/2020 02:20 PM EST
Hi, Home Inspection Forum Readers!
This is Aubri from InspectorPro Insurance.
The following is an excerpt from an article that we wrote on choosing entity types for your inspection business. We actually had a lot of requests to do an article like this, so hopefully it can be of some help.
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). We briefly summarize each type in the chart below.
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,”
“We felt that, as a small, one-person show, [an LLC] would be the best option for us [starting out].”