Business organization / liability

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Originally Posted By: Robert Jonston
This post was automatically imported from our archived forum.

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This may have been discussed before, but I have not learned how to quickly search old posts (56k).


I am considering starting an inspection business and am trying to determine the best organizational structure. LLC is my top choice right now. My main goal is to isolate the business from personal assets. Business assests will be limited. In short, if I am sued for a business issue, I would like to limit potential losses to business assets - don't want to lose my daughter's college fund etc.

Can this isolation be accomplished? I am also considering E&O insurance but currently believe it is cost prohibitive for a part time inspection business (I am an Civil Engineer / Construction Manager by day) and I think it may even spur on a lawsuit through "deep pocket" theories.

Any thoughts / experiences would be appreciated.

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Originally Posted By: Blaine Wiley
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Robert,


I think most of us are either LLC or incorporated. I went with an LLC on a recommendation from my lawyer and accountant.

I would NEVER consider doing this business without E&O insurance. You will pay somewhere around $250 per month or a little more, which will be covered by your first 1 to 2 inspections. Every lawyer I have ever spoken to about this business, including my brother in law  , says that you can be personally sued for your actions whether or not you are an LLC or Inc. For that reason, and others, the inspection agreement between you and your client (one available here at NACHI) and your E&O are the only thing stopping potential draining of the kids college fund.

I have two friends who started part time. One quit because he didn't want to work hard, the other left his six figure job because inspecting paid better.

Blaine

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Originally Posted By: rray
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There’s a lot of information out there, some from former IRS agents, warning that because LLC’s are such a new entity and have not been tested in courts, they in and of themselves raise red flags with IRS agents, causing a higher rate of audit. Since most home inspection companies are home-based businesses, which typically also raise red flags, my attorneys, my CPA, and my tax advisor believed that INC was better than LLC.


From what I have read in the law journals and various other places, a properly set up corporation (LLC, Inc., LLP, etc.) will protect your personal assets if the business is sued. A "properly set up corporation,' however, as my advisors and I discussed, would include E&O insurance, general liability insurance, etc. Not having such insurance in this specific industry could be considered gross negligence. And such things as gross negligence, fraud, etc., (see WorldCom, Enron, Martha Stewart, and others) will not protect your personal assets. So, yes, under the proper adverse conditions, it appears that you could lose your personal assets.

Along with E&O insurance, get a qualified business attorney, a qualified tax attorney, and a qualified CPA, all having experience with home-based businesses (if yours is) and service businesses (as opposed to retail businesses).

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Home inspections. . . .
One home at a time.

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Originally Posted By: Robert Jonston
This post was automatically imported from our archived forum.

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Russell & Blaine,


Thanks for the insight and quick replies. My wife (former legal secretary) found a very informative and interesting site regarding asset protection - www.rjmintz.com. Eye opening to say the least. I thought that E&O insurance was more expensive and since I don't expect to do a large volume, was concerned I wouldn't be able to clear much on an average month. I live in a VERY rural area so I am not sure how quickly business can be developed. According to the real estate agents I have spoken with, there is a rising demand in the area but there is not exactly a booming housing market.

Well, off to study more on insurance and liability. Thanks again.

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Originally Posted By: rray
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That’s a very good site. I ordered his free book and started a subscription to his newsletter. Most of his advice is stuff that I already have done, but I did find some other good tidbits there. And you get it all for free. I paid dearly for it. Shall have to drown my sorrows with a good margarita.

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Home inspections. . . .


One home at a time.

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Originally Posted By: Blaine Wiley
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Russel,


What kind of tequila do you use in your margarita. I think I see the need to buy stock in them   

Blaine

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Originally Posted By: rray
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Jos? Cuervo. It’s the best. Costco actually has a half-gallon of Margarita for $10.99. It’s not margarita mix; that’s $5.99. It’s the actual margarita already mixed. Added to crushed ice in a 24 oz frozen glass, it’s just scrumptious. I cannot make a margarita as good as Jos? Cuervo does.


My favorite restaurant margaritas are (1) Canyon Cafe (California and Arizona that I know of, possibly New Mexico and Texas), (2) the Grrrrrrrrrand? Rrrrrrrrrrrrrraspberry Swirrrrrrrrrrrl (got's to rrrrrrrrroll them rrrrrrrrrrrrr's) at On The Border, (3) Chili's. Canyon Cafe doesn't exist here in San Diego anymore.  The closest one, I think, is now in Glendale (L.A.). I think they also go by the name of Cactus Cafe or something like that in some locations, like Scottsdale, Airzona.

So, buy stock in Jos? Cuervo, On The Border, and Chili's.

Note: Russel R. Kirk (hereafter, "Captain James T. Kirk of the Starship Enterprise") is not a licensed stock brocker in Spring Valley, San Diego County, California, the United States, Earth, or the United Federation of Planets. Readers agree to relieve and hold harmless Captain James T. Kirk of the Starship Enterprise, his crew, particularly maintenance personnel, union workers, the meal crew, any Vulcans and shape-shifters, and the United Federation of Planets for any advice concerning stock transactions. Readers agree to provide Captain James T. Kirk of the Starship Enterprise with prompt written notice of any complaint concerning stock transactions so that Captain James T. Kirk of the Starship Enterprise can have Scotty beam any complainants to the Undiscovered Country where they can meet God face to face and have a little chat with Him. Any controversy or claim arising out of or related to any stock transactions shall be settled by the Borg, probably immediately resulting in assimilation of the complainant.

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Home inspections. . . .
One home at a time.

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Originally Posted By: rking
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Captain Kirk,


Now that we all know that Margarita's are very near and dear to you, do we start calling you margarita?  
Oh yeah, have you converted Scotty from that dastardly 20 year old Scotch he so loves?

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Muskoka Home Inspections
"Wisdom is the Anticipation of the Consequences"
Steering Committee Member At Large

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Originally Posted By: rray
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If you look up “Scotch whiskey” in the dictionary, you’ll find that the definition is “margarita.”

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Home inspections. . . .


One home at a time.

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Originally Posted By: jhagarty
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Joseph Hagarty

HouseMaster / Main Line, PA
joseph.hagarty@housemaster.com
www.householdinspector.com

Phone: 610-399-9864
Fax : 610-399-9865

HouseMaster. Home inspections. Done right.

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Originally Posted By: rray
This post was automatically imported from our archived forum.

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Scotty’s dad was Scottish. However, Scotty’s mom was, yep, you guessed it, Margarita. It’s there in the official Star Trek records in invisible print.

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Home inspections. . . .


One home at a time.