I have some questions about starting my own business:
As mentioned in the course, I could start my business as “sole proprientorships” or " limited liability companies".
What is the common practice in home inspection?
If I work as a sole proprientorship, how could I provide liability protection?
Is there any sentence in contract which could provide this protection and wave home inspector liability?
Does a home inspector needs to buy any liability insurance? what is the common practice?
There are quite a few things you need to consider. I would suggest you speak with a lawyer familiar with business law and be guided by his/her advise. I would also suggest you speak with an accountant so things are set up properly.
As for liability… no such magic elixir. anyone can sue anyone for anything. You need to make sure that your clients have a clear understanding of the limitations of a home inspection and that they understand you do not have super hero powers.
The government in Ontario is moving toward home inspector regulation and licencing. It is a sure bet they will require E&O insurance for home inspectors. Very$$$$$
I suspect, based upon my experience and observations, that you will need a considerable amount of financial backing for the first 1-2 years in business, if you survive that long, that is.
Don’t believe you are going to go out and earn an executive income in the first year, like some of these schools would have you believe.
On the questions of the difference between sole proprietorships and LLC’s you can find the detailed information for Canada here
This is a business decision only you can choose. If you intended to have others working with you as employees, the LLC is the better option to go. The paperwork load is higher, but there is “some” protection against personal liability if you own a company. As Doug said, a business lawyer or chartered accountant (as opposed to a book keeper) is your best source of information as to what your option are. You also need to decide if you are going to offer services only in Ontario or in other provinces or out of country. If it’s the latter then LLC registered in Canada is, in my opinon, your best bet.
If you want full liability protection, regardless of whether you are a sole-proprietor or you own a company, you need to get E&O indemnity insurance. Owning a company does not necessarily protect you from a law-suit. When someone decides to Sue a Home Inspector for anything, they usually go to a lawyer, and they use the shotgun approach and name everyone as the defendant, that would be the Inspection Company AND the Inspector.
The Standard inspection agreement provided by InterNACHI, OntarioACHI, PHPIC and I believe OAHI/CAHPI provide some relief from liability in their wording. Of course this is dependent upon you as an inspector performing the inspection according to the relevant SoP (Standard of Practice) AND ensuring the Client has a chance to read, agree and sign the inspection agreement PRIOR to the inspection starting, and that does not mean just prior. (This already has precedent in the law courts in Canada as being signed under duress)
At the end of the day, the best way to reduce your liability is taking your time and attention to detail (as per Bryce Jeffrey’s recommendation on other posts), speaking soft and writing hard (as per Roy Cooke’s recommendations on many posts) and ensuring you are always open to the client and ready to discuss all their concerns without admitting fault or declaring blame (as per the recommendations of multiple insurers)
As Doug said, at the present point in time in Ontario, there is no need to buy liability insurance. It’s a personal business decision, but offers some comfort for those that are not certain of their abilities or not prepared to defend themselves in court. The liability without insurance is always on you to defend yourself. The liability with insurance is that you may end up having to pay deductibles if the insurers caves on a frivolous claim.
There are only two practices. Some Inspectors choose insurance, others don’t. Some of the ones that do use it as marketing material, some of the others that do choose not to advertise it fearful of the fact it may encourage litigation.
Invested: One truck at $20,000, tools at 16K E&O 1,800 the firs year, 2,200 the second year, 4,400 the third year.
Do not give up your day job, keep at it, InterNACHI has all the tools, we are all here to help.
Hopefully you depreciated the truck and equipment over several years, and carried forward your taxable losses.
What we are all trying to say is that Home Inspection is not a “get rich quick scheme”. It takes hard work, long hours of education and practice, attention to detail and a massively thick skin.
To be successful you have to be the consummate worker, a diligent worker, a pragmatist, a diplomat, and every once in a while you’ve got to have the confidence in what you believe to stand up for yourself.
You will have to budget for 3 months of marketing every year, and in the beginning 3-4 months of no work at all.
The Realtors are your first source of income, but repeat income comes from ensuring you serve, and are known for serving your clients.
As you become successful expect blow-back from your peers, but muddle on regardless. My personal experience has shown me that the more successful you are, the more you are liked by the consumers and the less you are liked by your competition, and that pretty much goes for any service industry.
Above all, be sure this is what you want to do, and don’t enter the profession lightly. If you do, it will bite you hard.