Starting business- Possibly a Non-Profit

[Andrew Kling]

Thoughts?

My thought being it would be a benefit to those that hire me being able to write off part of my services, also I'd benefit in the sense of marketing over my competitors.

I'm just north of philadelphia, there are quite a few other home inspection businesses in my extended area. No non-profits of this type though.

I could see my salary being a downside, that I'd need a board of directors and all that fun stuff to get an increase in a raise.

Anyone see a downside?

Andrew

[Darrel Hood]

If you give yourself a salary of approximately 2% of the revenue and send all of the remaining net revenue to a legitimate charity, it is an honest concept that would probably survive scrutiny.

However, in my opinion, if the salary eats up most of the net revenue, it is a dishonest scam. JMHO

[Scott Patterson]

Actually it makes no sense with the line of work we do unless you are trying to avoid paying taxes. I have served on the board of a few non-profit organizations and I just do not see it working in our profession. We already have plenty of chances to do charity work with the public.

I just do not see how being a not for profit would give you a marketing edge. I can see it getting you into a bunch of homes and areas that you might regret after awhile.

[Andrew Kling]

Ok, I'll explain my thinking.

So you have 3 different home inspection companies, they all charge around $300 to inspect your home, for all the same basic service. One of the 3 is a non profit, so of that $300 you can write off half of it as a charitable donation.

Which of the 3 do you think the home owner is more likely to choose?

And yes, I'd be more then likely doing lower end home inspections. But so what? I mean money is money, and being a home inspector your doing a service that everyone is required to have when buying a home when borrowing money from a lender. So those lower end clientele still would have to pay that $300 fee that is normally charged them.

As well as I'll be a charitable donation for many companies, some of the larger ones in my area that make sizable donations to smaller non-profits are comcast and dupont, for example. Their is a non-profit auto repair shop locally to me, they were given $3.1 million last year, their opening year from dupont. I'm not expecting those kinds of donations, but an odd donation of a $14k FLiR might be nice now and then. Just saying.

And yes, I'd have to do lots of free home inspections, but that's fine with me. But like you said Scott, you do lots of charitable work anyhow. I'm hoping you have all your charitable work listed on your website so that potential clients can see how giving you are as well. Might be a good reason to hit up your local paper to have a story run about your charitable efforts as well, I'm just saying. Because any publicity is good publicity.

Darrel, I appreciate your honesty, and I'll take it under advisement. I'll be meeting with an attorney this week to feel it out, as well as a tax professional.

It might be that you gentlemen are correct and I'll need to go for a llc or Inc like many of you have already done. But I just want to look at all my options.

Also E & O insurance seems to work slightly differently for a non-profit, as well as liabilty standards, the reasons behind someone suing you can change. Also like most businesses, it's something you really only want to do one time, starting a business I mean.

Andrew

[Welmoed Sisson]

In your hypothetical situation, everyone is charging $300 for an inspection. So the value of the home inspection is $300. If I hire your non-profit to do the inspection, I am receiving goods or services valued at what I paid for them, so nothing is a tax deduction. I'm not an accountant, but when I make a donation for which I receive goods or services, I have to deduct the value of those items from the total donation amount. So your clients wouldn't be able to deduct anything... unless you charged a $600 "donation" for the inspection, valued at $300, allowing them to deduct $300.

[Trent Tarter]

I would have to say that this is a great idea if you do not plan on making a living as an inspector.

[Andrew Kling]

Trent,
Technically, no. I don't NEED to make a living as an inspector. More of a nice to have business then anything for me. My wife works, I'm a fulltime stay at home dad. As my son gets older, I'll need to find a job outside the home. Growing a business, any business takes a couple of years really, so by the time my son is in kindergarten, I'm hoping to have a profitable business, I'm not expecting it to be instantly profitable the first year anyhow, that would be delusional.

Welmoed, Yes you are correct, I was more looking at it as a $300 valued inspection, charging them $150 or so. Though I haven't figured out all the fine details as of yet anyhow. That's what the lawyer and tax professional are for, I've got both on retainer anyway, why not use them.

[John Arnold]

I started a "non-profit" about 12 years ago without even knowing it. It's called Arnold Home Inspections.

[Andrew Kling]

John Arnold,
I do like your website. Finally someone in the Philadelphia area that has a website that doesn't look like crap.

[Gregory Booth]

Ok, I'll explain my thinking.

And yes, I'd be more then likely doing lower end home inspections. But so what? I mean money is money, and being a home inspector your doing a service that everyone is required to have when buying a home when borrowing money from a lender. So those lower end clientele still would have to pay that $300 fee that is normally charged them.

Andrew

..........your "lower end" customers most likely will not have income tax brackets where chaitable donations will be of any use. Most of those folks need more "write-ons", not write-offs..........Greg

[Brian Hannigan]

Trent,
Technically, no. I don't NEED to make a living as an inspector. More of a nice to have business then anything for me. My wife works, I'm a fulltime stay at home dad. As my son gets older, I'll need to find a job outside the home. Growing a business, any business takes a couple of years really, so by the time my son is in kindergarten, I'm hoping to have a profitable business, I'm not expecting it to be instantly profitable the first year anyhow, that would be delusional.

Welmoed, Yes you are correct, I was more looking at it as a $300 valued inspection, charging them $150 or so.

Please run The Cost Of Business HTTP://WWW.costofbusiness.com

I believe you have said that you do not need to make much but I believe you will be loosing money on every inspection. I think there are many more cost in this business than you may be aware of.

Just be very sure of your plan before you start.

If you do decide to go with your plan I hope you keep us posted. I find new approaches at business very interesting.

[Ken Rowe]

Re: Starting business- Possibly a Non-Profit

Andrew


Growing a business, any business takes a couple of years really, so by the time my son is in kindergarten, I'm hoping to have a profitable business, I'm not expecting it to be instantly profitable the first year anyhow, that would be delusional.



The downside is what you're thinking about doing and what you hope to accomplish are two completely different things. You can't have a "non-profit" and a "profitable business".

My suggestion is you start your business, LLC, Corp or whatever, and do some charitable inspections. Advertise your charitable inspections through your local first time buyer's programs etc. Talk to your tax professional to see if the amount you would typically charge for your charitable inspections can be deducted from your taxes.

But to answer your other question, out of the three inspectors I'd hire the one with the most experience.

[Scott Patterson]

Ok, I'll explain my thinking.



And yes, I'd have to do lots of free home inspections, but that's fine with me. But like you said Scott, you do lots of charitable work anyhow. I'm hoping you have all your charitable work listed on your website so that potential clients can see how giving you are as well. Might be a good reason to hit up your local paper to have a story run about your charitable efforts as well, I'm just saying. Because any publicity is good publicity.

Andrew

No, I do not list my charitable work as this is between the recepiant and myself. I do not give for the glory or self promotion, I give because it is the right thing to do..

[ren ramsey]

If you're thinking of a 501c3, a inspection business would not pass the irs test for a non profit.
" The two types of 501(c)(3) tax-exempt status
When an organization first establishes its 501(c)(3) status, its first designation is private foundation unless it can demonstrate that it is a public charity. The difference between the two designations is based on the source of financial support. A private foundation has a single source of support and tends to be an organization that awards grants. A public charity has a broad base of financial support stemming from active fundraising programs. ( IRS publication )
So what type of non profit are you referring to?
Why do you want to be a non profit? Is it to gain some type of edge? I think most would see through this smokescreen. You need to find another edge. If you are a stay at home dad what type of background did you have before that? Was it in construction? If not it's gonna be hard to hone an edge in the home inspection world quickly and with the other competitors already having the edge of experience , knowledge, contacts, etc already above you.

[Darrel Hood]

I think he is attempting to start a business in which he takes a salary without the taxation of the business. Occasionally he might do a free inspection so he can claim to be a charity. Some industries lend themselves to this type of charade, but, for all the reasons others have mentioned, I don't think our industry does.

If the true intent was to make charitable donations of inspections, it would be much less blood, sweat and tears to simply hire existing inspectors to inspect the homes and pay them. This would be a straight forward, unambiguous method of donating without the head aches of running a business. Actually, it would be a better deduction since the full price of the inspections would be deductible, instead of just the business cost.

[John Kogel]

In Canada, you can join a religious order and take a vow of poverty. Religious Orders - Vow of Poverty (http://corporationsole.insights2.org/Poverty.html)

After you take the vow, you will have no need to collect the $300 at all. Just do the inspections for free and hold out your hand for donations, like gas money to get you home. ;);)

[Garry Sorrells]

Maybe you need to contact the "PTL network", ask for Tammy she should be able to get you hooked up with the non profit information. :amen:

[Andrew Kling]

I talked with my tax professional and my lawyer, they both basically told me just to start an LLC, more for that fact of all the problems involved with starting a non-profit then anything else. I can turn the LLC into a non-profit at a later point in time if need be though, they suggest that I go in that direction if I'm still interested in starting a non-profit in 2-3 years.

So I'm looking into a LLC. Thanks for all the excellent responses to the thread. I'll keep reading and learning on this forum, classes, etc.

I might go down to the AC convention for a day, not planning on going for the 3 day conference though. Right now, more interested in finding insurance, getting the LLC setup, registering it, etc. I also need to do a marketing poll on a business name and all that fun stuff.

Andrew