Do you want to go out on your own and start a roofing business? In this article we have a few tips to help you save money and run a successful business. You will have lots of decisions to make before you can start your first roofing job.
You Need A Business Plan
What kind of business entity do you want to start?
There are four types of entities to choose from and each will be outlined below:
- Sole proprietorship (DBA) is the simplest. You use your name or a DBA (doing business as). This type of entity is cheap and you can use your own social security number or you can get an EIN (employer identification number). The only drawback is that you have no protection from creditors; everything is your responsibility if things go wrong.
- Partnership: This also is a simple startup for two or more people. It works the same as the sole proprietorship as you have no protection from creditors if things go wrong. Partnerships don’t pay federal income tax. Instead, the partnership’s income, losses, deductions, and credits pass through to the partners themselves, who report these amounts—and pay taxes on them—as part of their personal income tax returns.
- Corporation: A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity and recognized as such in law for certain purposes. This type of business entity requires that you file paperwork with the Secretary of State in your state of business. A corporation gives you the protection of your assets that are not included in the corporation from creditors in the case of business loss. It can be expensive to set up. You will need to file state and federal corporate tax returns for the business each year. Additionally, a form needs filed annually to keep the corporation in good standing.
- LLC – A limited liability company is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. You do need to file this type of entity with the secretary of State. It gives you the protection of your assets that are not included in LLC from creditors in case of business loss. It can be expensive to set up. You will have to decide how the entity will be taxed.
Tip – It is best to start the business off the right way even if money is tight. Contact a lawyer or an accountant to guide you through the process. Each state has different laws setup for different businesses. For example, in Illinois, roofers can not form an LLC so if you have an LLC your roofing license application will be rejected. California requires LLC’s to post an expensive $100,000 bond for workers comp. These are just a few reasons that spending the money upfront from an experienced professional can save you from many headaches later.
Is A Roofing License Necessary?
Tip – Just be sure what your state requires. And also check with your municipality who may require a bond or a building permit. Usually a municipality does not have a blanket bond; each job will require a bond, usually a coat is about $100 per job.
What Kind Of Insurance Do I Need For My Roofing Company?
- General Liability for roofers: This is the most basic insurance. In order to be licensed or get a permit, you will be required to have a general liability insurance policy. Homeowners and businesses understand that accidents can happen. That’s why they prefer to work with roofers who have general liability insurance to cover the costs of those accidents. Customers may be able to sue your business or you personally for these costs. Customers may demand to see proof of your general liability insurance before they accept your services.
- Workers compensation for roofers: Workers’ compensation is insurance coverage that protects your employees in the case of an accident or injury. Roofing is a dangerous job. No matter how careful you are about your safety practices, there’s always a chance that one of your employees may suffer a work-related injury. Roofing is a high-risk class code so you will pay large premiums even if you have experience. Workers compensation insurance is required by law and failure to purchase it to cover employees can lead to large fines. General liability does not cover injury to employees.
- Surety Bonds A surety bond, also known as a contractor bond, is a form of business insurance that will pay your customer if you fail to complete a job. You pay an insurance company a yearly fee. In return, they offer you a bond for a certain amount. Once you accept a job from a customer, you are obligated to complete that job. If you don’t, your customer can file a claim with the insurance company to have their costs covered, up to a maximum amount, called the penal sum. As a professional roofer, it is in your best interests to have a surety bond to reassure your customers and win more contracts.
- Commercial auto insurance: Your personal auto insurance policy will not cover your work vehicle, which is a valuable asset you likely can’t afford to lose. Purchasing insurance for it is a wise idea and is mandatory under almost all state and provincial laws. The long and short of it is that if you use your vehicles to produce the income you need commercial auto coverage to be properly protected.
- Tool and equipment insurance: Your auto insurance may not cover the contents of your vehicle or equipment in your work storage space. For that, you need tool and equipment insurance, sometimes called a tool floater. A tool and equipment policy can reimburse you in the event that the tools you need to run your roofing business are stolen or damaged. Note that these policies usually don’t cover stolen or damaged materials, such as premium shingles.
Gartman Insurance Can Help Roofers With Contractors Insurance
Contractor insurance isn’t one-size-fits-all. A specialized policy allows you to easily customize and simplify your insurance coverage to ensure that your business’ unique needs are protected.
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About Gartman Insurance
About Gartman InsuranceWe are your trusted, family-owned independent insurance agency. Your family, your business, and your possessions are all important to you, but you may not know how to best protect them. We have the experience and local knowledge to navigate the unique risks you face, serving as your insurance advisor. Since 1999, Gartman Insurance Agency has proudly served our customers in Kentucky, Ohio, Indiana, Tennesee, and Alabama, helping them to find the right insurance coverage to fit their needs. Our customers are our priority, and we are always finding ways to better serve them, whether that’s helping them find a better policy or giving them the power of choice when it comes to their insurance coverage.
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