Navigating the Roofing Business
The roofing business can be tough, but it offers a stable income for an established company. So, it’s no surprise that roofers are constantly looking for new ways to increase their profitability.
One way to do that is by choosing a roofing business model to suit your staff, resources, and capabilities. Coupling the right business structure with roofing software will make you more money on each job and make it easier to complete projects on time.
But which roofing business structure would work for you?
Here’s a list of the 3 most common business structures in the roofing industry and their pros and cons.
Sole Proprietorship
A sole proprietorship is a business structure where the owner owns everything. The owner is responsible for all aspects of the business, including finances, marketing, sales, and hiring. A sole proprietor has no legal protection under state law if sued for personal injury or property damage.
This roofing business structure is often a one-person operation like a traditional small business owner. In this case, the roofer works directly for the homeowner. The homeowner typically hires the roofer to complete their project.
The roofer then has the choice to hire subcontractors if the job is too big. They might also consider hiring one or two people to assist them. The roofer owns or rents the equipment.
In the sole proprietorship model, the roofer will charge their clients for the supplies and materials they use to perform the job in addition to the cost of the service. The roofer is personally responsible for paying taxes and insurance.
Pros
- Low startup costs
- A simple registration process and limited tax responsibility
- Complete control over every project
- More flexibility and lower fixed overheads
- Less paperwork
- Financially rewarding
Cons
- Time-consuming
- Limited clientele
- Lower work quality
- Unlimited liability for debts or risks
- The owner takes full responsibility
Partnership
Partnerships are businesses owned by two or more people who share profits and losses. They also share the responsibility for debts and any legal action taken against the roofing business.
Partners may agree to share ownership equally or they may decide to own different percentages of the company. Most partnerships mandate the creation of a legal partnership agreement that specifies the profit-sharing ratio and guidelines in case of disagreements between partners or if one or more partners decide to leave the partnership.
The United States allows three types of partnerships: general, limited, and joint venture.
General Partnership
In this type of partnership, each partner has an equal share in the business’s responsibilities, liabilities, profits, and losses unless otherwise specified.
Limited Partnership
This type of partnership restricts the partners’ decision-making powers and liability based on their investment in the business.
Joint Venture
A joint venture is very similar to a general partnership but is for a short period. If the partners decide to continue the partnership, they can file for a general partnership.
Pros
- Divides the financial burden between partners
- Helps bridge any gap in knowledge and expertise
- Increases the cash infusion into the business
- Offers better potential for forming strategic connections
- Potential tax benefits
Cons
- Partners share responsibility for losses and debts even if another partner incurs them
- Joint control means loss of autonomy
- Differences of opinion can lead to conflicts
Limited Liability Company (LLC)
LLCs are a popular business structure with roofing companies and other businesses. Unlike a proprietorship or partnership, an LLC protects the business owner’s personal assets in the event of debts or lawsuits since it is its own legal entity.
An LLC business can be registered by one owner even though it is a mix of a partnership or a corporation and will have the initials LLC in the registered business name.
LLCs are like corporations, but they don’t pay federal income taxes. Instead, members of LLCs file separate returns reporting their distributive shares of the LLC’s income, deductions, credits, and pass-through items.
Individual members in an LLC may share responsibilities or lead a specific team. Often, one partner handles the books, another handles marketing and sales, and another handles the services and daily operations.
LLCs in the roofing industry may have partnerships with manufacturers and suppliers nationwide so they can offer more roofing options to their clients.
Most roofing LLCs take care of permits, licenses, and insurance that roofers and clients need to complete the job. Typically, a company representative does all paperwork, and then a team of installers completes the job.
It is tedious and effort-intensive work, but management system technologies like roofing business software can make it easy. A roofing business software like JobNimbus can help roofing companies streamline their processes and automate scheduling, billing, and other operations.
Pros
- The company’s liabilities do not affect the owners’ assets
- Lower registration costs compared to forming a corporation
- Easier registration formalities and requirements
Cons
- Higher fees and taxes. For example, LLCs registered in California must pay annual fees that start at $800 and increase with the company’s net income
- LLCs are governed by state laws, so more regulations apply
Choose the Roofing Business Structure for You
If you are a new roofing business, you can consider setting up a proprietorship or partnership depending on the resources and capital you have available. Using software technologies like JobNimbus, you’ll be well on your way to building a roofing business that sets you ahead of your competition.
Building your roofing company from the ground up is a challenge, but the right business structure will help you reach your business goals faster.
Leave a comment down below and tell us about your business structure!
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One Response
We recently did an analysis of roofing company names and it turns out that LLC and Inc are basically equally popular (at least as quoted in local business listings). Unfortunately we couldn’t compare sole proprietorship as people don’t usually include that in their company name.