CCPIA Articles - Certified Commercial Property Inspectors Association

Every business undergoes a natural evolution. As a property inspection business evolves from a single inspector handling residential jobs to also potentially offering commercial property inspections, a key decision arises: Should the company hire employees or work with independent contractors to accommodate the needs for commercial projects? Let’s explore this decision and consider the legal and practical implications, particularly following the IRS guidelines for classification.

The IRS plays a crucial role in determining whether an individual is an employee or an independent contractor. This classification not only impacts all parties’ tax obligations but also the degree of control and flexibility a business retains.

IRS 20-Factor Test

Let’s take a closer look at the key differences between an employee and an independent contractor using the IRS 20-Factor Test. The factors are grouped into three general categories:

  1. behavioral control;
  2. financial control; and
  3. relationship control.

If you, as the employer, can say “yes” or agree with these three statements, that’s a fair indication the individual in question is an employee and not a contractor.

Behavioral Control

Factors to consider include whether the employer gives instructions to the worker about how, when, and/or where to do the work, and also provides training to the worker. Implicit in this factor is whether the business retains the right to direct and control the worker’s performance.

Consider the following:

  1. Instructions:  An employee is required to follow instructions about when, where, and how to do the work. The employer maintains control if the employer requires the instructions to be followed. This shows control over their work.
  2. Training:  An employee receives initial and continuing training from the employer or the employer’s agent. Independent contractors are not trained by the business for which they provide services. Independent contractors are already trained.
  3. Services rendered personally:  An employee must perform the work directly for the business entity and cannot contract it out because the business entity wishes to direct and control the method and means by which the work is accomplished, as well as the final product or service.
  4. Hiring, supervising, and paying assistants:  An assistant hired, supervised, and paid by a business entity is generally considered an employee, whereas an independent contractor can hire, supervise, and pay its own assistants under a contract that directs and controls how the assistants perform the job. This means that the independent contractor provides tools and materials to assistants. Independent contractors hire and pay their own staff.
  5. Continuing relationship:  If there is a continuing relationship, even if occurring at frequent but irregular intervals, it is likely that there is an employer-employee relationship, according to the IRS.
  6. Set hours of work:  If the business entity sets the worker’s hours of work, the worker is generally considered an employee. An independent contractor sets their own schedule, as they are masters of their own time.
  7. Full-time hours required:  An employee usually works full-time for an employer, while an independent contractor can work the days and hours of their own choosing. Independent contractors choose when they will work.
  8. Work performed on premises:  If the work is required to be or is usually performed on the premises of the business entity, it is likely that the entity exercises direction and control over the worker as an employee. An independent contractor is required to fulfill the requirements of the contract but may work whenever they wish to work in order to fulfill the contractual requirements. (This factor is obviously job-specific; if a job must be performed away from the employer’s own premises, such as an inspection needed at a commercial building, the independent contractor cannot perform their work anywhere they choose but must perform the actual inspection at the commercial building.)
  9. Order or sequence set:  Evidence of direction or control is when a worker is required to perform the work in an order or sequence set by the business entity, while an independent contractor works in the sequence of their choosing.
  10. Oral or written reports:  An employee may be required to submit regular reports to the business entity, often in writing, to show the completion of work, evidencing control by the business entity.

Financial Control

The significant factor is the right of the business entity to control the business aspects of the worker’s job.

  1. Payments by hour, week, or month:  An employee is usually paid for specified intervals of work, such as hourly, weekly, or monthly. An independent contractor is more likely to be paid as aspects of the total project are completed, but at no specific time interval. (Independent contractors are generally paid by the job or commission, although, by industry practice, some are paid by the hour.)
  2. Payment of expenses:   Reimbursement to the worker by the business entity of expenses incurred by the worker in completing the job indicates the existence of an employment relationship. (This tends to show control.)
  3. Furnishing of tools and materials:  Furnishing necessary tools, materials, and other equipment, such as inspection equipment, is generally an indication of an employment relationship. Independent contractors generally supply the materials for the job and use their own tools and equipment.
  4. Significant investment:  If the worker has a significant investment in the facilities where some of their work is performed, such as a home or business office where a commercial property inspector writes their reports, the worker is more likely to be an independent contractor.
  5. Profit or loss:   While an employee generally is paid for their time to complete the required work, and bears no liability for business expenses associated with completing the work, an independent contractor can generally make a profit or suffer a loss as a result of performing their service.

Relationship of Parties

The nature of the relationship may be evidenced by the existence of a written contract and any benefits provided by the business entity, such as vacation pay, health insurance, whether the position is of indefinite duration or will cease when the work project is completed, and/or whether the service is a critical aspect of the business entity.

  1. Integration:  An employee performs services that are integral or essential to the operation of the employer, rather than merely incidental to the business operation. (This may show that the worker is subject to your control.)
  2. Working for more than one firm at a time:  If a worker performs the service for multiple, unrelated business entities concurrently, the worker may be an independent contractor. However, this factor alone isn’t conclusive because employees can also work for more than one employer, unless they are contractually prohibited from working for different employers who provide similar services and the employee is bound by a non-compete clause in their employment agreement.
  3. Making services available to the general public:  If a worker holds themselves out to the public as being regularly and consistently available to perform the service for anyone contracting with them, the worker is likely to be an independent contractor.
  4. Right to discharge:  If the employer retains the right to fire the worker, the worker is likely an employee. An independent contractor can’t be fired without subjecting you to the risk of a breach-of-contract lawsuit.
  5. Right to terminate:  If the worker can quit work without breaching any contractual agreement, the worker is likely to be an employee. An independent contractor has a legal obligation to complete the contract.

Application to Property Inspection Business

When expanding into commercial property inspections, understanding these factors can help you tailor your hiring strategies. First, let’s assess the potential control requirements for a residential job versus a commercial job. Offering residential inspections might require having more control over your inspectors due to the nature and consistency of jobs, which may favor having full-time employees. The use of a standard reporting product, a set fee structure, and consistent branding are a part of this standardized approach of running a successful residential inspection business. Commercial inspection companies could benefit from exercising less control over their inspectors due to varying project demands, favoring the hiring of independent contractors. Commercial clients are used to having vendors and contractors from different companies present on their properties.

There are two forms of assistance a commercial property inspection may consider: a specialty consultant and an inspection team member. A specialty consultant is typically an engineer, trade professional, or contractor having a specific area of expertise. This individual may be needed to help the inspector tackle complex projects, or when the scope of work requires extensive knowledge of some particular aspect of the subject property.

An additional inspection team member is an individual who performs inspections alongside the property inspection company. The need for an additional team member can arise from various situations, such as being fully booked with residential inspections and unable to meet a commercial client’s timeframe, or requiring assistance to inspect large properties.

In both cases, the specialty consultant and additional inspection team member are hired on an as-needed basis, depending on the size, complexity, and volume or frequency of inspections scheduled. Now, let’s consider how some of the IRS 20-Factors apply when using a specialty consultant and/or additional team member for a commercial property inspection.

The specialty consultant and additional inspection team member:

  • creates their instructions and procedures based on the scope of the job;
  • provides their own training;
  • sets their own hours of work;
  • provides their own tools;
  • produces their own unique report; and
  • is compensated for the work they perform.

By asking these questions and reviewing the answers, we can determine that the specialty consultant and/or additional inspection team member qualifies as an independent contractor. They may be rehired for future projects, or this engagement could be a one-time collaboration.

Case Study: Example of an Independent Contractor in a Commercial Inspection

A property inspection firm booked a 40-unit apartment building and the client is on a tight schedule. Normally, the firm is able to perform all inspections without assistance but, in this case, it requires additional help to meet the client’s expectations. The inspection firm contracts with a colleague to assist with the inspection and offers them a daily rate for their services. The contractor will use their own vehicle and tools, and will already possess the necessary training, licenses, and insurance. The contractor was also informed that the inspection is scheduled for 9:00 a.m. on Tuesday.

In this scenario, here is a review of the IRS 20-Factors:

Behavioral Control 

  1. Instructions:  The independent contractor said the inspection was at 9:00 a.m. on Tuesday but they were not told they had to be there at that time.
  2. Training:  The independent contractor already has all of the necessary training.
  3. Services rendered personally:  Both the primary inspector and the independent contractor will be working independently based on agreed-upon scope of work.
  4. Hiring, supervising, and paying assistance:  Not applicable.
  1. Continuing relationship:  This is not an ongoing relationship and will only be for this specific inspection.
  2. Set hours of work:  This project will take as long as it takes and is not set according to specific hours.
  3. Full-time hours required:  Not applicable.
  1. Work performed on premises:  All of the inspection work will take place at the subject building. The report may be created off-site, but that is at the discretion of the independent contractor.
  2. Order or sequence set:  The independent contractor will be personally responsible for creating their own workflow or path of their portion of the inspection.
  3. Oral or written reports:  The final report will be submitted to the client by the primary inspector and not the independent contractor.

Financial Control 

  1. Payments by hours, week, or month:  The payment to the contractor will be made at the end of the project.
  2. Payment of expenses:  The independent contractor is responsible for any expenses they incurred.
  3. Furnishing of tools and materials:  The independent contractor provided all of their own tools.
  4. Significant investment:  Not applicable.
  5. Profit or loss:  The independent contractor is not responsible for collecting any payments from the client, and will be compensated by the hiring firm in the agreed amount of $1,000, regardless of the client’s payment.

Relationship of Parties

  1. Integration:  The primary inspector will not be relying on the independent contractor to perform any services other than those agreed to.
  2. Working for more than one firm at a time:  The independent contractor is also an inspector working for other firms.
  3. Making their services available to the general public:  The independent contractor is also an inspector working for other clients.
  4. Right to discharge:  Because the independent contractor is only providing inspection services for this one single day, they are not considered an employee, so they cannot be fired.
  5. Right to terminate:  Because the independent contractor is contracted only for the day, they have to complete the day or will be in breach of contract.

Using this example, this individual is classified as an independent contractor and not an employee of the inspection firm.


The basis for a business’s readiness to hire employees is that it must be able to assume the salary and tax requirements, as well as the liability and control aspects. Hiring employees for the commercial side of a residential business would mean that the business has reached its current capacity for job completion and would like to retain more control over the individual’s role. This typically applies to the role of an additional team member. For most businesses, specialty consultants are always independent contractors.

The business must be prepared to have the individual act as a direct extension of the company by standardizing the methodologies, procedures, reporting, and training protocols across the board, as well as offering benefits, covering expenses, and other financial considerations.

Here is a broad list of some the items the business must be prepared to be in control of:

  • Salary
  • Federal, state, and other tax withholdings
  • Training, both initial and ongoing
  • Licensure
  • Tool expenses
  • Uniform/assigned apparel
  • Vehicle expenses
  • Vacation pay
  • Health insurance
  • Retirement benefits

As the business matures and the residential side establishes a consistent workflow, the owner might consider hiring an employee to focus on residential inspections to free them to expand into commercial markets. Since this side of the business is already established, it may be adequately prepared for this transition. Based on everything we have reviewed, a single-inspector company may not be ready to hire employees right off the bat to handle the commercial side of the business. The business must be prepared to offer financial stability and standardized procedures, as well as consistent workload.

So, How Should a Company Scale Its Workforce to Expand into the Commercial Market?

Ultimately, the decision to hire an employee versus an independent contractor depends on the specific needs and capabilities of the business. The overarching theme is that the nature of the work and the state of business growth significantly influence whether to hire employees or use independent contractors. But, regardless of this, it is crucial for the business to comply with IRS classifications when hiring, which impacts the degree of control and flexibility that a business can retain with an individual.

The decision to hire employees or independent contractors for scaling a property inspection business, from a single inspector handling residential jobs to also offering commercial property inspections, is based on the following three criteria:

  • Volume of workload:  Analyzing the workload on the commercial side of the business to determine staffing needs.
  • Taxes and financial obligations:  Evaluating the company’s readiness to meet the different tax and financial obligations associated with each type of hire.
  • Control and flexibility:  Assessing how much control and flexibility the company wishes to retain over the work and the individuals performing it.


Property inspection companies do not necessarily need to hire employees to expand into commercial markets. Companies may choose to work with independent contractors on an as-needed basis. This approach can continue until business conditions evolve, at which point the company may be fully prepared to transition these workers to employee status in compliance with IRS requirements

An inspection company should never begin an inspection without a signed inspection agreement. The signed agreement provides the protection and expectations between the inspection company and the client. The same level of protection needs to exist between the inspection company and the specialty consultant or independent contractor. CCPIA has agreement templates for businesses to use when hiring independent contractors and/or specialty consultants. Refer to the links below.


Article By: Rob Claus and Maggie Aey


Additional Resources for Commercial Property Inspectors: