Mark Pestronk
Mark Pestronk
Q: I recently retired, and I am thinking of starting my own business taking small groups of U.S. clients on trips to Ireland that I will guide myself. I would make the hotel and restaurant reservations and charter minivans or small buses. I probably won't book airline tickets because I think many clients would rather arrange air on their own. I will make money by charging a package price that includes a markup of a few hundred dollars. Will my business be classified as a tour operator, a tour guide, a destination management company (DMC) or a travel agency? Regardless of the label, what kinds of risks do I face, and what licenses or registrations will I need?

A: Although the business you describe would make you a tour operator in industry parlance because you are putting services together in a package with a single price and then selling to consumers, the label does not matter. Under U.S. law, tour operators, tour guide services that make bookings, DMCs that offer tours to the public and travel agencies all have the same liability to clients.

You would be liable for negligently selecting suppliers, negligently advising clients and breaching your contract with clients. So, the very first thing to think about is how to protect yourself against such claims, even if they are frivolous.

You should take three steps to protect yourself: First, you should establish a corporation or limited liability company (LLC) under the laws of your state. You can do that yourself, since the necessary filing forms and fees are undoubtedly listed on your state government's website. You do not necessarily need a lawyer for that first step, but a lawyer's advice is useful to help you maintain the corporation or LLC.

The purpose of establishing a corporation or LLC is to protect your personal assets from liability to clients and suppliers, in case your company cannot pay its debts.

Second, you need to have a tour participant agreement that takes maximum advantage of the legal protections that U.S. law allows you to have, such as requiring all suits to be filed in your home city or county. The participant agreement must also clearly disclose that you are acting as the agent for suppliers of travel services.

Although you can find a sample, rudimentary participant agreement at www.pestronk.com/tourdisclaimer.html, you need to make sure your agreement is tailored to your company's needs; I highly recommend that you get a lawyer to review it.

Third, you need to sign up with a travel insurance company to be able to offer trip cancellation, interruption, medical and emergency evacuation insurance to participants. While selling insurance does not insulate you from liability for negligence or breaches of contract, the client is much less likely to decide to sue you, even if the client could win.

Although not mandatory, you should also consider buying a tour operator's errors and omissions insurance policy, assuming one is available to a startup tour operator. Such insurance will not protect you from many or most things that can go wrong, but the policy will cover your legal fees if you are sued.

If you are going to sell to participants in California, Florida, Hawaii or Washington, you will need to register as a seller of travel under each state's seller of travel law. The statutes do not distinguish between tour operators and travel agencies.

Irish law will determine what legal steps, if any, you need to take in Ireland. According to my research, you do not need a license to guide tours, but you may have to register your business there.

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