I can cover my monthly income if I get 100 USD every time I encounter this question online or in Facebook groups. Yes, this is the top question asked by coaches. And I can understand why.
You probably heard about liabilities and how you need to protect yourself.
And probably, you also heard that starting a practice (or a business) will expose you to tons of liabilities.
Your coaching federation probably hinted that you need an LLC or a limited liability company.
If you ask your business coach, he or she might tell you that you don’t need an LLC at all. An insurance will suffice (wrong!)
If you ask a lawyer who has never run a business before, he or she might tell you that you need to have an LLC before you even start your operations (well-intentioned advice but not realistic).
Should we then settle this question once and for all?
What business entity should a coach have or aim at, and when should they register it?
There is no question that, as a coach, your practice will attract legal risks.
People go to you to find answers and solutions. You may not promise them results; you may consider yourself only as a guide, but ultimately, there is an expectation on the part of your client that is why they hired you in the first place. Unmet expectations often lead to disappointment.
Moreover, as human beings, we are not perfect. This means that no matter how careful we are, we may commit mistakes that may cost us and our business financial liabilities. This is where business legalities will come in.
You might have noticed I used the plural form of “Legalities” because there is more than one. And to have the maximum protection, you need to layer them.
Creating a Limited Liability Company or LLC is often a go-to protection by business owners because it creates a wall between your personal and business money and assets. As a rule, if you create an LLC, then the debts and liabilities of the company will be paid only by the business money you have invested in the company. Your personal money and assets are generally safe.
An LLC involves costs But while incorporating an LLC is a great strategy for coaches and business owners, administrative costs are often involved. For example, if you are in Switzerland, not only should you have the minimum capital of CHF 20000.00 and initial incorporation costs of around CHF 1500.00, having an LLC (or GmbH/SARL) also means additional expenses related to accident insurance and an accountant to take care of your corporate tax return. If you are in the US, costs are also involved and will depend on your state. While the costs are minimal, having an LLC presents a bit of complication because there are four ways your company can be taxed in this country.
Is it really your most pressing legal concern? Here is my point — creating an LLC will require some time and resources, which you may not have if you are starting your practice. There may be other more pressing legalities, like your website legal policies, which you may need to accomplish first because you shouldn’t collect emails to build your leads list without those. You will always grapple with where to get your next client without a leads list.
But don’t get me wrong, I am not saying that forget about incorporating an LLC. You need it.
Test the waters before diving in My tip is to test the waters first. Get a few clients to see if your idea works. Set up your website and complete the policies to start your email list. Have proper contracts drafted for your services and get insurance.
In the meantime, operate as a sole proprietor. This way, it will also be easier for you to close or change the practice in case you find that your initial idea is not feasible or is not something you don’t find yourself doing in the long run.
As to whether you should be an LLC right away or wait a little bit more will depend on how much and how big your risks are. Below is a link to a Guidebook where I listed the common risks businesses have. Use the Guidebook to check your own risks.
Finally, don’t compare your journey to other entrepreneurs. Neither should you let your business structure be the cause for inaction. Don’t wait for the perfect moment or the perfect timing. That does not exist. Instead, decide to make do with operating as a sole proprietorship and work to save money to incorporate your LLC. Make it an immediate goal.
At the same time, don’t wait until you have lots of money or a successful coaching practice before you incorporate an LLC. That may already be too late.
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About the Author
Hi! I’m Vena Verga-Danemar, an Onlinepreneur Legal Strategist. As both a lawyer and an online business owner, I’ve helped dozens of coaches, consultants, and course creators legally start and grow their businesses using strategies that don’t require working 24/7.
Follow me in Instagram and Linkedin for tips and strategies on running a sustainable business that attracts leads and clients without the legal drama.
If you want weekly tips and strategies on legally running your coaching and expert business in the digital age, don't miss an episode of Legally Fluent® Podcast: Online Business Decoded. Click here to check out the episodes.
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