What is the best legal structure for a coaching business?

2 min read

The answer is short - a limited liability company or an LLC, GmbH or an SARL.

Now, the next question that I'm often asked is when to transform a sole proprietorship into a Limited Liability Company or LLC?

Myth or Truth?

There's a common myth that forming an LLC should only be done when you're already earning big bucks, but this couldn't be further from the truth. I understand where this myth comes from - forming an LLC involves some costs. For example, in Switzerland, you need a minimum capital of 20,000 CHF to form an LLC, and there are additional fees to consider. In the US, the fees vary from state to state. It is not as expensive as in Switzerland but there's always a cost involved.

Running a business will always cost money. Protecting it legally comes with a price. But not protecting your business comes at an even higher cost.

Personal Liability Protection

As a sole proprietor, your business debts and liabilities become your personal liability. That means if your business can't pay its debts, the state can come after your personal money, your house, your properties, and anything else you own.

But when you form an LLC, your liability is limited to your contribution to the company. The company, not you personally, will have to pay for its own liabilities and debts. In essence, your LLC acts as a shield that protects you from any legal or financial issues that might arise in the course of running your business.

Let me illustrate:

Lisa is a health coach who aims to improve her client’s fitness and nutrition. One of her clients follows her advice and begins a new exercise routine, but unfortunately, they experience an injury during a workout session.

If she operates as a sole proprietor, her client could potentially sue her and go after her personal assets, such as her home or car. But, if she had formed an LLC, her personal assets would be protected, and only the assets of the LLC would be at risk.

My tip

To conclude, an LLC is the best legal structure for a coaching business And my tip is to incorporate your business into an LLC as soon as you can afford the fees and if you have any risks. Waiting to become an LLC until you're already successful is not wise, and it's more expensive to retroactively take care of legal matters when trouble is already brewing.

Remember, protecting your business should be a top priority from day one. Don't wait until it's too late - take action now and give yourself the peace of mind you deserve!

If you're not sure what risks you may face, you can grab my free LLC assessment checklist, which is part of my Legally Fluent Guidebook, to help you make an informed decision.

Click this Link to download Legally Fluent Guidebook Do you need an LLC if you have Insurance? Listen here

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