Once you’ve decided to pursue your passion and become a life coach, you may decide to focus all your energy on finding your first client. And while you do need paying clients to grow your business, there’s something else you need to think about. You must legally establish your coaching business.
Laws and legal precedents are not my favorite topic to write about. However, they are important. But first, a disclaimer…
Disclaimer: I am not a lawyer. This blog post is not substitution for consultation with a lawyer who has experience with online coaching businesses. This is merely what I’ve learned through personal research for my own coaching business.
Now that we have that bit of legal business taken care of, it’s time to dive into five of the tasks you must do to legally establish your coaching business. These tasks can help protect you if something goes wrong.
You need to:
- Start Your Business Legally
- Create a Disclosure
- Add Legal Content to Your Website
- Develop a Contract
- Decide About Insurance
Since I know legal concepts can be complex, my goal is to keep this short and sweet. Please don’t get hung up on the legal aspects. You can do this.
And for a complete guide on how to start your coaching business, check out my book Make Money As A Life Coach. When you follow the steps in this book you’ll not only start your business, you’ll also sign your first paying client(s) in as little as 30 days.
Now are you ready to make sure your coaching business is legally legit? Let’s get started.
1. Start Your Business Legally
Jumping through the hoops to legally launch your business means you can pay taxes on your earnings and write off business expenses. This will help keep the IRS at bay.
As part of your legal set up, you will need to decide on a business structure. Many coaches, myself included, started off as a sole proprietor. Others launch as a limited liability corporation (LLC). If you start as a sole proprietor, you can transition to an LLC later (this is what I did with the help of Andrea at Vetted by Andrea).
There are pros and cons to both common business structures.
Launching a business as a sole proprietor means you report the business’ income and losses on your personal income taxes. Sole proprietorships are typically small (or part-time) businesses.
This is the easiest, fastest, and cheapest way to get your business off the ground. There aren’t any structuring fees or requirements. But you may need licenses and/or permits depending on the type of business you have and where you live.
You don’t need a separate business tax ID number. Though, sole proprietors can file for an Employer Identification Number (EIN) if they prefer to avoid using their social security number.
However, there’s one downside to being a sole proprietor. This business structure doesn’t offer the same protections as an LLC. If your business were to get sued, your personal assets may be at risk.
Limited Liability Corporation (LLC)
The second word in the phrase “Limited Liability Corporation” is the important one. With an LLC, you have the benefit of liability. It separates your personal assets from those of the business and establishes that the business assets are the only ones that can be taken.
Legal protection is the definite pro to forming an LLC. But there is a downside. It costs more to establish this type of business. You also need to fill out paperwork or pay a legal firm to help you with this step. Some states also charge LLCs a yearly license fee or franchise tax. For example, California (where I live) charges $800 each year.
Which Should You Pick?
If you aren’t completely sure that coaching is what you want to do, consider starting with a sole proprietorship. That way you don’t invest the money in creating an LLC only to discover that coaching is not a good fit for you.
However, if you have many personal assets, consider forming an LLC from the start.
The decision really is yours, so put some thought into which one will work best for you at this point and go from there.
2. Create a Disclosure
You are not providing therapy or any form of medical treatment as a coach. But your clients may think that you are.
Having a disclosure statement that your clients sign can help ensure that you are both on the same page. It reminds them about your licenses (if you have any) and what they expect.
It also can ensure you are legal. For instance, in California, where I live, the state law dictates that anyone who is not licensed MUST disclose in any advertisements that, “that he or she is not licensed by the state as a healing arts practitioner.”
3. Add Legal Content to Your Website
Your website is a form of advertisement, and it also needs to include certain legal content. You need terms and conditions that are unique to your business and that have been updated to fit your business practices.
Please don’t just stick a standard terms and conditions statement in without reading it. There are typically places you need to change.
As you work on getting your life coach website up and running, here are the legal components you need:
- Limit Liability – a simple statement protecting you from any errors in the content you produce. This also can limit you from liability for statements that readers left in the comments section. That way you don’t have to worry about someone suing you because of something someone else said.
- Copyright – To protect your work from being stolen.
- Terms and Conditions –Tells readers what they can expect from your site.
Depending on your circumstances, you can meet with a lawyer to get your terms and conditions established. Or, you can use a Google search for a terms and conditions generator. There is a standard set that comes with many themes on WordPress sites, and you may be able to update those to start with.
It’s always a good idea to check out what other coaches in your area are doing. You can see how their legal pages are structured on their websites.
But, use this information as research, not as a template to use verbatim. You do not want to copy and paste someone else’s terms and conditions onto your site.
4. Develop a Contract
You want your services to be crystal clear for your clients. If you offer a discovery call, make sure your website has precise information available.
After that initial contact if clients sign up for a coaching package, you need to have specific information available to them in the form of a contract.
In it, you need to include specific details about:
- Payment terms
- Costs of coaching
- Refund policies
- How you handle missed appointments
- What to do if a crisis arrives
Having a clear contract puts your client’s mind at ease. It shows them that you are a professional. Contracts that you have clients sign are also legally binding. They can help alleviate any problems that may arise.
5. Decide About Insurance
Some coaches opt to purchase insurance for their business. This can help protect them if something goes wrong. An example could be if you gave bad advice that turned out poorly for your client.
Others decide that the cost and hassle of securing a policy isn’t worth it. So, they move on without one.
You will have to decide which option you are more comfortable with. As you are researching your business, see if there is an insurance requirement in your area.
Also take your risk tolerance into account. If you tend to worry and avoid taking risks, an insurance policy can give you additional peace of mind.
Take the Steps to Legally Establish Your Coaching Business
These five steps help you legally establish your coaching business. They can protect you and help you appear more professional as you begin attracting more clients.