You’ve got the passion. You’ve made the time commitment. And you’ve carved out a unique niche in the coaching landscape by leveraging your personal talents and expertise. But in addition to the skills, training and coaching certification required of professional coaches, there are also a number of traditional business concerns that many people either don’t anticipate or get hung up on.
To help smooth the transition for new coaches (as well as certified life coaches who are branching out with new services – GO YOU!), I’ve compiled answers to the following Frequently Asked Questions. Whether you’re just getting started in your career or have been at it for decades, these business considerations can save you time and costly missteps.
They’ve worked wonders for the students in our business development courses. Here’s hoping they do the same for you!
How much money can I make before I have to file taxes?
Believe it or not, there are different standards for those employed by a company and those who are self-employed. Unfortunately, for those of us who are self-employed, the minimum income requirements for filing taxes are substantially lower. If you’ve made more than $400 in net self-employment income, you will need to report it to the IRS.
What expenses are considered tax deductible?
In short, almost any expense resulting from the generation of income can be written off, according to Section 62 of the Internal Revenue Code established by the IRS. Within these parameters, common deductions for a coaching business can include:
- Accounting fees
- Advertising (including website design and social media presence)
- Banking fees
- Business travel
- Computers and related tech equipment
- Consulting fees
- Education and training for employees
- Home office
- License fees
- Office supplies
- Telephone service and equipment
When should I start doing quarterly taxes for my business?
The process of paying your taxes quarterly (or “estimated tax” as it’s known) is common among those of us who are self-employed. In short, if you expect to owe more than $1,000 in taxes at the end of the year, you will probably have to make estimated tax payments, according to the IRS. Not doing so can result in penalties that reportedly range from 6% to 8% annually.
What is the simplest, most basic accounting approach for tracking business income and expenses?
Use Microsoft Excel. Track your income and expenses by setting up columns and categories for each. Easy to use and widely available on most devices, Excel can be accessed online or installed permanently when purchased individually or as part of the Office 365 suite. It’s also available as a free app for tablets and iPad at Google Play and Apple Store.
Another option is to leverage the software available through your bank, often provided when you set up a business account.
Can I deduct education costs as an expense? What if that education came before the business was legally set up (coach training for example)?
This area can get a little tricky. The answer could be yes or no depending on your business status and when the education was completed. Consider the following except from guidelines posted by the IRS:
Qualifying Work-Related Education
You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests.
- The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
- The education maintains or improves skills needed in your present work.
However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
- Is needed to meet the minimum educational requirements of your present trade or business, or
- Is part of a program of study that will qualify you for a new trade or business.
In short, if you are already in business and functioning as a coach, coach training will most likely qualify as work-related education. The key is you have to be in business first. Consult with your CPA for additional guidance and the best way to itemize this expense on your taxes.
How do I legally protect my business name?
Protecting your business name is an important step. It prevents someone from establishing another business with the same name, thereby safeguarding your brand reputation and identity while preventing confusion among your clients.
Specific business names can include legal names, trade names, domain names and trademarks.
Depending on the geographical scope of the coaching services you intend to offer, there are individual protections required for local, state, national and international business names, according to information provided by the U.S. Small Business Administration.
This step is actually a great place to start, before even settling on a final name for your coaching business. The SBA also provides a series of tips and guidance on how to create and register a business name that can save time and help you avoid disappointment if your first choice is already taken.
How do I legally protect my brand, tag line and product names?
The more widespread your brand name and products become, the less perceived value they begin to have – especially when those using them do not meet your business standards. Once your brand name is legally protected, you have to enforce the protection by monitoring the web for violations.
One of the easiest ways of doing this is through Google Alerts. Simply establish an alert for your brand name and all associated products or trademarked services. With that alert in place, you’ll be notified of infringements and can consult with an attorney if necessary.
Initial legal action typically includes sending a “Cease and Desist” or “Take Down Notice” to avoid costly legal and court fees. If the issue remains unresolved or the use results in monetary damages (such as loss of business), additional legal action may be required.
It’s worth noting that an infringement can be the result of an inadvertent use of trademarked names or intellectual property. This is common among brand partnerships and affiliate programs. In these instances, a Take Down Notice will often resolve the dispute.
When entering into these joint ventures, it’s also important to include specific restrictions on brand names and intellectual property in all of your contracts and agreements. It can eliminate a lot of the misunderstandings that lead to problems down the road.
How do I make sure I am not using a name someone else has already trademarked?
This is a great place to start when you’re brainstorming names for your coaching business and its products or services. Check for the availability of names by using the United States Patent and Trademark search tool.
What can people sue me for in relation to my coaching services?
People can sue for anything they like. Within the coaching spectrum, lawsuits tend to focus on damages to and/or destruction of property, physical injuries, negative publicity/public perception, copyright, and damages to personal or professional reputation.
Whether or not they win often depends on your conduct as a business owner. Additionally, a number of insurance policies exist that cover coaches, paying for costs related to attorney services, evidence gathering, witnesses, and even damages paid to the plaintiff as part of a judgment (see below for more information). Investing in such a policy can be a wise decision, if for nothing more than your peace of mind.
Is the ICF contract sufficient to limit liability?
No. The ICF’s sample contract provides a strong backbone in court relating to your coaching services but does not protect you from any of the myriad of situations that may arise.
In regard to the services themselves, you should always steer clear of consulting, advising, or providing information that could be used against you. If someone slips and falls on the property, that’s another case. And if you’re stealing content or marketing your business by infringing upon a trademarked brand, you’ll quickly find yourself up a creek.
The best approach is to sit down with an attorney who handles coaches. Have them run down the list of possible liability pitfalls, advising you on the specific protections for each.
What kind of business insurance does a coach need?
Coaching requires a range of different business insurance coverage depending on the type of services you offer. For example, if you combine coaching with another service-oriented practice, you may need general liability and professional liability insurance. This covers everything from physical damage and issues of libel and slander to errors and omissions and malpractice.
If you provide coaching services out of a home office, the location also has to be covered through a property insurance policy. It’s worth noting that this is often included in a comprehensive general liability policy. Be sure to explain your situation to your agent. Doing so will ensure proper coverage without doubling up on unnecessary premiums.
More information on the types of coverage available and how they apply to the various business entities is available in this article published by the U.S. Small Business Administration.
How much protection do generic disclaimers on a website provide?
It depends on what you are selling, which makes this an ideal question for your business attorney.
In general, disclaimers may not offer protection against lawsuits and other forms of legal action taken against you. And they definitely do not provide monetary compensation for aspects related to your legal defense. So in addition to speaking to an attorney, I’d once again recommend investigating business insurance for coaches.
Share your thoughts
Do you have experience with one of the topics covered above? Share your story in the Comments Box below to help others who may be currently traversing the same path.
DISCLAIMER: The above information addresses the basics of setting up a coaching business. It is not intended nor should it be used as a substitute for professional legal or financial advice available through a certified public accountant, attorney or tax specialist. To ensure your protection and compliance with all local, regional and national laws and regulations, please consult with the appropriate service provider when making any and all business decisions.
Do I need to start an LLC , for my health coaching business?
Hi Delia! You do not need to start an Limited Liability Corporation (LLC) for your health coaching business, although it would give you additional protection in terms if anything happened in your business. For example a client has a mishap or sues you for some reason. But… that being said, it’s best to speak to a CPA or Attorney who will ask you (hopefully) enough questions about your business, services and client base so they can tell you if the added protection is something you’ll want to consider. Another consideration is getting professional and/or liability insurance. Again, I’d reach out to an insurance company or two and get their perspective.
Thank you very much!
Hi – good article. I am an established coach in business for a few years and I want to add a new dimension to my coaching services – say, a weight-loss coaching program – and I want to enroll in another coaches’ weight loss coaching program not to steal specific content of course but to get a sense of how they are formatting it, running it, etc. – would that coaching package that I’m using for my educational/training purposes be tax deductible as an educational expense that “maintains or improves skills needed in my present work”?
Hi Rachel! Such a good question, and my best recommendation is to check with your CPA to ensure that it would indeed be considered a valid write off. It feels like it to me, but a CPA would be your very best resource for this one! And good on you for continuing to grow yourself and your capacity to serve your clients even better!
I am creating a life coaching business with online class training, phone coaching mainly and also business coaching. Do I need to have a corporation or LLC and insurance?
Hi Gretchen, no one is required to be an LLC or Corporation. Although, choosing one of these entities is a big step up from being a sole proprietor where there is no protection.
It has been my experience that some insurance companies prefer that you are an LLC or Corporation. If you are working with other companies; they may require you to have insurance before they will do business with you.
I would recommend speaking with a CPA about the level of protection you might gain from being an LLC/Corp.
I’d also recommend speaking with an insurance agent as well.
Being educated on “why” you might want coverage will help you to discern what is best for you and the future of your business. Good Luck with your new endeavor!
I have been coaching one-one and doing organic promotion through networking & referrals and recently decided to expend my practice online.
I am in the beginning stages of setting up ads for a package that I designed.
Of course I looked up my competition and there are a few coaches with very similar packages and content (there are only so many ways to deal with recovery!).
I am definitely trademarking the name and images related to my package but what are the odds of other coaches suing me over content?
To be clear: none of them invented the methods used! They basically did the same thing I do, use existing techniques and tweak and personalize them.
Thank you for your input.
Delphine, this is a really good question and one that is going to be best answered by a copyright attorney. There is software available that can check your content to see if it’s at risk for plagiarizing. But I would definitely find an attorney who can give you the right kind of advice. I hope this helps!
when filing an LLC for Life Coaching what would be the best category to file under….Consulting or Other?