Should I Start an LLC for My Relationship Coaching Business?
Starting a limited liability company (LLC) for your relationship coaching business can provide several benefits.
Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.
For a relationship coaching business, lawsuits can arise from things like professional malpractice (e.g., a coach breaking client confidentiality, giving negligent advice, etc.).
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your relationship coaching business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Relationship Coaching Business?
LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.
You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.
LLC Benefits for a Relationship Coaching Business
By starting an LLC for your relationship coaching business, you can:
- Protect your savings, car, and house with limited liability protection
- Have more tax benefits and options
- Increase your business’s credibility
Limited Liability Protection
LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.
Relationship coaching businesses will benefit from liability protection because of the risk of being sued for things like confidentiality breaches, defamation, and trademark infringement.
Example 1: A couple hires you to help coach them through a difficult transition phase as they move cities to take on new jobs. After four months of twice-weekly sessions with you, they sue you for failing to deliver on your contract with them, stating that your sessions aided in their eventual divorce. With an LLC structure in place, your personal assets will remain safe from fines imposed by the court.
Example 2: A top-notch celebrity comes to you privately for relationship coaching. One week later, some private information about her is exposed in certain gossip blogs, and she sues you for abuse of privileged information. You eventually discover that a recalcitrant employee was behind the whole fiasco. In the ensuing litigation, limited liability will protect your personal assets from the financial fallout of the lawsuit.
Example 3: Your relationship coaching service is recommended to a couple who have been married for 10 years but seem to have fallen into a rut. They misconstrue some advice you offered to them and end up investing in something that falls through. They sue you for emotional distress and fraud. Limited liability will ensure that your personal assets remain protected regardless of how the claim progresses.
An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.
To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.
LLC Tax Benefits and Options for a Relationship Coaching Business
LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.
The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.
Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.
S Corp Option for LLCs
An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).
S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.
The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.
In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.
We estimate that if a relationship coaching business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.
You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.
Credibility and Consumer Trust
Relationship coaching businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.
Businesses gain consumer trust simply by forming an LLC.
A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.
Northwest will start an LLC for you for just $29 (plus state fees).
How to Form an LLC
Forming an LLC is easy. There are two options for forming your LLC:
- You can hire a professional LLC formation service to set up your LLC for a small fee
- Or, you can choose your state from the list below to start an LLC yourself
Select Your State
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.
Should I Start an LLC FAQ
Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.
Visit our LLC vs. Sole Proprietorship guide to learn more.
At a minimum, you’ll need general liability insurance and possibly professional liability insurance.
Read our Small Business Insurance article for more info.
The costs of starting a relationship coaching business are minimal. This is especially true if you decide to run a home business and dispense with the cost of the rent. If not, rent, advertising materials, professional license renewal fees, and commercial insurance are the other ongoing costs such a business would require.
Visit our How to Start a Relationship Coaching Business guide to learn more about the costs of starting and maintaining this business.
The ongoing expenses of running a relationship coaching business include marketing, utilities, scheduling, billing service subscription, and insurance.
Learn more about running a relationship coaching business.
Relationship coaching businesses make money by charging a fee for their coaching services. Some earn additional income from courses, books, and merchandise.
Learn more about starting a relationship coaching business.
The US personal coaching market, which includes relationship coaching, is estimated at over $1 billion.
The average profit margin for a relationship coaching business needs to be at least 20% to be sustainable, but some relationship coaching businesses see profit margins greater than 50%.
Learn more about starting a relationship coaching business.
