Should I Start an LLC for My Career Coach Business?

Starting a limited liability company (LLC) for your career coach 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 career coach business, lawsuits can arise from things like false statements guaranteeing a certain salary for their clients, poor career advice that negatively impacts the client, and failing to honor a client’s contractual agreement.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your career coach business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Career Coach Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Career Coach Business

By starting an LLC for your career coach 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.

Career coach businesses will benefit from liability protection because of the risk of professional liability in addition to general risks associated with dealing with customers, including personal and property damage.

Example 1: A client hires a counselor from your career coach business in order to provide them with guidance. In the contract both parties signed, it states that your business will provide the client with a certain number of counseling sessions. However, when your business fails to deliver on this promise, the client sues you for breach of contract. Limited liability protects you from being held personally liable.

Example 2: An employee at your career coach business made a misleading statement to a client guaranteeing them a specific salary at the end of their package of sessions. When this didn’t come to fruition, the client filed a lawsuit against your business for intentionally misleading them. In the ensuing litigation, your personal assets are protected from being used to satisfy any damages the court awards the plaintiff.

Example 3: One of the coaches at your business provided poor advice to a client that resulted in severe negative consequences for the client’s career. As a result, he sued your business for professional negligence. In this situation, any liability to pay the plaintiff damages is limited in its entirety to the business’s assets.

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 Career Coach 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 career coach 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

Career coach 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).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a trusted 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

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.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Due to the role career coach businesses play in the lives of their clients, insurance is paramount for such businesses due to the array of liabilities they open themselves up to. It provides a layer of protection that sits between the assets belonging to your business and the liabilities they face by offsetting their risks to an insurance firm.

Common Situations Business Insurance May Cover for a Career Coach Business

Example 1: While visiting a client’s office, you accidentally spill your coffee on the client’s high-end laptop. He asks you to replace his damaged property. General liability insurance would cover the cost of purchasing a new laptop for your client.

Example 2: Another career coach accuses you of libel. While you disagree with the claim, you want to hire an attorney immediately. General liability insurance would pay for your legal defense fees.

Example 3: During a coaching session in a client’s home, you turn a corner and knock a family member to the floor where she sustains a concussion. The client demands you pay for her medical treatment. General liability insurance would cover the injured family member’s medical care.

Other Types of Coverage Career Coach Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all career coach businesses should obtain.

Professional Liability Insurance

This coverage policy protects you from claims of negligence due to errors you might make in your coaching — or mistakes your client might accuse you of and use to justify a lawsuit. If someone sues you for your professional work, professional liability insurance would cover your legal fees and any required settlement.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured, but also sufficient protection for any business materials you carry in your vehicle.

Home-Based Business Insurance

If you operate your company from your home, you may need this insurance to safeguard your equipment and the space in your home devoted to your business. A typical homeowners insurance policy may not cover business-related items if you don’t disclose you use your home for business purposes.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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 professional liability insurance.

Read our Business Insurance article for more info.

In order to launch your career coach business, you can expect to require several thousand dollars in order to cover the startup costs.

The two primary components of this figure will be acquiring qualifications from appropriate institutions (such as CPCC, PARWCC, or NCDA) and a comprehensive marketing strategy.

Visit our How to Start a Career Coach Business guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses include marketing, advertising, and networking costs. To remain competitive, career coaches also need to invest in continued training to keep their knowledge and skills relevant.

Learn more about running a career coach business.

Career coaches make money by charging individuals or organizations for their services. They can also take advantage of digital learning platforms and offer career courses and templates for job seekers.

Learn more about starting a career coach business.

Career coaches help people identify occupations and career industries and help prepare them to thrive in their chosen fields. Career coaches can also advise companies on the mindsets and behaviors that enable a high-performing workforce.

Just like some consulting businesses, low ongoing cost means that a career coach business can be very lucrative if you put in the time and effort to deliver results to your clients.

Learn more about starting a career coach business.