Do I Need an LLC for My Family Counseling Practice?

Starting a limited liability company (LLC) for your family counseling practice 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 family counseling practice, lawsuits can arise from things like professional malpractice claims (e.g., giving reckless advice or consultations that end up causing your clients foreseeable harm, etc.).

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

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

A couple holding hands across from a counselor

Should I Start an LLC for My Family Counseling Practice?

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 Family Counseling Practice

By starting an LLC for your family counseling practice, 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.

Family counseling practices will benefit from liability protection because of the risk of being sued for malpractice, personal injuries, property damage, and data breaches.

Example 1: You took out a loan to support your family counseling practice but ran into financial difficulties and could not repay it by the due date. If you have liability protection and did not personally guarantee the loan, your private assets will be safe from seizure by your creditors.

Example 2: While counseling a couple in conflict, your employee ends up saying or doing something that causes one partner to become enraged and physically assault the other. As long as you were not personally responsible for the incident, an LLC's limited liability would protect you from having to pay damages or cover legal fees arising from this type of lawsuit.

Example 3: During a session with a client, your office suffers a data breach that exposes the personal information of many clients to third parties. As long as you were not negligent in protecting this sensitive data, your LLC's limited liability would shield you from any legal consequences and damage claims resulting from this incident.

Example 4: A parent sues your practice, claiming that one of your counselors caused their child severe emotional distress during a session.

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 Family Counseling Practice

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 family counseling practice 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

Family counseling practices 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 dependable 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.

Family counseling practices need insurance to protect both the counselor and the client. By having insurance, a family counseling practice is able to cover any costs associated with a malpractice lawsuit or other legal proceedings.

Common Situations Business Insurance May Cover for a Family Counseling Practice

Example 1: As one of your counselors moves new office furniture into the building, they accidentally drop a large chair in the path of a passing client. The client falls to the ground, where he hits his head, and then needs immediate medical attention for a possible concussion. General liability insurance would cover the client’s medical bills.

Example 2: Shortly after you clean up a coffee spill, an adolescent client runs through your lobby, slips on the wet floor, and suffers a severe injury. Her parents decide to take legal action against your counseling business. General liability insurance would pay for your legal fees as well as any settlement to your client if needed.

Example 3: While moving boxes of client paperwork, your receptionist loses control of the dolly and causes significant property damage when the dolly hits a client’s car. General liability insurance would pay to repair the damages to your client’s car.

Other Types of Coverage Family Counseling Practices 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 family counseling practices should obtain.

Workers’ Compensation Insurance

While a counseling office isn’t the most likely place for employees to sustain on-the-job injuries, most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Property Insurance

Creating a safe and relaxing counseling space for your clients to enjoy typically requires a substantial initial investment. If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your office supplies, specialized furniture, and other business equipment after an accident so you can recover quickly.

Commercial Auto Insurance

Because it’s common for counselors to provide transportation for younger clients or clients with special needs, you need to invest in commercial auto insurance. Any vehicle you use primarily for business requires this coverage to protect the vehicle, driver, and others on the road in the event of an accident. While most states regulate the minimum coverage required, this often leaves business owners exposed to potential lawsuits. Therefore, consider seeking the assistance of an insurance professional to help you determine the appropriate coverage limits for your business.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance article for more info.

Starting a family counseling business often needs more time and effort than capital. As a counselor, you can see clients in their homes or practice from the comfort of your own home. With about $2,000, you can use different forms of advertising (social media, etc.) to promote your practice.

Visit our How to Start a Family Counseling Practice guide to learn more about the costs of starting and maintaining this business.

A family counseling practice can have very little overhead, especially if you are meeting in clients’ homes or your own home. In this case, you will have to pay for advertising, travel, and insurance. If you rent an office space, you will have lease payments. You also may need to pay membership fees in professional organizations.

Learn more about running a family counseling practice.

A family counseling practice makes a profit by charging clients for counseling sessions.

Learn more about starting a family counseling practice.

A family counseling practice conducts group and one-on-one counseling sessions for families, young children, and adolescents.

The profits of a family counseling practice depend on how many clients it serves and how much it charges per session.

Learn more about starting a family counseling practice.