Do I Need an LLC for My Health Coaching Business?

Starting a limited liability company (LLC) for your health 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 health coaching business, lawsuits can arise from things like hiring unlicensed coaches (depending on your state) or a health coach giving reckless advice that would foreseeably harm a customer’s health.

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

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

Should I Start an LLC for a Health 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 Health Coaching Business

By starting an LLC for your health 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.

Health coaching businesses will benefit from liability protection because of the risk lawsuits related to professional liability, copyright, trademark infringement, and other, general business risks like libel.

Example 1: A client falls and sustains serious injuries during one of your coaching sessions. They sue your business for negligence, claiming you were not sufficiently prepared to deal with health emergencies. Limited liability protection can protect your personal assets in the event that the court finds your coaching business guilty of the charges.

Example 2: An employee at your health coaching business accidentally posts sensitive client data on a public website. The client sues your business for damages and breach of confidentiality, which can negatively impact your company’s reputation. Limited liability protection limits the lawsuit costs to only your business assets, minimizing the damage to your business's credibility.

Example 3: One of your business’s vendors discovers that there has been a data breach in your client records and decides to sue your business for negligence. Limited liability protection can prevent the vendor from going after your personal assets in order to recoup losses from the breach.

Example 4: One of your clients claims that your advice caused their health to deteriorate and require medical attention, leading them to sue you.

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 Health 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 health 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

Health 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).

Get Started

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

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.

Health coaching businesses need insurance to protect themselves and their clients in the event of a lawsuit or other financial loss. Insurance can help cover medical bills, lost wages, and any property damage that may have occurred as a result of the health coach’s advice or negligence.

Common Situations Business Insurance May Cover for a Health Coaching Business

Example 1: In order to secure a loan to purchase a new building, your bank requires you to carry at least $1 million in general liability insurance. A general liability policy would ensure you meet that requirement.

Example 2: After a rainstorm causes water to pool around your business’s front door, a client slips on the wet surface and breaks a wrist trying to catch his fall. He asks you to pay for his medical bills. General liability insurance would cover his medical treatment and your legal fees in the event of a lawsuit.

Example 3: A competitor overhears you speaking poorly of him at a community event and decides to sue you for defamation, claiming your comments hurt his business. General liability insurance would cover your legal fees and any court-awarded damages.

Other Types of Coverage Health Coaching 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 health coaching businesses should obtain:

Professional Liability Insurance

While you strive to provide advice that benefits your clients, there’s always a chance someone might decide your professional guidance harmed them. If a client sues your business for negligence — even if there’s no merit to the claim — professional liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

Whether you own or rent your company’s office space, you should include this coverage in your insurance portfolio. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes your building as well as the business equipment and supplies stored there.

You can typically purchase commercial property insurance as part of a business owner's policy (BOP).

Workers’ Compensation Insurance

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 workplace accident.

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 possibly professional liability insurance.

Read our Health Coaching Business Insurance article for more info.

Starting a health coaching business requires minimal overhead costs and only requires basic advertising (online and in person). Most of the work involves visiting clients in their homes to observe and understand their individual struggles with improving their lifestyles.

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

The ongoing expenses of running a health coaching business include marketing, licensing, certification fees, and additional overhead costs.

Learn more about running a health coaching business.

Health coaches make money by charging clients a fee for individual or group coaching sessions. Some coaches also take advantage of online education platforms to offer remote courses and sell educational materials to help diversify their income streams.

Learn more about starting a health coaching business.

People often seek out health coaches to help them achieve physical and mental well-being. Businesses and insurers also employ health coaches to improve employee health and reduce the costs of insurance claims.

With the increasing popularity of health coaching businesses, this $6 billion market has a strong growth outlook. Health coaching businesses can generate very strong profits with successful health coaches earning up to $100,000 per year.

Learn more about starting a health coaching business.