Why are LLCs the Best Biz Entity for Coaches and Online Service Providers?

If you're a coach or an online service provider (and if you’re here at destionlegal.com I’m guessing you are!), you know that growing a successful online business is both amazing AND challenging.

I know, I know…building your brand and helping your clients IS really exciting and super important, obviously, but it's crucial to consider the legal aspects of your business. And I’m guessing you know that or else you wouldn’t be here, right?!

So one question that often arises in the minds of new business owners is, "Do I need an LLC?" or “What’s the best business entity for me?” 

In this blog post, we will explore the benefits of having a Limited Liability Company (LLC) and why it's considered the best business entity for coaches and online service providers. 

And just for fun, we will dive into the importance of coaching contracts and WHY they are so important in safeguarding your business.

What's the Best Business Entity for an Online Business?

When starting an online business, one of the fundamental decisions you need to make is choosing the right business structure. Now, of course this depends on your country but in the U.S. and a lot of other countries (even if they have slightly different names) the most common business entities include Sole Proprietorships, Partnerships, Corporations, and Limited Liability Companies (LLCs). 

Note, most online business owners start out as a Sole Prop and that’s totally fine, you stay that way for a bit but within your first year you want to upgrade to a business entity, more on that here.

Each entity has its pros and cons, but for coaches and online service providers, an LLC often proves to be the most advantageous choice and here’s WHY:

1. PERSONAL ASSET PROTECTION

This is the BIG reason you will want to think about being an LLC.  As a coach or online service provider, your business relies heavily on your expertise and knowledge. However, this also means that there is an inherent risk of facing legal claims or disputes. With an LLC, your personal assets are protected from the debts and liabilities of the business. This means that if your LLC is sued, your personal savings, home, car or other assets generally cannot be targeted to satisfy business debts, keeping your personal finances secure. Whew, that’s pretty good huh?

2. A SIMPLE BIZ STRUCTURE

Simple is good. I’m not sure about you but I’m always trying to simplify my life and business. LLCs offer a relatively simple and flexible business structure compared to corporations (NO THANK YOU). They require less paperwork, less admin.  Enough said. This leaves you more time and energy to focus on growing your coaching or online service business.

3. TAXATION

Another advantage of LLCs is their taxation. By default, LLCs are considered "pass-through entities," meaning the business itself does not pay taxes. Instead, the profits and losses "pass through" to the owners' personal tax returns, where they are taxed at the individual rate. This can result in potential tax savings compared to the double taxation that can occur with certain types of corporations. As you grow, talk to your accountant about keeping your LLC but being taxed as an S-Corp, this can also offer some tax savings if you are past the six-figure point in your business. 

4. YOU LOOK LEGIT

Having an LLC attached to your coaching or online service business can add a layer of credibility and professionalism. Potential clients may perceive your business as more established and trustworthy, which can be a big factor in attracting clients.

Sounds pretty good right? Plus, this is something you can do yourself without the need to hire an attorney or use some scary giant like legalzooooom. If you want help or a quick guide on LLC formation, checkout HAPPY HOUR YOUR LLC, we will walk you through exactly how to file your LLC online.

Now that we have established why an LLC is an ideal business entity for coaches and online service providers, let's explore another super really important aspect of your coaching business: contracts. While LLC’s are amazing and protect your assets if you get sued, CONTRACTS are what can keep you from being sued in the first place.

One to one contracts are legal agreements that outline the terms and conditions of your services. If you’ve been around Destination Legal for any amount of time, you know that I talk about these A LOT. Contracts protect both you and your clients by clarifying expectations, responsibilities, payment terms, and other important aspects of your coaching engagements.

"Do I Need a Contract?" The answer is a big ‘Ole YES! Coaching and service provider contracts provide a ton of benefits, including:

✅ Legal Protection: A well-drafted contract can protect you from potential disputes or misunderstandings with your clients. It sets clear boundaries and expectations, reducing the risk of legal complications.

✅ Establishing Boundaries: contracts define the scope of your services, ensuring that both you and your clients understand the limitations and parameters of the relationship.

✅ Payment and Refund Terms: Contracts outline the payment schedule and refund policies, preventing payment disputes and providing a recourse mechanism if conflicts arise.

✅ Intellectual Property Rights: If you offer proprietary coaching materials, the contract can specify the ownership and usage rights of these materials.

Thankfully, there are contract templates available just for you (Hi~). DL has legal templates drafted specifically for the online coaching and service provider industries. 

Investing in the legal aspects of your online business is a BIG step towards long-term success and peace of mind. If you are at a point where you need a contract, head over HERE, and when you purchase as a bonus, reach out to us and we will gift you Happy Hour Your LLC so that you have a FREE guide on how to form your LLC.