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You’ve made up your mind that it’s time to open your own private career coaching practice. Congratulations! If you have been researching how to set up your business online, one of the steps that is always on the list is to register your business and choose a legal structure.
However, for most career coaches thinking about transitioning to private practice or starting a side gig, it is hard to find guidance that fits this business model and services. You aren’t a budding entrepreneur or small business owner who plans to sell a product. You are likely going to be working on your own and can’t afford a lot of out-of-pocket costs.
The honest truth is, you don’t need to jump through a lot of expensive legal hoops to start a career coaching business, you just need to lay a solid foundation so your business can grow. In this article, we are going to share our experience with this process and offer a checklist to help you in your decision-making about your business setup.
DISCLAIMER: Be the Change Solutions, LLC does not provide legal advice, and this article is not a prescription of what you should do. It is a good idea to consult legal counsel to dive in further to what you read here and remember that you are responsible for your actions as a business owner.
I am just seeing a few clients on the side, so why should I register my business??
Most career coaches we know often start out by seeing a few clients outside of work. A colleague or friend refers people to them because of their valuable career expertise. They really enjoy the freedom of offering coaching according to their own values and style and they enjoy a little bit of extra income. As a result, this side gig inspires many to start building their own little business on the side with the hope of eventually launching into it full-time.
However, some questions begin to surface as you think about doing this:
Don’t fret. Unless you plan to hire a team or offer multiple services, there are simple, low-cost ways of getting your private practice off the ground with a solid foundation for growth.
Making use of legal entities and contracts can protect you from personal liability, help you save on taxes, and help you present a professional image to clients and the general public.
The simplest and most cost-effective business entity to start with is the sole proprietorship. You don’t have to take any formal action to form it, so it doesn’t cost you anything. Your name is the business name and any income earned by the business is considered income earned by you as the owner. A sole proprietor owner just needs to keep track of all their business income and expenses and report it on a Schedule C with their personal tax return.
If you decide you want your business to have a different name than your own, then you will need to file for a DBA (doing business as) name (which is still a type of sole proprietorship) but it legally allows you to conduct business under a different name. For example, if Joan Doe wants to open a sole proprietor cake business called “Cakes by Joan,” she needs to file a DBA for “Cakes by Joan.” This DBA becomes a public record letting everyone know what individual(s) are behind the business. The cost for this paperwork filing ranges from $10-$100. Again, because there is no separation between the DBA and the owner, any income earned by the business is considered income earned by the owner.
While you aren’t required to separate your personal and business finances as a sole proprietor, doing so allows you to track the components involved in managing your business throughout the year, and it makes it easier to spot any potential tax deductions your business might have. Also, as your business grows and you are ready to shift to a Limited Liability Company (LLC), this step of protecting your assets is already in place.
To set up a business account, we would recommend you obtain a federal Employer Identification Number (EIN) for your business. It is free and like having a social security number just for your business. As a sole proprietor you aren’t required to have an EIN if you don’t plan on hiring any employees, however, if you plan to hire contractors to help you build your business (i.e. a web designer, blogger, etc.) then you will be required to have one. Also, there are many other benefits to having an EIN. Many banks require it to open a business checking account, apply for loans and business credit cards.
While the chances of getting sued as a career coach are relatively low, it is a good idea to protect yourself with some cost-effective liability insurance. Not only will it help protect your assets, there will be opportunities to contract with organizations that you find require proof of this type of insurance.
If you are a member of a professional coaching association, they often offer low-cost liability insurance as a benefit to their members. For example, check out what The National Career Development Association (NCDA), National Board for Certified Counselors (NBCC), or the International Coaching Federation (ICF) offers.
The career coaches we know typically start with the sole proprietorship and then as their business grows and becomes more complicated, they invest in obtaining a Limited Liability Company (LLC) status. An LLC offers a legal separation between your personal and business finances and it is optimal for private practitioners because it offers the benefits of sole proprietorship along with many of the protections of a corporation.
This business entity does require some research to find out what documents need to be completed in your state or municipality. You can choose to hire a local lawyer to help you with this process, or you can do it yourself through an online legal service. The cost typically ranges from $100-$800.
As you can see there are many things to consider when launching your career coaching practice but it doesn’t need to be a scary overwhelming process. You can take the three steps outlined above as a starting point and build from there. Whether you start your practice as a side gig, or jump into it feet first, you can begin with low-cost options that give you flexibility as you grow. Starting your own career coaching practice is a rewarding endeavor and you are now one step (or three) closer to making your dream a reality!
Want to learn more about how to start your career coaching practice and become part of a private practice community? Check out our comprehensive Kickstart Your Private Practice course website, or schedule a fifteen-minute call with one of our team members.
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By registering for the Kickstart You Private Practice Program you will be on your way to a new and exciting chapter of your life that stars all the clients you will help on their way to a new rewarding future. Classes are limited and available on a first-serve basis. Take the time to start investing in your own career coaching practice.
Not ready to register? Schedule a call to learn more about this course to support your future.
Ronda Ansted, DMgt, MSW, GCDF, is committed to using career development to transform lives, communities, and the world. For more than 20 years, with a primary focus on international development and social services, Ronda has helped her clients to translate their skills and services into rewarding work and inspired lives. Through her private practice, Be the Change Career Consulting, Ronda works with those dedicated to serving others through support, guidance, and inspiration to increase their effectiveness professionally and to help them fulfill a personal journey.
She is the creator of My Career Design Studio, launched to increase access to career coaching to people around the world and with limited resources, and the Empowered Entrepreneurs Program, designed to launch career professionals into successful business owners. She is also the past President of the Maryland Career Development Association. Ronda holds a Doctorate of Management from University of Maryland University College, and a Master’s of Social Work from the University of Maryland, Baltimore.
Sheri Mahaney has worked as a therapist, career counselor, supervisor, staff mentor, group facilitator, teacher, and consultant throughout her career in social services and higher education. Now in private practice, she created New Insights Consulting to provide national certification (NCDA FCD) and private practice tools for those getting into the career coaching field.
As a trainer of other career professionals, her emphasis is on seeking out each coach’s strengths and sharing her expert knowledge of human behavior and the impact of personality differences on daily human interactions. She is a Nationally Certified Counselor, a trained NCDA Instructor of the Facilitating Career Development program, a qualified interpreter of the Myers-Briggs assessment, and has teaching certification for the StrengthsQuest assessment. Sheri holds a B.S. degree in Human Development & Family Studies from Cornell University and a Master’s degree in Social Work, occupational social work concentration, from Syracuse University.nd help create those A’HA moments in coaching. I understand that any career transition can be both extremely rewarding and exciting, but also overwhelming, and finding the time to dedicate to invest in your career and yourself can be difficult. Sometimes you just have to ask for help!
I am a highly creative career coach/counselor guided by strong intuition, drive, and a global perspective. I love career development and am an ardent supporter of Career Services, with over 19 years of experience in career development, training, and management. I am a visionary leader that possesses an honest and open communication style. I am energized by seeing my clients succeed in their career goals and connecting them to opportunities.
For Individual clients, my goal is to make a difference in an individual’s career decision-making and help create those A’HA moments in coaching. I understand that any career transition can be both extremely rewarding and exciting, but also overwhelming, and finding the time to dedicate to invest in your career and yourself can be difficult. Sometimes you just have to ask for help!