What Type of Business Structure Should I Use for My Coaching Business
Congratulations. You have proven that your online coaching business is profitable. Now you're ready to go pro and to set up a legal entity for your business, but you're not sure which business structure to choose. Well, look, no further, because in this episode I'm going to help you decide what is the right business structure for you and your online coaching business empire. In fact,
I'm going to share with you the four different structures, as well as how to register for them about the price that you can expect to pay for each and the three go-to professionals that you absolutely must speak to prior to making your decision. And if you hang around until the very end, I will share some insights as to some of my successes and pitfalls when it came to choosing the right business structure for me in my business. All right. So if you're ready to rock and roll, go ahead and smash that like button while you're doing that. Let me introduce myself. I'm Molly and Luna. This is the place to be.
If you're a coach consultant or corporate escapee who wants to start scale or skyrocket your online business, you're ready to cut your workload in half and really rev up your revenue by double, triple, or quadrupling your annual income, working smarter, not harder. I'm all about helping you create lifestyle and financial freedom, AKA building true wealth. And you're watching the series called the online business clinic. I show up for you every single Monday with intelligent online marketing strategies to help you take your business empire to the next level.
So this episode is actually part four of a multi-part series. So if you've missed any part of that, make sure you do check out this playlist linked here as well as in the description below. So you can binge watch all of those previous episodes as well as the ones that will be coming up shortly without further ado. Let's go ahead and let's talk about what are the four types of business structures structure. Number one is sole proprietorship. Sole proprietorship is when all of the cards are on your shoulders.
The managerial, the financial responsibility is all on you. Now it doesn't take anything to get your business entity set up as a sole proprietor. You'll just be using your social security number. And, um, the pro of this is that it doesn't cost anything it's easy to do. It's the most common version of business entities for entrepreneurs in at least the United States. I can at least speak on that. Um, and so it can be a really great option for when you're just starting out. Now,
if you have really been proving that your idea's profitable and you're needing to take things a little bit further, there are three other options. The next one is a partnership. Now a partnership typically is when two, maybe more, but usually two people come together and they sign an agreement saying that they will equally take on financial obligation and managerial obligations for the business entity. This is also very easy to set up. It also helps to mitigate the risk against your personal finances, because now if you have the right type of partner, a partner that can really be trustworthy and who really understands their numbers and can be a help mate, when it comes to building out your empire, um, it helps to split that risk, that financial obligation on both of your shoulders. So it's not all on you,
but it's between you and your partner. Another great option is to set up a limited liability corporation. Now, essentially a limited liability company is a form of a partnership that benefits both you and your partner. And you're set up more like a corporate business structure. So not all of the financial risk is on your personal finances, but now you're registered as an LLC. You can have some insurance or a buffer between you, your personal finances and your businesses gains or losses when it comes to setting this up. It does take a little bit of paperwork,
a little bit of a financial investment. And we'll talk about that in a few more minutes here. So hang with me. And the fourth option is to set yourself up as a corporation. Now,
once a business is a corporation, it is no longer solely responsible for the managerial operational financial aspects of your business. It is a standalone structure. It is typically issued what is called an E I N number. So now your finances, your personal finances and your business structure, finances will be completely separate. Um, typically a corporation has multiple chair persons on the board. So you might have a chief financial officer. You might have chief operational officer, the chief executive officer, that sort of thing. There's various ways that you can set up your corporation. It could be a C Corp. It could be an S Corp.
And with each one of those do come at different tax benefits. So it's definitely worth looking into, after you have hit a certain capital threshold with your online empire. Now, with both all four of those being shared. Now, I want to say that there are three professionals that I believe you absolutely must contact prior to registering your business. So kind of be thinking about which one you feel like the best fit for you, but then I want you to actually get on the phone or make an appointment to meet up with a lawyer, a banker and an accountant. Okay. Now I don't think this has to be done in any particular order, but, uh, we'll just dive in with the lawyer first.
So as your business moves from the idea stage into the implementation stage, you really should consider setting up time to meet with a lawyer. And if you don't know any lawyers, a great resource, actually I use quite often is called rocket lawyer.com. You can set up a chat or a phone call with someone there. Um, or you can meet someone in your town. Lawyers are not that hard to find, and it doesn't cost as much as you think, but what a lawyer is going to do, it's going to help protect you against unwanted litigation and or heavy tax burdens that your business might be facing in the future. It's going to take a look at where you are now, where you're wanting to go.
What's really feasible in the next 12 to 18 months and help provide the best business structure entity for you to advise you also in overcoming licensing or other regulatory hurdles that you and your business might face as well as reviewing and writing your client contracts. So yes, you absolutely must have client contracts, even if you're just starting out, even if you're not charging what you think you want to charge. Like I think every single person that comes through your business doors that you speak with and say, yes, I'd like to do business with you, have a contract in place, get everything just written down in black and white. So there's no confusion as to what it is you're delivering and the timeline for that delivery and so forth. So in the military, we call it C Y a, which stands for cover your assets. Okay? So a lawyer can help draw up that paperwork for you. Also,
a lawyer can help advise you on protecting your intellectual property and in the world of online business, building, between making marketing sales videos and, or putting together your program, you want to make sure that your intellectual property is properly protected. This can also include domain names and or trademarks if you eventually decide to go down that route. All right? And finally, a lawyer can help to research any legal advantages or disadvantages with various scenarios that you may encounter in the early stages of your business. Once you've spoken to the lawyer, I say head on over to the accountant and start crunching a few numbers. Okay? So here are five ways that an accountant can actually help you, uh, when it comes to setting up your business structure. So firstly, they are going to help you establish the right business structure and to minimize the tax burden so that you can maximize your profit potential because when it comes to wealth building, if you didn't know this, it's all about your income. Yes, it's great to make more,
but what's most important is that you are keeping as much of it as possible that you're making, so your income needs to be protected. And that's exactly what an accountant can help you do. Now, they're also going to be checking your numbers to help you arrive at the best price point for your various products or services.
They can also advise you on accounting practices for your particular situation and for you to set up a record system for your financial reporting. Okay? And finally, they can teach you how to analyze your financial statements so that you can make better business decisions in the long term. So I absolutely think you need to speak to both the lawyer and to the accountant before you register for your business. Now last, but certainly not least is to speak to a banker.
You should definitely speak to a banker because they can review your business plan and they can help you to avoid any potential financial pitfalls in the future. Also, it's extremely important that even if you're operating as a sole solopreneur to keep your personal and your business finances separate, so a banker can help you set up the appropriate bank accounts to do just that a banker can also analyze your financial trends in your business sector, and they can help provide some insight as to how it might affect your business in the coming future, um, properly setting up your financial instruments so that you can have better finances. So if you missed the interview that I did with the CFO, the cashflow CFO, I'm going to link it right here. Okay? Because I want you to not only be thinking about your business structure, but be thinking about how you will be keeping your cash flowing in your business because after all cash is King, and we want to make sure that you are building true wealth, right? So very important. All right. And then finally working with a banker, they will help calculate your break, even point for those calls cash flow projections.
So while I'm all about helping you starting your online coaching business with no startup capital, I totally am. And I teach you everything you need to know inside of my signature programs. I teach you the PIP method and teach you how to amplify your income using all free and organic resources. But at some point, if you really want to scale and to skyrocket your business, cashflow is going to be needed to help with some of those marketing or sales needs. So you want to make sure that you are doing your due diligence and educating yourself in the realm of online business finances.
And a banker is a great place to get started. Next step, how to register your business now in the United States, this is going to vary slightly state to state. So the best place to go is to your local state government's website. And to do a little research. Now, if you are speaking with an accountant and a lawyer, they can also help you set this up. The price point will be a little bit more expensive than say, using a resource like legal zoom to get started. Okay.
So what you're going to need to do is pull together some paperwork and you're going to file your business entity through the state department. Now, depending on the way you're showing up in the market, let's say, for example, if you're a personal trainer, who's also doing in-person services. In addition to your group coaching and or online products or services, you might need to check in with your local city government and see what additional licenses you might need to have.
I know at least my time as working as a personal trainer in Southern California, uh, specifically in the city of Santa Monica, I had to have a personal trainers license to be able to meet up with any clients at a local park. So do your due diligence check into both of those. And you can file the proper paperwork through your government's website. Now, unless you are wanting to get a specific tax identification number such as an EIN, that totally separates your business from your personal tax filings.
Then that's when you'll go to your federal government to file for that EIN identification number. This is fantastic so that you can partake in some of those tax exemption, statuses and opportunities, as well as if you think you will trademark in the future, having the, a federally backed EIN number, it will certainly help you in those regards. Now, if you are choosing to register your business as an LLC, a corporation or a partnership, or even a nonprofit, which we didn't really talk about, but any of those, and you are doing business across multiple States and or you have a virtual team who resides across multiple States, then you might have to register with each one of those individual States. So do your due diligence.
And this is also a great question for when you are speaking with your accountant and your lawyer and asking for their advice as well, because when it comes to doing business, what the state is taking into consideration is your physical location, as well as your team's location. And where is the majority of the finances coming in from, okay. So we want to make sure that, um, the revenue that you're gaining most, the state that you're gaining most of your revenue from you are legally registered under that state. Now, there is such thing as filing for foreign qualifications.
So this might be an example where you have possibly moved your headquarters and you are doing business across various States as an LLC corporation partnership or a nonprofit, and you are needing the ability to, um, work across various States. You might have to file a foreign qualification. So this is a great question to ask your accountant and or call up your local state representative and get some clarity there. I know that for me, my corporation was established in California and then when my family and I relocated to the state of Nevada, if I wanted to be able to continue to conduct business, I needed to file for a foreign qualification. So keep that in mind. Hadn't heard of that term prior to just a few short months ago. Uh, so I just want to plant that bug in your ear is this is why it's important to talk to those three professionals and get yourself set up accordingly. Now,
when it comes time to actually set up your business structure, what information do you need? Paperwork is going to require the business name, the business location, the names of the owners or management structure and or any directors. If you set up a corporation and you've got a board of advisory directors, they're going to need to know all of their names as well. They're also going to need to know the registered agent information, the number and the value of shares. If you're incorporating, um, how many shares you're wanting to issue. So keep that in mind. Um, but it honestly is not as complicated as it might sound.
So take a deep breath and just one step in front of the other. And you'll, you'll be a registered entity before you know it now, what does it cost to register your business? Well, in most cases it's often less than $300, but again, it's going to be probably a little bit more. If you go directly through a lawyer directly through an accountant, um, versus saying, using something like legal zoom. Now there are other platforms out there.
Legal zoom is the only one I can speak on directly because I have used it in the past for filing my LLC as well as my S corporation. And at that time to file an LLC, it was around $80. And to file an S corporation, it was closer to like the one 50 Mark. Now,
one thing I do want to share, depending on what state you're in, you may have to pay for franchise fees if you are registered as a corporation. So during my time in California, when I was registered as an S corporation, I was responsible for paying about $800 a year in franchise fees, just to be able to do business. That didn't matter if I made money or lost money that year I had to pay those fees.
So this is why I highly recommend that before you land on your business structure, that you are making a profit first. So I want to just give you a couple of guidelines to kind of, uh, these are loose guidelines, again, of course, ask your lawyer, ask your accountant, ask your banker what's right for you. Um, but for me, these are my kind of my go-to guidelines, as far as how do I structure my coaching business when I'm making zero to $50,000 a year. And for that, I would go with sole proprietor.
Now, when you're making 50 to a hundred thousand dollars a year, you could consider an LLC. The nice thing about an LLC is that even though you're registered as an LLC come tax time, if it's appropriate, you can potentially file your taxes as a full corporation. Don't let that stop you. But if you know, you're making less than a hundred K for the year, an LLC is, is more than enough. And then once you've, um, toppled over that six figure, Mark consider maybe going full-blown corporation. Now,
one of the pros of corporations is that there are a lot of tax benefits with that. Um, however, it does require a little bit more organization on your front. So if you're a one man or a one woman, you might not want to jump into that just yet, because you do have to keep up with paperwork and make sure you are potentially filing those franchise fees every single year. Okay. With that being said, now, I want to hear from you. I want to know of these four structures,
which one do you feel like probably suits you the best right now? There's no right or wrong answer. This is just a community we're here to share. And in also, if you have more experience with this particular topic and I misspoke, or I left something out, please leave it in the comments below, let's help each other. Okay. We're all about coming together to build wealth,
right? And so you might have an area of expertise that's even stronger than me. And I would love to hear your opinion. So do not be afraid comment below. I did promise that I would share a little bit of info about my experience with building businesses. And when I first started in my health and wellness business, and I was just a one woman show, I just operated at our sole proprietor. Okay. I didn't file any paperwork, anything like that? It wasn't until I started making over a hundred K that then I went ahead and filed for an LLC. And I did just do that on legal zoom. I paid like my 80 bucks and we were covered right.
Once I passed the six-figure Mark, then I chose to incorporate as an S corporation that was in the state of California. I have since dissolved that. And I'm reestablishing it right now in the state of Nevada. But that is also because I'm making well over six figures annually. And I have a team that works with me. So, uh, I'm ready, got my big girl pants on and we're just ready to continue to scale and skyrocket. So I hope you found that helpful.
If you've got more specific questions, don't hesitate to ask. I am here for you. Every single Monday, I release a new video of the online business clinic with smart strategies to help you start scale or skyrocket your online coaching business. And I'm always just a chat box away.
So do not hesitate to reach out. Now in the next video, I'm going to be sharing with you, um, how to legally protect your small business. So do be sure to check that out right here. And in the meantime, remember that so much of business building is a mental game.
So keep striving to master your mind and to live your legacy bye for now.
2021-03-24 12:29
