Does A Life Coach Need A Business License And Insurance?
Wondering what you need to set up your coaching business right? Learn about the legal requirements for life coaches in our resource guide.
Business Basics for Life Coaches
Launching a life coaching business is easier now than ever before! These days, you can begin seeing clients with little more than a phone and a laptop. But just because it’s easy to get started, doesn’t mean there aren’t any guidelines.
If this is your first foray into entrepreneurship, we suspect you may have a few questions about the business end of things. Here’s a few that we hear most often from students in our life coach training program:
- Does a life coach need a business license?
- What are the legal requirements of life coaching?
- Do life coaches need insurance?
- Should I operate as a sole proprietorship, or set up an LLC?
If you’re new to self employment, some of these questions may not have even occurred to you yet! But don’t worry - we’ve got you covered.
Does A Life Coach Need A Business License?
In most cases, the answer to this question is no. In the United States, there are currently no licensure or certification requirements for life coaches.
With that said, it’s a sound business strategy to invest in life coach certification.
The Business Value of Coach Training
A good life coach training program will teach you coaching theory, interventions, techniques, frameworks and ethics to help you facilitate effective client sessions. These are the skills necessary to help your clients achieve real, lasting results.
Great programs go one step farther, providing you the opportunity to put what you're learning into practice through peer coaching, mentoring, and feedback. Many programs will also provide business training on how to define your voice and brand, attract clients, and launch a coaching practice.
Important note: Even though you don’t need a formal license to coach in the United States, it is likely that you’ll need a business license in order to operate your coaching practice. You’ll also want to consider how to best structure your business for tax purposes. More on this below!
What Business Setup Is Best?
If you are charging for your coaching services, you’ll want to think about how to structure your life coaching business from a tax perspective. This can look a couple different ways, depending upon your financial circumstances and professional objectives.
According to the US Small Business Association, you’ll most likely choose from one of these three business structures:
- Sole proprietorship
- Limited liability corporation (LLC)
For many life coaches, operating as a sole proprietor is a sound approach. You may never decide to incorporate your coaching business, and that’s fine. This decision looks different for everyone, and has a lot to do with your financial circumstances, local laws, and personal tax status.
Regardless of which direction you go, make sure you understand your location’s laws regarding small business operations.
Even if you don’t legally incorporate, it may be necessary for you to obtain a business license with your city, county, state or province.
When it comes to choosing a business structure, the main thing to understand is this: if your life coaching business is NOT incorporated as a separate legal entity, you are personally liable for all financial obligations associated with your business. You’ll also need to report business income as part of your personal tax return.
Your fiscal responsibilities as an individual includes any legal judgements made against your business. While such occurrences are rare, it is an important fact to be aware of.
In contrast, once your business is incorporated, none of your personal assets (such as your house and retirement accounts) are tied to the fate of your business.
What About Liability Insurance?
While life coaches practicing in the United States are not currently required to have it, investing in coverage can be a sound business strategy.
According to author Amy Montemarano, “most of the publicly available lawsuits against coaches fall into two broad categories: (1) breach of contract, and (2) tort (including claims of negligence, fraud, misrepresentation, and infliction of emotional distress).”
The best protection against these types of claims is to make sure that you consistently:
- Operate within your scope of practice as a life coach
- Don’t give advice that you’re not qualified to offer
- Honor the boundary between life coaching and therapy
Even when you’re doing everything right, someone may still file legal action against you. From there, it’s up to a court to decide the merits of their claim.
This is where professional liability insurance comes into play. Even a frivolous lawsuit requires time, money, and resources to address and defend against. Much like homeowner’s insurance, liability coverage is a form of protection for your coaching practice that you hope you’ll never need to use.
What Types of Life Coach Insurance Are Available?
There are several types of coverage to consider, and the right policy for you will depend upon the particulars of your business. Let’s quickly review the list of insurance coverage options, with a short explanation of each.
General Liability Insurance
This is the most common form available, and will cover the most bases. According to Truic, it typically includes:
- Legal defense and judgment
- Personal and advertising injury
- Bodily injury
- Property damage
Situations where General Liability comes into play include a client claiming that the services you provided didn’t align with what had been advertised. If you are seeing clients in person at your office or in your home, it also addresses injuries that may occur on the premises.
Professional Liability Coverage
This form of insurance protects you if giving advice or providing expertise is part of your work. It covers your life coaching business in the event that a client files suit claiming that the advice you gave was faulty or otherwise damaging.
Professional liability coverage is also known as Errors and Omissions insurance, and it helps to protect you… even if you haven’t actually made a mistake, but someone says you did.
Home-Based Business Insurance
This one is worth a look if you are operating out of your place of residence. Check your homeowner’s or renter’s insurance policy to see if your business equipment and operations are covered. Sometimes an addendum to your existing policy is required.
Where to Find Insurance Coverage
You can start today by requesting a quote from several insurance companies to compare general liability coverage rates and policies for life coaches. Some providers that offer life coach insurance include:
Simply Business offers a free insurance quote comparison service online. You can fill out a single form and receive quotes from several different insurance providers.
When it comes to building your life coaching business, we know insurance coverage isn’t one of the most exciting topics on your list. So if you’ve read this far, congratulations! You’re well on your way to creating a strong foundation for the future.
Wondering what other legalities you should be aware of in the process of establishing your coaching business?
Consider checking out our guide Legal 101 for Life Coaches. In it, you’ll get the rundown on:
- Privacy policies
- Client contracts and agreements
- When and how to incorporate your business
- How to properly use other people’s imagery and ideas on your website and in your content
- Handling client refunds
This guide is intended for informational purposes, and does not constitute legal advice. For guidance regarding your particular circumstances, you may wish to consult a lawyer or professional advisor to review and finalize your business contracts and other legal documents. And if your coaching business is based in a location outside of the United States, we recommend looking into your local laws and regulations in addition to the information presented here.
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