One of the most popular and rewarding career paths for individuals who are passionate about helping people lead more fulfilling lives and achieve their goals is life coaching. If you are wondering how to start a life coach business in 2023, look no further. This post will walk you through all the steps you need to get started, including"
Successful life coaches work with clients to provide guidance, support, and motivation to help them make positive changes in both their personal and professional lives.
If you're interested in becoming a life coach and building your own business, there are certain steps you can take to ensure your success.
In this blog post, we'll walk you through the process of starting a life coach business, from determining your niche to launching your business and everything in between.
One of the first things you will need to do as you think about pursuing a career as a life coach is to determine your niche and identify your target market. As a business coach myself, this is one area that I see a lot of my clients struggle with. The problem here is obvious - when you are just getting started in business you want to be everything to everyone and the thought of niching down your practice to one small group of people is terrifying.
In fact, deciding on a small niche is the fastest way to reach success in your life coaching business. The reason for this is also obvious, but counter-intuitive. When you niche down to a certain group of people that you want to help, you are more likely to attract the clients that you most want to help, and repel everyone else.
But the reality is actually quite different. By niching down you will attract the ideal client you most want to work with, but you still find that people outside of this niche will continue to reach out to you. It’s a strange phenomenon, but very common.
So what type of niche should you pursue as a life coach? The possibilities are endless, but I would recommend starting with a group of people that most closely resembles a struggle that you have faced in your own life.
Some possible niches for a life coaching business include:
It's important to choose a niche that you are passionate about and have experience in, as this will enable you to provide the best possible service to your clients.
Once you have decided on a niche, you should move on to determine if you need to obtain any certification or training.
Generally speaking, certification and training are not required to become a life coach. However, obtaining certifications can help you to establish credibility as a certified life coach and gain a competitive advantage in the life coaching industry.
It is also important to understand that in some specific niches, such as health and wellness coaching or financial coaching, certification may be required and failure to obtain proper training could expose you to civil liability.
Therefore, before you launch your life coaching business, it is important to research the certification requirements for your chosen niche.
Now that you have a niche that you wish to pursue and have obtained the proper training and certifications, it is always a good idea to develop a life coach business plan.
Many first time entrepreneurs who are just getting started in a new business will skip this all too important step. As someone who has started multiple businesses and developed business plans to help in starting those businesses, I can say that a business plan will help you tremendously.
The purpose of a business plan is to put down in writing the key components of your business. Some of the sections you may want to include are your client story, your personal story, a description of your target audience, the services you intend to offer, how you intend to price your services, your marketing strategy and tactics, and financial projections for your business.
This plan will serve as a roadmap for your business and help you to stay focused on your goals as you launch and grow your coaching practice.
By creating a solid business plan, you can ensure that you have a clear understanding of your target audience and the services you will offer, as well as a plan for reaching and attracting new prospective clients. Additionally, having a business plan will help you to stay organized and focused on your goals, which can be especially important as you navigate the early stages of building your coaching practice.
In general, a life coach offers coaching services. This seems pretty obvious!
But the nature of these coaching services, and how they are structured and priced can vary widely among different coaches. In addition to providing various coaching services, such as: career coaching, relationship coaching, health and wellness coaching, financial coaching, personal development coaching, spiritual coaching, leadership coaching, creativity coaching and more, a life coach can also create their own unique curriculum and service offerings.
Most first-time life coaches will start by working with individual coaching clients and bill on a per session or per hour basis. This is the easiest and most straightforward approach to building a life coaching business. The benefits of this approach is that you can give personalized services to your clients and learn more about what they want and need. In this way you can start to build a curriculum and standardized processes that you can use with all of your clients. You can also get a sense of what type of clients you enjoy working with vs. clients that you are less fond of.
Over time, as you get busier and busier, you can start to raise your rates, thus weeding out clients that you might find more difficult or less enjoyable to work with.
The downside to this approach is that your income is limited by the number of clients your work with and the amount you are able to charge. Also, if you decide to take a vacation or are unable to work with clients for an extended period of time, you won’t be earning any income.
For many life coaches, the solution to this dilemma is to build online courses, or group coaching programs to sell. By doing this, you can work less and earn more. Instead of working with 10 clients per week for $100 each (i.e. $1,000/week in income) you can build a group coaching program where you work with as many clients as you can legitimately handle for a lower fee.
Imagine working with 50 clients in a group coaching program where you meet with those clients once a week and charge $100 per month. In this scenario, you earn $5,000 per month for 4 hours of client time, vs. $4,000 per month for 40 hours of client time under the 1x1 client model. Which sounds better to you?
But before you can start earning the big bucks, you need to figure out how you are going to get those clients…
This is where the rubber really meets the road. If you want to build a life changing coaching business (for both you and your clients) you need to get clients. While there are a seemingly endless number of marketing tactics that you can use to develop your business, here are some of the most tried and true methods.
It should come as no surprise that a website is absolutely essential for your business. And the sooner you can build and start adding content to your website, the better. There are many tools available to make sure your website looks professional and is easy to navigate. You will also want to register a domain name that is catchy and easy to remember.
As you start to build your website, you should make sure it includes the following fundamental pages:
Social media can be a great way to connect with potential clients and share your expertise. But before you just start randomly posting on social media, you may want to think about the best way to do this strategically.
To do this, you must refer back to your target demographic and determine where they are most likely to “hang out”. If you are targeting consumers (think weight loss, financial coaching, health and wellness, etc.) then Facebook, Instagram, Tik Tok and/or Youtube may be great places to post. If you are targeting business professionals, then LinkedIn may be a better choice.
Once you have chosen a platform, then you should decide what you will post and how often. Social media can be overwhelming and all-consuming. My best recommendation is to pick one platform and focus all your efforts there.
If you don’t want to show your face, then writing and posting photos on Instagram or Facebook could be a good option. If you don’t mind recording yourself for video, then Youtube is a great choice. Short, value-packed content through Reels, Tik Tok and Youtube shorts are also great ways to get yourself in front of your target customers.
Consider creating a Facebook page or LinkedIn profile for your business, and regularly post helpful tips and insights.
This one may seem like a little more up-front work, but trust me, it will pay off big time if you upload consistently and can build a loyal following. There are few things that are more intimate that being in someone’s ear for an extended period of time while they are driving to work, walking the dog or even doing the dishes. If you don’t like showing your face on camera, or aren’t big on writing, then a podcast may be a great marketing option for you. I know coaches who have built there entire business on the back of their podcast and their podcast alone.
When you upload a podcast episode, you can repurpose that content as a blog post, quote cards on Instagram/Facebook, and even on Youtube as an audio only video.
In addition, you can leverage your podcast to get guest spots on other podcasts, and invite guests onto your show.
Recommended Resource: Podcast Guest Agreement Template
Starting and building a podcast will allow you to reach a wider audience, build trust and credibility with your listeners, and establish yourself as an authority in your chosen niche. Additionally, podcasting can be a great way to provide valuable content to your audience and showcase your expertise in a more intimate and engaging format.
Many people would like you to believe that webinars are dead but I’m here to tell you that they absolutely are NOT. Webinars are one of the best ways to showcase your expertise and attract potential clients to your coaching business.
Offering free workshops or webinars is a great way to showcase your expertise and attract potential clients. Make sure the topic is relevant to your niche and target audience, and promote the event through your website and social media.
You may be wondering, “how will I get people to watch my free workshop?”
Great question, and it won’t happen overnight. This is something you will want to notify your email subscribers about, as well as the people that follow you on social media. You can present your webinar through Facebook or Youtube for free when you are just getting started.
Ideally, as your business starts to grow, you can use these events to build your email list and use a service such as Webinar Jam to conduct your webinars.
What? Am I smoking something?
No, hear me out. Writing a book has been the single best investment I have ever made in my business. It is the best business card you could ever hand out to your clients and customers.
I practiced family law for years before starting this website and building my trademark law firm. I wrote a book on divorce and I still get referrals and calls from people seeking a legal separation even though I stopped taking those clients years ago.
And it is easier than you think, especially if you are writing about a topic such as life coaching.
Here is the process:
I just finished the first draft of my third book and am about to start editing. If I can do this, you can do this.
Word-of-mouth is one of the most powerful marketing tools available, especially for life coaches. The best way to seek out referrals is to think about the different professionals that might also work with your potential clients and then ask them to coffee or lunch. If your countries are across the country, then these meetings may need to be virtual - which is perfectly fine.
The key here is to develop relationships with strategic partners that also serve your ideal clients. Collaborations on your podcast or social media channels is another great way to build your network.
After you get a few clients, you will want to build a system to make sure you ask your best clients for referrals, and consider offering a discount or other incentive for clients who refer others to you.
Remember, the key to successful marketing is to understand your target audience and tailor your approach accordingly. Take the time to research your niche and the needs of your target audience, and develop a marketing strategy that speaks directly to them.
Setting up your business legally is not as hard as you think, but it will take some time and money. There are 4 main areas that you will need to consider, and I cover all of these in depth in my LOCK it Down® (legal) Toolkit. But I will give you a quick overview here:
Since you are going to be working with clients and giving advice, I do recommend setting up an LLC (i.e. a Limited Liability Company) as opposed to operating as a sole proprietorship. Depending on the state you live in and whether you choose to hire a lawyer, this could vary in price from less than $100 to $1,000 or more.
Once you have your LLC setup, you will need to:
I’m not going to go into specifics for all these topics on this blog post, but you can review this post for more information on how to set everything up.
The most important thing you can do to protect your online presence is make sure you have the proper legal pages in place on your website and social media channels. This means having a proper Privacy Policy, Website Terms of Service, and Legal Disclaimers.
When you are just getting started as a life coach, you don’t need a ton of contracts, but you need the right contracts.
Hiring a lawyer to draft a custom contract will frequently run anywhere from $3,000 to $5,000 or more, depending on the length and complexity of the contract. Most lawyers don’t have an intimate knowledge of what it means to run a life coaching business, so their contracts may be overkill for what you really need.
For this reason, the easiest way to get legally protected is by purchasing a contract template. Honestly, this may may be a smart and relatively inexpensive alternative to hiring a lawyer to draft a custom contract.
Using legal contract templates is not only more affordable than hiring a lawyer, they can also provide a good starting point for creating a contract that is tailored to your specific needs as a life coach, and they can help to ensure that you include all the necessary legal language to protect your business.
Regardless of which option you choose, you will want to make sure that your coaching contract includes the following information:
Our Life Coaching Client Contract Template contains everything you need to make sure your new business is legally protected.
Normally, I would include protecting your intellectual property near the top of this list of legal protections you need. However, most life coaches operate under their personal name as opposed to a brand name. When you are just getting started, you probably don’t need to worry about a trademark for your coaching business.
But as you start to gain traction and think about creating a group coaching program, branded workshops or even a signature course, you will want to invest in your brand. The best way to do this is through a federally registered trademark.
That being said it is never too early to start the process of protecting your personal brand with a trademark also. Having a trademark for your personal brand allows you to establish yourself as a unique and recognizable authority in your coaching niche. A registered trademark allows you to keep others from using your brand name or a similar name, which can help to avoid confusion in the marketplace and protect your reputation.
Additionally, having a trademark can help to increase the value of your business and make it more attractive to potential investors or buyers should you decide to one day sell off your practice.
To learn more about trademarks or how to protect your personal brand, click here.
Ok, now you have the basics on everything you need to get your life coaching business off the ground. So get out there and do it! Getting your first client is probably the best feeling in the world, and is your first step in becoming a successful life coach.
As always, if you need any help from a legal standpoint, our team at One Stop Legal™ is here to help!
]]>One of the the most important things you can do to set yourself apart from your competition is to have a clear, concise and easy to read contract for use with your clients. Failing to have a contract, or worse, one that is confusing and contradictory, can mean the difference between landing an awesome client and struggling to get work.
To make your client contract clear and easy to understand, you need to make sure it includes the following five essential contract clauses. Heeding this advice will allow you to avoid misunderstandings with your clients, prevent foreseeable disputes, and make sure that everyone is on the same page in terms of the work you will be doing and how you will get paid.
Here are the five necessary clauses that you should include in every client contract:
Including these seven essential clauses in your client contracts can help you to establish clear expectations and boundaries with your clients, protect your business from unintended work and failed payments, and avoid foreseeable disputes. If you're unsure how to properly draft a client contract that includes these invaluable clauses consider consulting with a lawyer in your jurisdiction or purchasing our client services agreement template which contains everything you need to protect your business.
But you remember reading somewhere that you need to do some legal stuff first…
Listen, I’m not trying to be a stuffy lawyer who tells you what to do, but that’s kind of what I do for a living.
My sole job, the way I get paid, is by protecting my clients from liability. And that liability can come in many forms - higher taxes, fines from the FTC, chargebacks or lawsuits from disgruntled clients and customers.
And for new entrepreneurs who are just getting started with their online business, 99% of their legal problems can be avoided with some simple contractual agreements.
A privacy policy is legally required in all 50 states, and outlines how your business collects, uses, and protects personal data from anyone that provides you with their contact information.
This could include casual readers of your website who choose to join your email list or download a resource you advertise, or people who purchase your products and services, this giving you additional contact information such as addresses, phone numbers and even credit card information.
If you don't have a privacy policy for your online business, you may face the following consequences:
A website terms of service outlines the terms and conditions that govern the use of your website or online services, including acceptable use policies, dispute resolution processes, and limitations of liability.
If you don't have a Terms of Service (TOS) agreement on your website, you may face the following consequences:
A Terms of Sale agreement is a contract between a seller and a buyer that outlines the terms and conditions of a sales transaction. For an online business, a Terms of Sale agreement typically covers the following items:
A client contract is a legal agreement between a business and a client that outlines the terms and conditions of a business relationship. A client contract is important for several reasons:
A client contract is important for defining the scope of work, protecting confidential information, setting payment terms, managing liability, and supporting dispute resolution. It helps to ensure a clear and mutually agreed-upon framework for the business relationship, which can improve the chances of a successful outcome.
These 4 contracts, (privacy policy, terms of service, terms of sale, and client contract) are foundational contracts that are necessary for every budding online business.
But this is just the beginning. Check out these other contracts that you can use for your online business.
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Are you thinking about starting a business this year?
Or maybe you have already started one but aren’t sure if you did it the right way?
Not to fret, in this episode we are going to take you by the hand, and walk you step-by-step through everything you need to do to make sure your business is set up for success… legally speaking of course.
Whether you have the right business model and idea – that’s up to you.
https://podcasts.apple.com/us/podcast/the-legal-jim-podcast/id1590666001?i=1000597709793
Enjoy!
Some of the resources mentioned below are affiliate links, which means that if you purchase through this link, we will receive a small commission, but it won't cost you any extra money. This is a great way to support what we are doing here at One Stop Legal™. Thank you!
Here are the steps you need to take to get your business going. All of these are discussed in detail in the podcast:
Apple | Google | Spotify | Stitcher | Overcast
If you need some legal templates for your online business, click here.
The content of this podcast episode is provided for informational purposes only and is not intended to constitute legal advice. You should not rely upon any information contained on this podcast episode for legal advice. Listening to The Legal Jim Podcast is not intended to and shall not create an attorney-client relationship between you and James W. Hart or The Hart Law Firm, P.A. d/b/a Hawthorn Law. Neither James W. Hart nor The Hart Law Firm, P.A. makes any representation, warranty, or guarantee about the accuracy of the information contained in this podcast episode or in links to other podcasts, resources or websites. This podcast is provided “as is,” does not represent that any particular outcome will result from listening to this episode. Your use listening to this podcast is at your own risk. You enjoy this podcast episode and its contents only for personal, non-commercial purposes. Neither James W. Hart, The Hart Law Firm, P.A., One Stop Legal™ nor anyone acting on their behalf, will be liable under any circumstances for damages of any kind.
]]>If you are just getting started with your online business or blog, you need to have a number of rock solid contracts for your small business.
In this post I will share with you 8 of the top contracts for creatives that you need for your website, as well as some of the top clauses that you must include in those contracts to make sure your legal rights are protected.
]]>If you are just getting started with your online business or blog, you need to have a number of rock solid contracts for your small business.
In this post I will share with you 8 of the top contracts for creatives that you need for your website, as well as some of the top clauses that you must include in those contracts to make sure your legal rights are protected.
Many small business and online entrepreneurs severely underestimate the importance of having legal contracts in their business.
But like it or not, almost every aspect of your business (or even your day to day lives) is governed by a variety of contractual relationships.
Whether you are an independent artist or running multiple creative businesses, having a number of solid contracts in place is vital to your overall success as a creative entrepreneur.
But you don’t need to attend law school, or even hire a lawyer to get a well-drafted contract for your business (although as a lawyer, I typically recommend it).
That’s because there are a variety of really good legal templates that can be found online for a fraction of the cost of hiring a lawyer to draft a custom contract for you. So whether you are running a photography business or building out an e-commerce website, you can make sure you are protected.
Here are 8 of the legal contract templates you should be considering for your creative entrepreneurship business.
Most people that are just getting started online are still offering freelance and 1x1 client services. If you fall into this category, you must have a custom contract that you can use with your clients.
Many creative professionals completely neglect having a solid contract template that they can use to protect themselves in their business relationships. But purchasing a custom professional services contract (or even hiring a lawyer to draft one for you) is the best investment you can make in your business and will provide you with peace of mind that your creative work is protected and that you have a solid foundation for your creative business.
Not only does it make tremendous legal sense to have your own contract for your professional services business, a solid contract can increase your prestige in the market and potentially lead to lucrative partnerships that will pay for the investment in your custom contract many times over.
So if you are just getting started with your online business and you intend to bring on private clients, you absolutely must have a professional looking custom contract that you can send to potential clients on a moment’s notice.
Once you start to build your online business, you may decide that you need to hire a graphic designer, a website designer, a virtual assistant or someone in any number of creative fields that you do not have an expertise in.
When this happens, you must be ready with an independent contractor agreement. An independent contractor agreement will outline what your contractors will do for you as their client, how much and how often you will pay them, and make sure that you own all of the intellectual property rights to their work.
Many creative entrepreneurs piece these contracts together with information they find online, but this is a huge mistake. There is nothing worse than a poorly written independent contractor agreement (or any other type of poorly written contract, for that matter).
A bad contract is not worth the paper it is written on, and if you ever get into a disagreement with your contractor it could actually be used against you in future legal proceedings.
Here is an affordable independent contractor agreement template that you can put to use immediately in your business for all of your current and future contractor hires.
I am amazed at how many websites I visit where businesses are collecting personal information from visitors, but still have not placed a privacy policy on their site.
It is truly baffling.
This is the single most important contract you need for your creative business because failing to include a privacy policy on your website is not only against the law in the United States as well as in the European Union, but it is just a bad business practice.
How could a potential client or customer take you seriously as a legitimate business if you don’t have even the most basic of contracts on your website in 2022?
If you are reading this and realize that you don’t have a privacy policy on your website, stop everything and download this privacy policy template today.
I highly recommend forming an LLC for your creative online business as soon as you can. Preferably before you even have clients or are generating any revenue.
And when you set up an LLC, you must have a proper Operating Agreement in place. This will allow you to open a bank account, take out a loan for your business, or even apply for a credit card. It is also vitally important in the unlikely event that your business gets into legal trouble.
Here is an LLC operating agreement template that you can put to use in your business today.
There are a number of reasons for why I recommend this, most notably because it is easier to set up a limited liability company (LLC) now than after your creative business gets busy. In addition, it will make you look more professional to have an LLC behind your website, and it will give you a mental shift that says “I have a legitimate online business” rather than just another side hustle or hobby.
If you would like to learn more about why I think it is important to set up your LLC from the beginning, watch this video:
The first thing you must do after you set up your LLC is apply for an EIN with the IRS. The second thing you need to do is write up an operating agreement template for your LLC.
Don’t skip this important contract!
A website terms of service is almost as important as a privacy policy for your online business.
And while it is not legally required, it is vitally important as a way to protect your intellectual property and govern the use of your website by visitors.
Not to mention, it will provide a jurisdictional clause and important legal disclaimers in the event someone tries to sue you based on the information you provide on your website.
Here is a great website terms of service legal template that you can plug and play into your website.
Almost all creative entrepreneurs have a heavy social media presence. And while most social media platforms have their own terms of use, you may still want to include your own social media policies and legal disclaimers on your own website, and link to these policies in your social media bios.
So whether you are posting on Instagram, Facebook, TikTok, or even creating YouTube videos, having a social media policy in place is a smart move.
When you are ready to hire that first employee, you will want to make sure you have an employment contract in place. Many US states are employment at will states, meaning that you can fire someone (or they can quit) at any time for any reason that is not illegal.
And without an employment contract in place, you likely will have no protections against that employee stealing your intellectual property and the creative works they made for your business. You may also have trade secrets, business processes and systems and other things that you want to retain privacy rights over. Not to mention that you may want to prohibit an employee from going to work for a competitor (or even starting their own business that competes with you) and steals your clients.
An employment contract can assist you in protecting these rights and allow you to obtain injunctive relief against a former employee that is looking to rip you off or violate your employment policies.
Click here for an employment contract you can use in your business.
Are you running a podcast? Do you have guests on that podcast?
If so, then you likely will need a podcast guest agreement.
Again, this is a contract that will protect your intellectual property and says to the guest that they can use their name and likeness in promoting your podcast. Without this contract, if your relationship with the guest breaks down, then you could have legal issues.
Here is a podcast guest agreement that you can use for your podcast.
Whether you decide to purchase one of the legal templates listed in this post or attempt to draft your own legal contracts, there are certain clauses and contract terms that are best practice to include in any legal document. Here are just a few elements of a good contract, with a brief explanation of what they do.
Every jurisdiction (i.e. state or country) has its own set of laws. There can frequently be conflicts between what the law says in one state versus what the law says in another state. A choice of law clause states what law governs the interpretation of your contract.
It will frequently sound like this:
“The validity, interpretation and/or enforcement of this Agreement shall be governed by the laws of [STATE], including its recognition of applicable federal law, but excluding such jurisdiction’s choice of law rules.”
A cancellation clause is just what it sounds like. It is a clause that indicates under what conditions or circumstances the contract can be terminated.
You can write these clauses such that it is difficult to terminate a contract, or easy to terminate a contract.
These clauses became all the rage at the beginning of the COVID pandemic because many in person events had to be canceled for completely unexpected reasons, i.e. the pandemic.
Many existing contracts did not list a pandemic in their force majeure clause, and some contracts didn’t include a force majeure clause at all.
A force majeure clause outlines what happens when a contract cannot be performed as a result of a specific event or specific problem that was unanticipated or beyond the control of the parties to an agreement. These could include acts of war, acts of God (i.e. storms, earthquakes, fire, etc.), and yes, a global pandemic.
Here is an example of a force majeure clause that you can use in your contracts:
“Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any obligation under this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected party, including but not limited to fire, floods, embargoes, war, acts of war, insurrections, riots, strikes, lockouts or other labor disturbances, or acts of God; provided, however, that the party so affected shall use reasonable commercial efforts to avoid or remove such causes of nonperformance, and shall continue performance hereunder with reasonable dispatch whenever such causes are removed. Either party shall provide the other party with prompt written notice of any delay or failure to perform that occurs by reason of force majeure.”
Source: American Bar Association
Many contracts are written such that one person or party will perform certain services in exchange for monetary compensation.
But what happens when the person or organization that is supposed to pay is habitually late with their payments or stops paying altogether?
Typically, this would be considered a breach of the contract. But there are times when non-payment is excusable, such as if the person providing the services stopped providing them. Or if the services were unsatisfactory.
You should have a clause in your contract that indicates what happens if payments are late or if they stop altogether.
The One Stop Legal Contract Shop is a great place to start and get all the contracts you need for your online business. We sell legal templates that are different from the types provided by other online contract shops.
Most online contract shops will sell you a word document that has multiple clauses and instructions contained within the document itself.
When you purchase a legal template from One Stop Legal, you will receive some instructions as well as a link to an online contract template form.
This form will allow you to enter all of the information needed to complete your contract, and give you options to include the clauses you need, and keep out the clauses you don’t. Once you finish the online form, you will be able to download a legal document that is 95% of the way completed. All you need to do is read it over, make sure all the information is correct, and then upload it to your favorite contract software or convert it into a PDF document that you can use with your clients, employees, or contractors.
Hiring a contract attorney or other legal professionals will frequently cost you many thousands of dollars, and while we won’t discourage you from hiring our sister law firm if that is what you need, we also want you to have the right contracts at the right price for where you are as a business.
I realize it goes without saying, but One Stop Legal is not a law firm, and no attorney-client relationship is formed just because you have read this post. This post is for informational purposes only, and if you require additional legal support or advice you may click here to schedule a strategy session with a lawyer from The Hart Law Firm, P.A.
If you require additional legal expertise or legal resources, please contact our sister law firm for expert contract negotiation skills and assistance with any of your business related legal needs. Stop worrying about the legal stuff and hire a business lawyer instead.
]]>This post will demystify many of the questions surrounding EIN numbers, such as what they are, who needs them, and when to apply for them.
I will also take some time to review some of the common mistakes people make when applying for an EIN number and what to do if you are an international applicant.
]]>I’ve been talking to lots of online entrepreneurs on strategy calls recently, and one question that comes up repeatedly is “when do I apply for a new EIN number?”
In this post I want to take a minute to demystify many of the questions surrounding EIN numbers, such as what they are, who needs them, and when to apply for them. I will also take some time to review some of the common mistakes people make when applying for an EIN number and what to do if you are an international applicant.
Let’s get to it.
Simply put, an EIN stands for Employer Identification Number or Federal Tax Identification Number (TIN). This is a nine-digit number used by the Internal Revenue Service (IRS) to identify businesses that operate in the United States.
You can click this link to apply for an EIN through the IRS website online. But before you do, read on to make sure you are eligible for an EIN and need one for your business.
To be eligible for a Federal Employer Identification Number, you must meet two primary criteria according to the IRS.
First, your principal business must be located in the United States or the U.S. Territories.
Second, the person applying for the EIN number online must have a valid Taxpayer Identification Number already. This could be a Social Security Number (SSN), Individual Tax Identification Number (ITIN) or Employer Identification Number (EIN).
Also, be aware that the “responsible party” may only submit one application online per day. This is typically not an issue. But if you are forming multiple companies, then you can only request one EIN per day.
You should also note the requirement that the responsible party must have a valid tax ID number already. If they don’t, which is typically the case for non-US citizens who are operating a US based company from overseas, then they must go through a separate process to obtain an EIN.
An EIN has many different uses. Aside from identifying your business for the IRS as mentioned above, an EIN is also required to open up a business bank account or obtain a business loan.
Note that while you can use your SSN to open a business bank account or obtain business loans, this practice is discouraged as it can lead to commingling of business and personal funds which will cause you a number of headaches come tax season.
If you decide to move forward with forming an LLC, you should obtain an EIN after your LLC is formed. Many people make the mistake of obtaining an EIN after they file their Articles of Organization, but before their LLC is approved.
If for some reason the LLC is disallowed (frequently because the name is not available) then this can again cause you problems with the IRS as you will need to cancel that EIN and request a new one. (In reality, because the IRS issues a unique number for each business entity, your number will never actually be "cancelled" but the IRS will close the business account associated with your EIN).
This is a major question I get with people that schedule a strategy call with me.
And my answer is always a resounding YES.
First, I try to explain to clients that they do in fact need an LLC, even if they don’t think they do.
Here is a video that explains why you should have an LLC.
If they decide to hold off on the single-member LLC against my advice, then I strongly encourage them to obtain an EIN. There are two primary reasons for this.
As stated before, your bank will require an EIN to set up a business bank account or open up a business credit card or line of credit. And as a sole proprietor it is possible to use your SSN, but for privacy reasons and tax purposes, I strongly discourage this. For a variety of reasons, having a business bank account is a great idea for entrepreneurs that are just starting out, especially if they decide not to set up an LLC right away.
Second, if you are working with any type of payment provider, such as Stripe or Paypal, or are generating income on Etsy or Shopify, or maybe are receiving revenue via Adsense or via any number of Affiliate Products, then chances are you will be asked to supply the entity receiving payments on your behalf with an EIN. And while yes, you can provide a Social Security Number, for privacy and tax reasons this just isn’t a good idea. (It will make it so much easier to file your tax returns if you have a separate bank account and EIN for your business... even if you are a sole proprietor).
If you are operating a business in the United States, it is good practice to obtain an EIN for that business as soon as you are ready to begin operating. As mentioned above, you will need this to obtain a business bank account, so there really is no reason to wait. Obtaining an EIN is free and takes about 15 minutes to get when applying online.
It doesn’t matter if you are operating a sole proprietorship, a Limited Liability Company (LLC) or a Corporation, you can obtain an EIN for any of these business entities.
Obtaining an EIN through the IRS website takes about 15 minutes.
International applicants can call (267) 941-1099 (Note that this is NOT a toll-free number).
Alternatively, you can fax a completed Form SS-4 to the service center for your state. The IRS website states that they will send you a return fax in about one week if you include a return fax number and two weeks via mail, but with the current delays at the IRS, I wouldn’t hold your breath.
If you apply by mail, send your completed Form SS-4 at least four to five weeks before you need your EIN to file a tax return or make a deposit.
Bottom line - just apply online. It is the easiest and fastest method to receive your EIN.
Before you apply for an EIN number, you should have several pieces of information.
With the exception of Pennsylvania, no states require an EIN at the time you file your Articles of Organization.
Pennsylvania requires a “docketing statement” that asks for your EIN. If you are filing an LLC in Pennsylvania, we recommend entering "applied for" in the space where it asks you to fill in your EIN number, and apply for the EIN AFTER you have received your final approval back from the state.
For every other state, you should receive your approved Articles of Organization back from the state BEFORE you apply for your EIN.
The responsible party for purposes of the EIN application is a third party designee in the eyes of the IRS. This is the “true principal officer, general partner, grantor, owner or trustor” of the business entity. The name and TIN of this individual must be disclosed on the EIN application. According to the IRS, this person controls, manages, and/or directs the applicant entity and the disposition of its funds and assets. The responsible party must be an individual (i.e., a natural person), and not an entity (unless it is a government entity).
If there is more than one responsible party (i.e. in the case of a partnership or multi-member LLC), the applying entity may list whichever party the entity type wants the IRS to recognize as the responsible party.
The Form SS-4 is also known as the “Application for Employer Identification Number”. This is the actual form you will use if you are applying for your EIN by fax or mail.
You do not need to use this form if you are applying for your EIN online.
Although applying for an EIN is not a terribly difficult process, there are a number of mistakes I see people make when they are applying.
After you submit your online EIN application, you will be provided with an IRS notice immediately that contains your EIN. Many people inadvertently think that the IRS will mail or email a copy of this document.
But in truth, this is the ONLY opportunity to obtain your EIN. So when you apply online, make sure you save this document to your computer and/or print it out and keep it in a safe place.
Recommended Resource: Business Binder
This is the only correspondence you will receive from the IRS when you submit your SS-4 online.
If you are a US resident and already have a TIN, then you should not have any problems applying for your EIN.
But if you live abroad and do NOT have a TIN, then you must use the procedures below under “international applicants” to apply for your EIN.
We highly recommend you form your LLC or Corporation BEFORE you apply for an EIN. But some people disregard this warning and apply first anyway.
The problem here is that you are applying for an entity that doesn’t yet exist, and which may never exist if the state declines your filing for whatever reason.
So we recommend that you wait until you have your file-stamped Articles of Organization in hand before applying for your EIN.
If you have an ITIN and are an international applicant, then you may use the online application process to obtain your EIN.
If, however, you do NOT have an ITIN, then you must obtain one first before applying for an EIN on behalf of your business entity.
Preparing an application for an EIN is a fairly straightforward process.
First, click here to visit the online form.
Note that you must complete the application in one session. You are not able to save and return to your application at a later time. In addition, your session will expire after 15 minutes of inactivity. If it times out, you will need to start over.
Once you finish your application, you will receive your EIN immediately. At this point, you will have the option to download, save, and/or print your EIN confirmation notice.
I realize it goes without saying, but One Stop Legal is not a law firm, and no attorney-client relationship is formed just because you have read this post. This post is for informational purposes only, and if you require additional legal support or advice you may click here to schedule a strategy session with a lawyer from The Hart Law Firm, P.A.
If you require additional legal expertise or legal resources, please contact our sister law firm for help negotiating your contracts or for assistance with any of your business related legal needs. Stop worrying about the legal stuff and hire a business lawyer instead.
]]>But most people are not aware that while an agreement can (and typically is) a legally enforceable and binding contract, it doesn’t have to be and sometimes isn’t.
In this post, I’m going to outline the main differences when it comes to determining whether you are entering into a legally enforceable contract vs. an unenforceable agreement.
An agreement, also known as a “gentlemen’s agreement” is an informal agreement between two people or parties where they agree to how they will work together and what financial compensation will change hands.
Remember the scene in Jerry Maguire where Cush's Dad shakes hands with Jerry and says "I don't do contracts, but my word is stronger than oak"... and then promptly breaks the agreement and signs with another agency?
That was an unenforceable "handshake" agreement.
The primary difference between an unenforceable agreement and a legal contract is in terms of enforceability. By unenforceable, we mean that if one of the people that entered into the agreement decides to back out, they can’t be held liable for damages in a court of law.
It should be noted that the “breaching” party could still be sued, but if there is no legally enforceable contract, then the lawsuit will get dismissed.
In other words, Jerry Maguire could have sued Cushman, but the lawsuit would have been tossed.
Alternatively, with a legally valid contract, if one party breaks the agreement (also known as “breaching” the contract), the damaged party can bring a legal action for breach of contract in a court of law and receive monetary damages or equitable relief or both.
How do you know if you have an enforceable contract?
In order to constitute an enforceable contract, a contract (or agreement) must include the following 4 key elements:
Frequently referred to as a meeting of the minds or mutual agreement, an offer and acceptance is required for a contract to be held enforceable. This means that one party or person must make an offer to the other party and the other party must accept that offer without altering the legal terms of the offer. Any alteration of the terms would be considered a rejection and “counter-offer”.
As an example, we are about to list our house for sale. We will list our house at a certain price. Any prospective buyer may make an offer at, below, or above our listing price. They may also include certain legal terms and conditions in their offer. If we sign their offer without changing it, then there is an offer and acceptance.
But if we make even the most minor of changes, then a new offer sheet or written contract will need to be drawn up and sent around for all parties to sign. (A real estate contract must be in writing or else it violates the statute of frauds and is unenforceable).
Another example is when one party sends another a “letter of intent”. This can happen when an entrepreneur decides to sell their business. Potential buyers will send a letter of intent as their offer. When the business owner is satisfied with the terms of the prospective sale, then they will countersign the letter of intent and thus the process of selling the business begins.
Consideration is often referred to as the contract price.
For there to be valid consideration, it must be reciprocal, meaning that there must be mutual obligation on the part of both parties to either give up a legal benefit (typically cash) or obligate themselves to fulfill a promise in exchange for financial consideration.
If only one party to the contract gives up a legal detriment, then the contract is deemed gratuitous and is unenforceable in most situations.
This is one reason why it is important to have a lawyer review your contracts or use a lawyer drafted legal template. I’ve seen more than my share of gratuitous contracts over the years that were offered to unsuspecting and naive individuals who didn’t realize that they were entering into an unenforceable contract.
Both parties that enter into a contract must have the legal capacity to do so.
This means that both parties should have reached the proper legal age to enter into a contract, must be clear-headed and free of any mental defect, and must be capable of understanding the contract they are entering into.
You can’t enter a contract that is illegal. Contracts to sell illegal substances (such as drugs) or to commit a crime are illegal and unenforceable. This is because the contracts are void as against public policy. Consider the legal implications of allowing the courts to adjudicate breach of contract cases where the subject matter of the contract is illegal!
The best example of this is the drug dealer who thought it would be a good idea to sue the person that took their drugs to sell but never shared the profits. Believe it or not, this has happened.
If you have entered into a contract with someone, but aren’t sure whether you have negotiated an enforceable agreement, review these four legal elements and determine whether your agreement would stand up in a court of law.
If there is mutual assent (i.e. a meeting of the minds that is shown through a valid offer and acceptance), if there is reciprocal legal consideration (i.e. one of you is paying something and the other is agreeing to perform a task or fulfill a promise), if both of you have the mental capacity to enter into an agreement and the purpose of the contract is legal, then chances are good that your agreement will be legally enforceable.
Many people wrongly think that a valid contract must be laid out in a written document. But this is not necessarily the case. Verbal contracts and oral agreements, provided that they don’t violate the statute of frauds, can also be enforceable agreements.
A good example of a verbal agreement would be the following.
Your yard needs mowing and some mulch. You see somebody working on your neighbor’s yard, and decide to walk up and ask them if they can mow your yard and add some mulch. They take a look and say sure thing, for $300 they will do it after they finish up your neighbor’s yard. You agree and they start working on your yard that afternoon. After they finish they ask you for payment. If you decide not to pay, they could sue you in court for breach of contract because all of the elements of a contract are met in this situation.
Each state has slightly different rules regarding what contracts must be in writing to be legally enforceable.
If you are interested in looking up the rules in your state, just do a search for “[Your State] Statute of Frauds” and you will find a list of the specific contracts that must be in writing.
The Statute of Frauds is a common law principle that states that, in general, the following contracts must be in writing to be legally binding and enforceable:
This is one reason why we frequently recommend that online entrepreneurs who are selling courses that exceed $500 use our online terms of sale on the order page for their course or membership.
If you are going into business for yourself as an online entrepreneur or small business owner in the United States, you want to make sure that all of your business contracts are legally binding and enforceable.
Following are 5 essential business agreements that you should use in your online business.
If you intend to work as a freelancer or independent contractor and will be taking on clients, you want to make sure that you enter into a formal agreement with each and every person or business you intend to work with. This is frequently referred to as a professional services agreement.
By doing so, you will ensure that there is a mutual understanding between you and your clients as to what services you will perform and how much you will get paid to perform those services.
For a solid formal contract that you can use in your business, click here for our client services agreement.
Whereas the client services agreement is written from the perspective of the independent contractor, an independent contractor agreement is written from the perspective of you as the business owner.
This means that the legal terms and legal obligations of the independent contractor agreement will offer you more protection as a business owner than the standard client agreement would.
This agreement will outline what the contractor will do for you and how they will get paid, as well as whether you are ok with the contractor working with competing clients. In addition, this contract will spell out who will own the intellectual property that your contractor prepares in your business.
Click here for this independent contractor template agreement.
If you are just getting started with your online business, chances are you are building a website and trying to build an email list. And even if you aren’t building an email list, you may be trying to set appointments online with potential clients and are asking people to fill out a contact form on your website.
If you are doing any of these things, then you are legally required to have a valid Privacy Policy on your website. This is a policy document that states what information you are collecting, why you are collecting it, what you are permitted to do with the information, and how the individual submitting the information can ask you to purge their information from your database.
This is a document that is legally required in all 50 states if you are operating online, as well as in the European Union (via GDPR).
Click here to get a legally binding Privacy Policy today.
If you are selling products, including digital goods, online then you must have an agreement for the sale of goods.
This is because, under the statute of frauds as referenced above, a contract for the sale of goods that exceed $500 must be in writing.
Our recommendation is that you include a copy of this template, personalized for your business, on your checkout page so that the buyer of your course or membership may review your contract and will “check the box” indicating that they fully understand and agree to your contract terms.
This is just as important, if not moreso, if you are operating an online store where you are selling and shipping physical products that exceed $500 in value.
A non-disclosure agreement is exactly what it sounds like. It is an agreement where one party agrees not to disclose the information of another party.
Frequently the legal consideration in these contracts is ongoing employment of one party by the other. But the enforceable promises contained in the agreement can last for a period of time after the employment relationship ends.
The common understanding in these agreements is that one party (typically the employer) will be injured or damaged if the employee or contractor discloses certain business practices, systems or trade secrets of the employer.
The legal consequences of breaching these agreements can include injunctive relief (i.e. the court ordering someone to stop certain behavior), or even financial damages or a sum of money as listed in the contract payable to the injured party.
Many of the agreements at One Stop Legal contain non-disclosure language within them. Notwithstanding, we frequently recommend that our clients have their employees and contractors sign a separate non-disclosure agreement so that there is no question about the intent of the parties entering into that agreement.
For a non-disclosure agreement that you can use immediately in your business, click here.
Whenever you are entering any type of business relationship with another business, an employee, a contractor, or even a client, you must have a written contract in place.
But many entrepreneurs will have a contract agreement in place, but still find themselves in legal jeopardy if something goes wrong. The following is a list of common mistakes people make when it comes to their legal documents (or lack thereof).
Many entrepreneurs make the mistake of either not entering into a contractual relationship at all (i.e. assuming that there gentlemen’s agreements will suffice), or entering into a contract that is legally unenforceable because it lacks one of the main elements of a contract as outlined above, or else it violates the statute of frauds.
I can’t tell you how many times I have had consultations with entrepreneurs who are seeking advice about a contract they are thinking about entering into. I will read the contract and think to myself “why in the world would ANYONE sign this?”
And then I tell the client this, and in the heat of the moment they explain why it is such a great deal for them. But the fact of the matter is that the agreement is so one-sided in favor of the other party that if anything goes wrong they are likely to bankrupt themselves.
Any contracts that are incredibly difficult to get out of, or that would require a huge cash payment as an “exit fee” should be looked at with suspicion.
The best contracts are easy to read, and contain very specific terms that are non-contradictory. This means that if you read one part of the contract it doesn’t conflict with another clause in the contract. Furthermore, a reasonable person would understand what the terms of the contract mean.
Unfortunately, many people cobble together contract agreements that they find online without fully comprehending what they are doing. When you do this, you will frequently cut and paste various clauses that don’t work together and make the contract as a whole confusing.
Worse than this are contracts that contain terms that are vague and non-specific. Some people do this because they want to make the contract sound better to the other party, or even to themselves. But in reality they are just creating a legal document that doesn’t do them or the other party any good because nobody knows what their true contractual obligations are.
Using lawyer drafted and approved legal templates are a great way to insure that you have a rock-solid contract in place for a fraction of the price of hiring a lawyer.
At One Stop Legal, you can find a variety of legal agreements that will protect your online business. What specific type of agreement are you looking for?
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