Should a New Business Coach Incorporate? [LLC vs. S Corp Explained]

Q: Hi Adrian, I’m new to coaching. Should I set myself up as a corporation for liability protection?

A: Absolutely—but only if you do it the right way.

Setting up the correct business structure can be a goldmine for your coaching practice—but it’s not one-size-fits-all.

Disclaimer: I’m not an attorney or CPA. Always consult a qualified professional to determine what’s best for your unique situation. What I’m sharing here is based on what’s worked for me and for many business coaches in the U.S.

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What Is Business Incorporation?

Forming an LLC (Limited Liability Company) or incorporating means your business becomes a separate legal entity. Instead of operating as a sole proprietor, your company is officially recognized by your state and the IRS.

Key Benefits of Incorporating:

1. Liability Protection: Your personal assets—home, car, savings—are protected if your business is sued.

2. Tax Advantages: If done right, incorporating can save you thousands in taxes every year.

Let’s break those down.

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Why Most Coaches Should Form an LLC or S Corporation

If you’re still operating without a formal structure, you’re not alone. More than 50% of small business owners haven’t incorporated. That’s a problem.

Most who do incorporate choose an LLC. But here’s the kicker: if they elected to be taxed as an S Corporation, they’d unlock major tax savings.

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S Corp vs. LLC: The Tax Advantage Explained

An LLC offers liability protection and passes income through to your personal tax return. But it can also elect to be taxed as an S Corporation—and that’s where things get interesting.

Here’s why:

• As an S Corp, you must pay yourself a reasonable salary.

• The rest of your profits? They can be taken as dividends, which aren’t subject to self-employment tax (Social Security and Medicare).

In the U.S., that’s a 15.3% tax savings on everything above your salary.

Let’s run the numbers.

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Example: Coaching Business Earning $140,000 Annually

• No S Corp Election: You pay 15.3% FICA tax on the full $140K = $21,068

• S Corp Election + $40K Salary: You pay 15.3% on $40K only = $6,120

Your tax savings: $14,948 per year.
And yes—you still get the LLC’s liability protection.

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This Isn’t a One-Time Trick—It’s Annual

That ~$15K savings isn’t a fluke. It happens every single year you operate under the S Corp tax election with reasonable salary planning.

Talk to your accountant about:

• What qualifies as “reasonable salary” in your coaching niche

• How to elect S Corp taxation through IRS Form 2553

• Whether your state has additional filing rules

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Bonus Tip: Maximize Your Tax Deductions

While you’re with your accountant, ask about other money-saving deductions, including:

• Home office expenses

• Office supplies and business meals

• Vehicle mileage or lease payments

• Equipment depreciation

• Repairs and maintenance

And here’s a powerful one…

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Put Your Kids on Payroll

If your children help in your business (trash duty, running errands, light office work), pay them a salary instead of giving them an allowance.

• Kids under 18 can earn up to $12,200/year tax-free

• You get the deduction. They get income. Everybody wins.

Make sure the pay is fair for the work and hours involved, and document everything properly.

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Final Thought

Setting up the right corporate structure isn’t just about playing defense. It’s one of the smartest profit acceleration strategies you can implement in your coaching business.

It protects your assets
It boosts your tax efficiency
And it helps you keep more of what you earn

Speak with a qualified professional to structure your business right—and start building a coaching practice that’s legally sound and financially optimized.