What is the best legal structure for a coaching business?

 


When starting a coaching business, one of the most important decisions you'll make is choosing your business structure. The "best" structure isn't one-size-fits-all—it depends on your specific circumstances, goals, and appetite for risk.

The most common structure options these days are sole trader and company. I will explore these in turn below.

 

Sole Trader Structure

This is popular for business owners starting out because a sole trader business structure offers:

  • Simple and inexpensive setup

  • Complete control over business decisions

  • Straightforward tax arrangements (I am not an accountant, so be sure to speak with your accountant if tax strategy is important to you)

  • Lower compliance costs

  • Direct access to business profits

 

However, consider these drawbacks:

  • Personal liability for business debts sits with the individual

  • Limited options for tax planning (again, not an accountant!  Reach out to your accountant to discuss tax planning options)

  • Challenges with scaling or selling the business down the track (it’s still possible of course, but it’s not straight forward)

  • Personal assets are at risk in legal disputes

 

Company Structure

Whilst a more complex structure, it does offer greater protection and is ideal if the appetite for risk of the business owner is low.

This structure option offers:

  • The company is a separate legal entity from the owner/s

  • Limited liability protection (liability doesn’t sit with the individual the way sole trader does)

  • Can offer enhanced professionalism (which can be important when seeking to build a brand)

  • Can be more appealing when seeking to attract investors

  • More tax planning opportunities (see my comments above, and speak to your accountant!)

  • Better succession planning options

  • Can be attractive if wanting to offer employees the option of buying in to the business down the track

 

But has these challenges:

  • Higher setup and maintenance costs

  • More complex regulatory requirements

  • Additional reporting obligations

  • Higher compliance costs

 

When thinking about what business structure will suit you best, consider these factors:

1. Risk Profile

  • What services will you offer?

  • Are you operating in a high-risk industry?

  • Could your services lead to legal claims?

  • Is asset protection important to you (do you have significant personal assets to protect?)

  • Will you be working with high-value clients?

 

2. Growth Plans

  • Do you plan to stay solo or build a team?

  • Might you want to sell the business eventually?

  • Will you need external investment?

  • Are you considering international expansion?

 

3. Financial Considerations

  • What's your expected annual revenue?

  • Do you need tax flexibility?

  • Can you afford compliance costs?

  • Will you reinvest profits or need regular drawings?

 

Remember: While you can change structures later, choosing the right structure initially can save significant time and money. Professional advice is crucial in making this decision – talk to your business lawyer and your accountant.

If you need help in this area of your business you can download our free Essential Legal Checklist for service-based business owners, or book a Complimentary Introduction Call here.

You may also like to read this blog (Sole Trader or Company? | What is the best business structure for me?).

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Small Business OperationTracey Mylecharane