Blog posts of '2017' 'November'

As a Personal Trainer Should I be a sole proprietor or LLC?

As a personal trainer, should you form a limited liability company (LLC) or operate as a sole proprietor? The choice could have important implications for the success of your business.

Sole proprietorship: The Simplest, But…

One of the benefits of being a sole proprietor is that you are in full control of your destiny.

As a sole proprietorship, you are simply operating your business as a single individual who has not registered with your state as a type of business entity, such as a corporation, partnership, or LLC.

In other words, if you are operating your business as yourself.

As a sole proprietor, you should keep track of business expenses and income separately from your personal expenditures and at the end of the year, you will report your business gain or loss on your personal tax return.

What could be easier?

Risks of Sole Proprietorship

While it costs nothing to form, and is the simplest and most popular form of business start up, a sole proprietorship does not provide you with the same legal and tax advantages that forming an LLC provides.

A sole proprietorship is not considered a separate legal entity.

Operating as a sole proprietor exposes your personal assets to business creditors, as your business is simply an alter ego of yourself, rather than a separate legal entity.

For instance, if your business fails you can be personally liable for any debts or liabilities incurred by the business. If you are sued by a client or by a gym or have a legal disagreement, you could be personally liable for any claims that occur.

Business and Insurance Benefits of an LLC

A limited liability company, or LLC, is a common legal structure for small businesses in America.

By forming an LLC, you gain the same flexibility benefits, independence and control as a sole proprietorship, while gaining the protection of being treated as a separate legal entity.

If you are operating your business as an individual, you may form what is called a “single member LLC”. In a single member LLC you will most likely declare yourself as the “Managing Member” of the LLC. As the Managing Member of the LLC you are in charge of maintaining the LLC.

When you conduct business, any clients you work with or companies you do work for will use the name of the LLC (i.e. “XYZ Fitness LLC”), rather than your individual name.

The LLC structure provides you with personal asset protection, since creditors can only go after business assets held in the name of the LLC. An LLC protects the owners from the debts of and any judgments against the business.

As mentioned above, a single member LLC is similar to a sole proprietorship from a tax standpoint. An LLC is considered a “pass through entity”. As the Managing Member of the LLC, you are compensated in the form of distributions of profit, which are taxed at your own marginal tax bracket (the tax rate applicable to the next dollar of taxable income that you earn).

Conversely, if your business declares a loss, you claim the losses on your personal tax return.

Insurance for Personal Trainers and LLCs

Another benefit is insurance.

Personal trainers are often required to provide proof of insurance coverage and name the gym as an “additional insured”. No problem! With FITCO, you can get $2,000,000 of general liability coverage, and up to $5,000,000 aggregate, in minutes.

But what if you need more than $2,000,000 of insurance on a per incident basis?

Personal trainers and other health and wellness professionals can sometimes find it difficult to obtain higher levels of insurance coverage (i.e. $5,000,000 of per incident general liability coverage) when operating as a sole proprietor.

However, by forming and operating as an LLC you have indicated a certain level of sophistication and thoughtfulness in your business approach. And higher levels of coverage are often no problem for an LLC.

How do I form an LLC?

Forming an LLC is simple.

You can literally create an LLC from home with your laptop by using companies such as Incorporate.com, or Legal Zoom. The process usually only takes a few weeks to complete and may cost as little as $300-$1,000. While there is a small investment, the upfront cost is well worth it when compared to the thousands, or tens or even hundreds of thousands of dollars you could be liable for as a sole proprietor.

If you are a single individual, and are serious about your personal trainer business, you may want to strongly consider selecting the LLC form of business organization.

FITCO can help with any business insurance you need as a personal trainer, martial arts instructor, yoga instructor, dance instructor, swim instructor, CrossFit instructor, music instructor, Pilates instructor and more. Have questions? Give us a call or send us an email.

PLEASE NOTE:

FITCO is not providing legal advice, and we are not CPAs or attorneys. As such, you should not consider anything in this article to be tax or legal advice. You should consult your personal attorney or CPA before you make any decisions on the structure of your business or changing that structure.

An Insurance Program Designed for Tai Chi and Qigong Instructors

Tai chi, also known as T'ai Chi Chuan, is an ancient Chinese form of exercise that is practiced by people all over the world.

While practiced as an individual exercise, tai chi was originally created as a form of self-defense and is also a form of Chinese martial arts. Tai chi has its roots in Chinese healing, as do other Chinese martial arts practices, including pushing hands (aka “push hands”), and qigong.

As a martial artist practicing tai chi, he or she learns to redirect internal energy, or chi (pronounced “chee”), by carefully repeating physical movements that appear to flow effortlessly, in slow motion.

Tai chi can not only be excellent exercise, it also has mental benefits. Some consider tai chi to be a form of meditation, and even medication. Indeed, in both Eastern and Western medicine, a prescription of tai chi can be used in conjunction with primary medical treatments to improve a patient's functioning and quality of life.

The mind-body connection in tai chi may be why its adherents are so loyal to it.

According to Peter M. Wayne, assistant professor of medicine at Harvard Medical School and Director of the Tai Chi and Mind-Body Research Program at Harvard Medical School’s Osher Research Center, "A growing body of carefully conducted research is building a compelling case for tai chi as an adjunct to standard medical treatment for the prevention and rehabilitation of many conditions commonly associated with age."

Fulfill Local Gym General Liability Insurance Requirements

As a tai chi instructor, you may conduct outdoor clinics or work indoors at a gym, or a local recreation center. For private or 3rd party locations they will often require that you have your own general liability or professional liability insurance. They may also require you to name them as additional insured on your policy.

For instance, you may be required to sign an agreement with the gym or rec center that requires you to produce a certificate evidencing current liability insurance from a carrier that is “admitted” in your state and by a company with an AM Best rating of A or better. The required insurance may include commercial liability insurance inclusive of professional liability with a minimum of $1,000,000-2,000,000 liability coverage per occurrence. The actual requirements you encounter will vary, of course.

FITCO offers this type of insurance for Tai Chi, Qi Gong, Push Hands and more. If you are a tai chi and other Chinese martial arts instructor, you can get the peace of mind by knowing that you have broad insurance coverage, and are protected at an affordable premium. If you need additional insured added to your policy? No problem. The first 10 are FREE. Any additional insureds thereafter are $25.00.

Unlike other insurance programs for martial arts instructors, FITCO’s martial arts insurance includes general liability, professional liability, sexual abuse/molestation coverage, personal & advertising injury, damage to rented premises, products and completed operations, meical payments coverage and more.

Professional liability coverage provides you with protection from claims of negligence while delivering professional advice or performing professional services. For martial arts instructors trainers and athletic trainers, professional liability can also be referred to as malpractice insurance.

If a client follows your professional advice in the course of your duties as a martial arts instructor, and they hurt themselves, they could make a claim against you for negligence.

What do you get with Tai Chi and Qigong Insurance from FITCO?

Affordable: Insure yourself for as little as $ 0.63 cents per day. Get general liability coverage including:

• $1,000,000 per occurrence/$3,000,000 aggregate $
• 100,000 sexual abuse/molestation coverage
• $1,000,000 personal & advertising injury coverage
• $3,000,000 products and completed operations coverage
• $100,000 damage to rented premises coverage
• $2,500 medical payments coverage

Need higher limits? No problem! Additional per occurrence and general aggregate policy limits are available up to $2,000,000 per occurrence and $5,000,000 aggregate for only pennies a day.

Credibility: Establish credibility and professionalism with your clients and partners by having insurance for your business. Your customers will appreciate when you tell them that you have insurance. Provide partners with additional insured coverage at their request.

Broad protection: Unlike certain other martial arts instructor insurance policies that exclude important coverages such as sexual abuse and molestation, FITCO includes sexual abuse and molestation coverage automatically.

Zero deductible: General liability policies have zero deductible. Certified trainer professional liability insurance may also have zero deductible.

Getting covered takes only a few minutes and you'll have the protection you need from an A-Rated A.M. Best carrier. Signing up for FITCO insurance is easy. Get covered in just a few seconds. Have questions? Contact us or call us at 800-991-3080.