Intro to Legal Basics for Life Coaches
Not unlike many professions, legal professional standards apply to life coaches, whether consciously or sub-consciously through contractual relationship, or by operation of law. There are three areas of law that life coaches should be aware of:
Legal Contracts: As noted above, life coaches often "contract around" many potential areas of liability through client agreements, waiver and release forms, and other documents. Coaches should keep in mind that certain state laws have specific requirements for such documents. For example, many states such as California require pre-printed documents to include certain font sizes and spacing. Failing to meet those requirements may void the document or result in fines. Additionally, there may be limitations on how such documents can be handled from a legal perspective. For instance, Washington State does not allow contracts to be retained in electronic form, but instead requires that contracts be kept in their original paper form.
Professional Licensure: While formal licensing is not required by most states or jurisdictions for life coaches, other professions (e.g . counselors, therapists, psychologists) whose business model overlaps with coaching services often do require licensing. A coach providing services in therapeutic counseling may want to ensure that they have the appropriate licensing to avoid any criminal or civil liability. If they do provide services without such licensing, the implications can be serious, including the threat of losing your license.
Employment Law: Many life coaches hire independent contractors to assist them with developing and operating a coaching practice. Life coaches that have contractors should remember that contractors can misclassify them for tax purposes and be liable for certain taxes. Properly classifying a worker as either an employee or, as lawful under applicable law, a contractor can save money for a business.
Similarly, coaches that do have employees should maintain the appropriate legal paperwork, including employment contracts, non-disclosure and non-compete agreements, and insurance policies. Life coaches that have employees should also familiarize themselves with the various state and federal laws that govern employers.
Life Coaches & Licensing Regulations
The answer to this question depends on where you do business and the specific services you provide. To date, there is not a license specific to life coaches. However, in many regions and municipalities, a business license or a fictitious name registration (doing business as – D/B/A) is required. If you will be entering into contracts with clients or hiring independent contractors, your location may also require professional bonds.
Evidently, there are significant differences across the states and cities. Moreover, if you provide services in more than one location, be sure to check the requirements for each one. This also applies to independent contractors. Finally, if you hire an employee or independent contractors, be sure to check labor laws in your location and that of the contractor.
Coaching, Contracts, and The Law
Contracts and agreements are necessary in every business, and the life coaching business is no exception to this rule. A contract is a mutual legal agreement between you and your client. Contracts are legally enforceable, so a coaching contract sets expectations of behavior for both you and your client. The contract is necessary because of the transference of money for services that you have entered into with your client. If for any reason there is a dispute, or either of you does not live up to expectations, the contract allows both you and your client to seek a legal remedy to the dispute. Therefore, the contract is your protection.
Your life coaching contract should be specific about what services you are going to provide to your client. It should also outline the financial terms of the agreement, such as fees for services, payment terms, refunds, and a cancellation policy, plus details about how to renew the contract. Some contracts also include a confidentiality clause which may be modified depending on the exact nature of your services, so it is wise to have your confidentiality clause reviewed by an attorney.
The relationship between a life coach and a client is one of mutual trust, and it is critical to clarify the expected boundaries between you and your life coaching client. You will also refer to the terms and conditions of your life coaching contract if someone ever claims they were harmed by your services, or if you decide to sue someone for breach of contract.
Life Coach Insurance Basics
For most life coaches, their career is a new venture into the world of self-employment. When you become your own boss, you are responsible for your own professional liability exposure and have to manage it accordingly. One of the best ways to manage risk is with insurance. If a client were to file a lawsuit against you, would you want to pay out of pocket for your legal defense and any resulting settlement or judgment? Having the right amount and type of insurance is essential so you can run your coaching practice in peace.
Professional Liability Insurance
Some people may know it as "errors and omissions insurance" or "malpractice insurance," but it all comes down to the same thing: protecting yourself from claims of negligence, personal injury, and errors or omissions in the services you provide to clients. Obtaining this type of insurance is very important for life coaches, especially since the life coaching industry is relatively new and evolving.
Commercial Liability Insurance
If you have a brick-and-mortar office space that clients visit, you will want to consider commercial general liability insurance to protect your assets from lawsuits due to personal injury, property damage, and legal liability.
Life Coach Data Privacy and Confidentiality
Following on our discussion on data security, life coaches must also be mindful of the legal obligations they have concerning client confidentiality and data privacy. Life coaches should be wary of sweeping generalizations; applicable law may differ based on the nature of the coaching practice and the type of relationship created with the client. Life coaches who are professionals or who hold themselves out to be professionals in their practice may have specific restraints on their communications with clients. Data privacy laws are not unique to the North American continent. The European Union’s General Data Protection Regulation ("GDPR") has been a hot topic for businesses and service providers who do business with European citizens. The GDPR is enforceable by numerous EU regulators and imposes massive fines for violations. Life coaches servicing clients in the EU should take care to understand their obligations under the GDPR. Deficient data security practices may carry legal consequences for any life coach , regardless of the services offered by the coach. The California Consumer Privacy Act (the "CCPA") is a notable expansion of consumer data privacy law passed in the United States, and other states may follow suit with similar legislation. The CCPA provides for a private right of action for damages caused by deficient data security practices by a service provider, including the failure to implement reasonable data security procedures. A life coach may also be liable for civil or criminal actions for violating coach-client confidentiality and privacy standards. Privacy and data security are evolving fields of legal practice with new legislation and case law every year. Having an understanding of privacy and data security and confidentiality laws in your jurisdiction is critical for life coaches.
Life Coaching Business Structures
Life coaches, like many professional service providers, must choose a business structure that is right for them. Choosing the appropriate business structure is extremely important, because the structure you choose can have a significant impact on your liability exposure, taxes and flexibility.
You have probably heard some of the following terms used as different business structures: sole proprietorship, LLC, partnership, corporation.
As a life coach, you may not need to have a sophisticated legal entity such as an LLC or corporation, but you still have the option to form one of these entities if you desire.
It’s especially important for a life coach to address the various forms of risk that are associated with being in business. So, even if you don’t form a separate legal entity such as a corporation or an LLC, it’s important that you have an operating agreements, a privacy policy and a confidentiality agreement to limit your personal liability, protect your legal rights and insulate your personal assets.
As a sole proprietor, your business is you. A sole proprietor files a Schedule C along with their personal tax return and claims a profit or loss from the business.
As a sole proprietor, you have full exposure to liability. Since you and your business are one and the same, there are no legal limits on your personal liability. So, even if you form an LLC, it does not prevent you from being personally responsible for business related liabilities.
How do life coaches minimize risk? Several legal documents can be amended from an LLC and/or independent contractor agreement. Often times, an independent contractor agreement can be used as an alternative or in conjunction with an LLC.
Making Sure You Comply with Advertising Regulations
As with alleged misrepresentations made by coaches or others to potential clients, the Federal Trade Commission has provided notice and determined that it will prosecute when false or deceptive advertising appears in the marketplace. Life coaches are subject to a variety of legal standards and regulations, and, it is important for life coaches to consider the following.
- (1) Make sure all claims made through advertising, marketing or promotions are truthful.
- (2) Make sure that any material claims you make, whether implied or explicitly mentioned, are provable.
- (3) Disclose if any "typical results are not achievable by the average consumer."
- (4) Keep a copy of all testimonials that you receive and have a file to preserve them .
- (5) Disclose any material connections that exist between you and advertisers (i.e., "if a blogger receives a free product," or has received a payment to promote the product, or there is an "affiliate linking" agreement.)
- (6) Make sure that your emails comply with the requirements of the CAN-SPAM Act so that recipients can opt-out.
- (7) If you advertise your services on social media, make sure you comply with each platform’s terms of use, particularly where you are using the platform for advertising purposes.
- (8) If you make any statements about your business, state or country, make sure they can be substantiated.
- (9) Respond promptly to consumer complaints about any representations made in advertising or marketing materials.
