Is Your Coaching Business Still a Hobby?

You started coaching because you wanted to help people – maybe to share your life experience, your career insight, or your hard-won wellness journey. At first, it was a few conversations, maybe some free sessions, or a little weekend gig that felt good and helped others. But now… money’s changing hands. People are referring you. You’re booked weeks out.

So here’s the real question: Is your coaching business still a hobby – or has it become something more? And if it’s something more, what do you need to do to make it official?

Hobby or Business? The IRS Has an Opinion

The government draws a legal distinction between hobbies and businesses – and it’s not based on how you feel about your coaching gig. It’s based on intent, income, and behavior. If you’re earning money and operating in a way that resembles a business (advertising, invoicing, tracking clients), then the IRS expects you to treat it like one.

• Hobby income is taxable, but you can’t deduct your expenses like a business can.
• A business can claim deductions for tools, advertising, training, and more – but only if it’s structured properly.
• Failing to report income or misclassifying your activity can land you in hot water – even if it’s unintentional.

So if you’re making money coaching, even just a few hundred dollars here and there, it’s time to think like a business owner.

Coaching Feels Personal – But That Doesn’t Mean It’s Not a Business

One reason many coaches hesitate to formalize is because the work feels personal. You’re helping people one-on-one. You’re not running a storefront or managing inventory. But that intimacy doesn’t mean you’re not running a business.

In fact, the more trust clients place in you, the more you need to protect yourself. This means having contracts, setting boundaries, and considering liability issues.

If you offer:

• Career coaching
• Life coaching
• Wellness, fitness, or nutrition guidance
• Mindfulness or spiritual mentoring

…then you’re providing services that impact people’s lives – and potentially their finances or health. The stakes are high, even if the work is heart-centered.

When Clients Start Paying, It’s Time to Structure

There’s nothing wrong with starting informal. But once you’re booking regular sessions, getting referrals, or charging real money, it’s time to protect yourself and set up shop properly.

This includes:

• Creating a business entity – usually an LLC – to protect your personal assets.
• Opening a business bank account to separate personal and business income.
• Getting an EIN from the IRS so you don’t use your personal SSN for tax or payment forms.
• Using clear contracts or service agreements to outline expectations and boundaries.
• Considering liability insurance to protect yourself from claims of harm or dissatisfaction.

Structure isn’t about red tape. It’s about professionalism – and peace of mind.

Legal Protection Matters More Than You Think

Let’s be honest: coaching is a low-barrier industry. That’s both a blessing and a risk. Without clear legal boundaries, one unhappy client – or one misinterpreted recommendation – can spiral into a mess.

An LLC gives you limited liability protection, meaning if someone sues your business, your personal assets (like your home or savings) are shielded. And even if you don’t think a lawsuit is likely, what about chargebacks, missed payments, or clients who ghost after three sessions?

Structure helps prevent these problems, and it gives you leverage to enforce agreements if something does go sideways.

You’ll Be Taken More Seriously – By Clients and Yourself

Clients can sense when you’re winging it. They may not say it, but it affects their trust, their willingness to pay your full rate, and whether they refer others.

When you have a real website, intake forms, booking systems, contracts, and a business name (with an LLC behind it), something shifts. You feel it. They feel it.

• Credibility increases – You’re seen as a professional, not a hobbyist.
• Pricing improves – You stop apologizing for your rates.
• Boundaries solidify – You stop saying yes to 10 p.m. texts.

Business structure isn’t just for external optics. It reinforces your internal mindset.

Formalizing Now Sets You Up for What Comes Next

You may not know where this is all going. Maybe it’ll stay small. Maybe you’ll launch group programs or publish a book. Either way, starting with the right foundation makes everything easier.

• Need to apply for a business loan? You’ll need a real entity and bank account.
• Want to scale? A structured business makes it easier to hire, automate, or collaborate.
• Planning to sell digital products? You’ll need systems that make payments, refunds, and taxes manageable.

Think of structure as your business’s bones. You don’t see them – but you need them to grow.

So, Is It Still a Hobby?

Here’s a simple test:

• Do you make money from your coaching work?
• Do you promote it online or take referrals?
• Do you plan your schedule around it?
• Do you buy tools, training, or software for it?

If you answered “yes” to even two of these, then you’re no longer dabbling. You’re a business – even if it still feels small or new.

That doesn’t mean you need to become a corporate juggernaut. It just means you owe it to yourself – and your clients – to treat it like the real thing it already is.