I have decided to start a little business that provides people with individual fitness/ sports training programs and motivation online/ over the phone. The basic premise is that it is a cheaper alternative to hiring an in person personal trainer (at $45/ wk rather than $180-$300/wk) for people who have trouble staying motivated and/ or need guidance as to how to reach fitness/ performance goals. It will be 100% remote and I plan to take up to about 25 clients. I am already looking into forming an LLC and I have a lawyer to do up all the liability and assumption of risk stuff.
Here are my questions:
What do I need to consider if I form my LLC in Pennsylvania but take clients from other states or ever other countries?
How do I organize myself for taxes? Do I open a separate bank account for the LLC and “pay mayself” out of there (and somehow have taxes take out of my “paycheck” to myself? How do I set that up???
If I have clients from other countries, does this complicate the tax situation?
Not exactly. For people who have trouble staying motivated in a fitness program, a bot, or instructor who does not get to know the individual and their unique life challenges is not going to be effective. Thats where I come in!
OK. My best advice (to a person who lives in Texas–you’ll have to “translate” this into Pennsylvania-ish)
Set up a Single Member LLC by downloading the form on the Secretary of State’s office, filling it out, & sending it in. (Note that this will probably require you to file some sort of business tax return or franchise tax return with the state.) Unless required by the state, I would NOT try and write any articles of incorporation or organizational documents–unless you plan to bring in other partners or plan to sell the business. (There’s nothing wrong with creating these documents, but it’s probably a waste of time and money.)
Once the LLC has been recognized by the state, get an EIN. (This takes about five minutes on the IRS website.) They will give you a letter that shows your EIN. Print that letter and hold on to it. You will need your EIN, and it’s hard to find it once you lose it.
(Note - if you get the choice, you’ll want to file as a Single Member LLC, or Sole Proprietor. You do not want to file a separate federal tax return, such as a 1065 or 1120S or 1120. But merely getting an EIN does not require any type of tax return–so if they say “Based on your answers you need to file _____ tax return and the due date is _____”, you can safely ignore that.)
Once you get an EIN, go open a BUSINESS bank account at your local bank or credit union. I would get the cheapest one that offers check imaging. (I pay $12/month for mine.) You probably also need to figure out how you’re going to get paid, and the best type of account to collect it. (Do you need a credit card machine? Venmo? Cashing checks? Paypal? Discuss this with the banker.)
WRT #3 - The reason to open a BUSINESS account is because it gives plausible credence to the fact that you’re operating as KMD, LLC, rather than as KMD (the person). If, in the highly unlikely event that you were to get sued or otherwise have creditor problems, they could only sue the assets of the LLC, and not your personal assets. But you need to “prove” that the LLC really exists. Make sure the checks are made payable to KMD LLC, and that you’re paying your bills with your KMD LLC bank account.
To the extent possible, try to run all business expenses & income through the bank account. That way, at the end of the year, it’s easy to go through the bank account to itemize income & expenses. Yes, you CAN keep track of it on Excel, or some 12-column paper, but I think using bank statements is easier. (Plus, as mentioned earlier, it helps legitimize the existence of KMD, LLC)
Hope this helps. Let me know if you have questions. (FYI - this is the exact same advice I give to all my clients here at the CPA firm.)
Thanks so much Greenie! Really puts all this stuff into a context. The only question I have now is that I am foggy as to how I physically pay the taxes. Do I pay estimated quarterly or do I set something up where it gets directly taken out of the income in the business account?
What is the actual service you plan to provide for $45 a week? Presumably, you will not do actual training sessions, but rather, call them and check on whether they did exercises. To be honest, there is probably a market for this, but you need a reason for them to stay hooked on the service. Otherwise, I’d be like yeah, yeah KMD called me again, but I did the same thing as last week, I don’t need her to tell me to do push ups again. What is the psychological dependence that you will cultivate in your clients over a period of time?
As alternative, maybe just subscribe to Nery’s Instagram. The alpha energy alone will boost your testosterone and help you to dominate others in every day life.
The central component is a shared log between me and them. By the start of each week I load their workouts into the log. Then they can comment in the log about how each exercise went, if they got sore, if they liked/ disliked it, what times they got for intervals or whatever they want. Since the log is shared I can go in there and give the feedback promptly.
Since there is a weekly meeting to discuss goal progress and how well the workouts are fitting into their lifestyle, the program is always alive and and adapting every week.
For clients that are having trouble just getting started on their workouts I plan to literally call them up when they say they want to workout and make sure they get to it!
I also plan to start an instagram/ twitter with a mix of my own motivational/ fun material and posts featuring client achievements. Hopefully I would eventually get a large enough of an audience that being featured on the social media could be very motivating and rewarding for the client… not to mention seek out new clients.
The business doesn’t pay taxes. YOU pay taxes on the income from the business. The information is reported directly on your personal income tax return.
Quarterly taxes are voluntary. You don’t HAVE to pay them. But if you don’t, or if you don’t have enough withheld from other sources, you will have to pay “failure to pay estimated tax” penalty, which is essentially the government charging you interest. It’s around 3% per year. So it’s up to you to decide if you want to prepay or just pay the tax on April 15.
Alternatively, if you get a W-2 every year, you can always fill out a new W-4 and increase your taxes withheld. Remember–all dollars are the same, The government doesn’t care how it gets paid, as long as it gets there.
