Do Energy Healers Need a Business Entity?

✏️ Editor’s Note:
Are you running your energy healing business without a formal structure? Have you wondered whether forming an LLC or corporation is something you should do—or just another confusing step for bigger businesses?

In this article, attorney Ian Foster explains exactly what a business entity is, how it protects you, and why so many solo practitioners miss out on its benefits. You’ll learn what entity types are most common, how they impact your taxes and liability, and the simple rule that makes everything easier to manage.

Once again let’s address a critical legal topic for your energy healing business…and again, it’s one we don’t always like to talk about: back-end business structure.

Yuck!

Or, maybe not.

Maybe…just maybe…the way in which you structure and organize your business can be an interesting and creative part of your mission to bring healing to the world!

More importantly, it can be an empowering experience to know you are doing things “the right way” so you create a safe container for you and your clients to co-create together for years to come!

What Is a Business Entity, and Why Does It Matter?

So let’s take a few minutes to talk about business entities: what they are, how they work, and why you need to be forming one (if you haven’t already) as well as making sure you are using your existing business entity properly.

Put simply, a “business entity” is a separate legal person from you.

Wait a minute…a business entity is a “person?”

Yes!

In fact, in business and tax laws, the word “person” is not limited to human beings. A legal “person” includes both human beings and business entities, which are fictional creatures of the law that exist primarily on paper.

I’m pretty sure you’ve heard of the most common types of business entities, which are corporations and limited liability companies. There are many other types, including things like general partnerships, limited partnerships, limited liability partnerships, professional corporations, and nonprofit corporations (just to name a few).

But, for now, we’ll focus on corporations and limited liability companies because 99% of you will choose one of those entity types. You will choose one of these entity types for both liability protection and tax benefits. Let’s see what we mean by each of those.

Liability Protection: Keep Your Personal Assets Safe

When you operate your healing business under a corporation or limited liability company (“LLC”), then your personal life is protected from the potential liabilities your business might incur.

Think of the corporation or LLC like a bucket which contains everything the business does. Any income earned from the healing business goes into that bucket. Even more important, any liabilities created by the operation of the business also go into that bucket. This means you cannot be forced to pay the liabilities with your personal assets, such as your personal bank account, house, or car.

Tax Benefits: Legitimize Your Practice and Maximize Deductions

When you operate your healing business under a corporation or LLC, you get access to tax benefits that you wouldn’t otherwise have. For one thing, when you operate a healing business on your own (with no entity) there is always the risk that the government will think you are really just performing a “hobby” and not allow you to use the deductions or losses to which you are otherwise entitled.

With a corporation or LLC, you’ll never be accused of running a hobby because the government sees you are running a real business. Plus, both corporations and LLCs have different tax options that you can’t use if you don’t have an entity.

Discussing the details of those options is beyond the scope of this column, but given that I was a long-time government tax attorney, take my word for it that you are almost always better off from a tax perspective when you have a corporation or LLC.

Why So Many Healers Don’t See the Benefits (and How to Fix That)

Certainly that’s all pretty great, but I want to make sure you actually get the intended benefits of having a business entity. Too often in my legal practice I’ve seen coaches and healers complain that they went to the trouble and expense of forming a corporation or LLC and then did not get the benefits they were promised. And, in every case, it was because the person did not use the business entity properly!

So let’s make sure that you are actually getting the benefits you want!

There are several things you should do if you want to get the desired benefits from a business entity. And they all come down to this one rule of thumb: treat your business entity like your neighbor.

How to Treat Your Business Entity Like a Real Person

That’s right; I said you need to treat your business entity like your neighbor! But what does that mean in practice?

Well, let’s think about it this way…

• Would you and your neighbor share a bank account? Of course not.
• Would you use your neighbor’s bank account to pay your personal expenses or vise-versa? No.
• Would you put your name on your neighbor’s business contracts? You would not.
• Would you and your neighbor have proper terms in place when you do business with one another? Yes!
• Would you and your neighbor treat one another as though you are each separate, legal people? Of course you would!

So, if you treat your business entity like it’s your neighbor, that means…

• You and the entity will have separate bank accounts.
• You would not use entity funds to pay your personal expenses or vice-versa.
• You would not be a party to the entity’s business contracts or vice-versa.
• You and the entity would have proper terms in place when you do business with one another.
• You would treat your business entity like it’s really a separate, legal person!

The point is to help you remember that you and your entity are NOT the same person and to make decisions accordingly. If you always remember to treat your business entity like it’s a separate person from you (and NOT use your business entity as an alter-ego or a piggy bank), then you will get the benefits the law intends.

What’s Next: Running a Business and Building a Legal Foundation

I’m always trying to dispel fear, anxiety, and misinformation around the law. This discussion of business entities is part of that strategy. So, let’s take some empowered action and start running our healing businesses “like grown ups” by forming and using business entities properly!

✏️ Editor’s Note:
Getting your business entity in place might seem like a small detail, but it can shape how secure and sustainable your practice really is.

Many energy healers don’t realize how much protection and peace of mind this one step can offer—until they need it.

If you’ve been putting this off or feeling unsure about how it works, now’s a good time to explore your options and set your foundation with confidence. Connect with your business attorney and CPA to support you through the process of becoming an LLC, if you choose to pursue this path.

Forming a business entity is more than a legal box to check! It can be a protection for your practice. EMPA supports energy healers and holistic professionals with tailored liability coverage and business guidance built just for you. Find your fit with EMPA.

This article was originally published in the March/April 2024 issue of Energy Magazine. As part of the ongoing Laws & Regulations column by Ian Foster, these articles aim to help energy healers navigate legal, ethical, and business challenges with clarity and confidence.

Disclaimer: This article is for educational purposes only and does not provide legal, financial, or medical advice. The examples are general, and coverage may vary by policy. Always refer to your insurance provider or policy language for specific details, as the policy terms take precedence. For legal concerns related to your practice, consult an attorney.