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Lee: Well, hi, Braden, thank you so much for coming on the Coach with Clarity podcast.

Braden: Hi, Lee. Thanks for having me – excited to be here.

Lee: I have been looking forward to this episode for a while, and I just want to welcome you as the very first guest expert that we have had on the show. So I feel like there should be confetti and balloons in the background right now.

Braden: Yeah, that I mean, that also feels like a lot of pressure, though. So hopefully I live up to the standard.

Lee: Oh, I have no doubt you will. And in fact, I was really excited to bring you on as the first guest expert because you are going to be talking about a topic that I get tons of questions on. So, this is going to be a fantastic show. I know it's going to be one that people reference in the future. So let's kick things off with introducing you to everyone who's listening right now! Tell us a little bit about who you are and the work you do.

Braden: Sure. So, hello, everyone. My name is Braden Drake. I live in Southern California down in San Diego. I am a California licensed attorney, and I also have a Master's in tax law. So what that means, I always tell people that I'm an attorney and I do CPA adjacent work. Technically, tax attorneys are different than CPAs, but I work with small business owners, a lot of online business owners, so there tends to be a lot of overlap. Now though I don't do a lot of one on one work, I don't really do any one on one work, I'm all into education, much like yourself with courses and memberships.

Lee: Yes, and you have some fantastic programs that we will definitely be talking about today. But I'm just so happy to have you on the show because I know a lot of coaches, whether they are just starting out, or whether they've got a few years, even a few decades under their belt, always have questions about the legal side of their business and how they can protect themselves. And typically what I hear from people is, “I need a contract, what does that look like? What needs to be in it?”, but I'm assuming there's more to being protected legally, than just having a contract. What are some other things that coaches in particular need to be aware of?

Braden: Well, first of all, I'm going to give a little bit of a caveat as we get started here, because I think this will help give some context. You like how I'm just skirting your question for the get-go? 

Lee: We'll come back to it. 

Braden: Yeah, one of the things that's really interesting about this conversation Lee, I was thinking about this the other day, is that I don't work with a lot of online coaches, I have a few online coaches who are students of mine, but it's not like my niche expertise. But what I realized is, is that your situation is very similar to mine, particularly the coaches out there who come from a therapy background, because in my business, I started in a law firm, and then I shifted into education. So it's very similar in the sense that in my second business, I'm not operating as the licensed professional, I am in my first business. So that is what a lot of the challenges are, they're going to be presented to your audience so I can kind of relate to it and speak to it in that sense.

Lee: Perfect. And I think a lot of times when we're able to match our professional expertise with our personal experience, that is where we're able to shine. So I have no worries about you kind of coming from that approach when we're talking about what coaches need to know with regard to staying protected legally.

Braden: Yes. Okay. So circling back to your question, what all do we need to do? Well, first of all, you have to have separation. So I know we're going to talk a little bit about this later on, so I'll wait for you to prompt me with that one. But the main thing is, you know, I teach a concept called the layers of protection for your business. So the way I teach it is I always tell people to imagine you're someplace really cold. Maybe you're in the Arctic, and ask yourself, “How many layers of clothing do I need to be wearing in order to feel comfortable outside for a prolonged period of time?”, and the answer is going to depend on, “Well, how long are you going to be out there? What time of year? Is it a time of day? Are you a naturally warm person like myself?”, all these various factors. And the reason why this hypothetical analogy works really well is because the number of layers you need is very personal. So the same thing is true with legal protection, so layers of protection are things like contracts, business entities, trademarks, different types of contracts, different types of insurance, and you can layer and layer and layer and get yourself more protected, and it's kind of an ever evolving thing. But we do have what I call like the minimum legal essentials, it's like your minimally viable amount of protection.

Lee: I think that's such a helpful metaphor to use when thinking about how to protect yourself legally, and the idea that depending on where you are, and what your circumstances are, you're going to need more or less coverage. But one of the things you alluded to was, let's say, a base layer, a foundational layer, is a separate business. And, you know, a lot of the coaches that I work with are just transitioning into coaching, or even still have another practice, whether it's a therapy practice or a consulting practice, but they've got something already going on. And so a lot of times, they're like, “Well, can I just fold my coaching into my current business? Or can I just do it on the side?”, and so I'm curious, kind of, how you would respond to them in terms of what would best serve their legal interests?

Braden: So the answer is, it depends. But for most of your audience probably no, they would not want to combine them. So, Lee, you've heard me talk about the magic bubble of protection, yeah?

Lee: Mmhmm. 

Braden:Okay, so let's talk about this for a second. Another analogy or metaphor, so to speak, I call it the magic bubble of protection, and I tell people to think about the scene in The Wizard of Oz, where Glenda floats down in her bubble. But imagine that your business is in the bubble, and the bubble is representative of your LLC or your business entity. Technically, if you have a Sole Prop, there's no bubble. LLCs give you this magic bubble around your business, and if anything were to happen in your business, and your business were to explode, the bubble protects everything you own on the outside of it from that shrapnel. Now, if you have multiple businesses do you want to put them both inside of the same bubble, inside of the same LLC? Probably not. Because if you have an issue with one, now you have an issue with the other one, they're interconnected. But if you separate them into their own bubbles, they're protected from one another, as well as continuing to protect your personal assets. So that's the first thing. And the second kind of prong to this issue is, I always try to come up with a good example here. But what happens a lot of the time is that people really just have different marketing streams, like under their umbrella. So for example, let's say I have all my courses, and I have one business name over here where I cater to online coaches like yourself, Lee, and then I have another stream over here where I cater to wedding professionals. I really have like one business, I'm just marketing to two different audiences, I probably put those in the same business umbrella. But where you have one business with potential liability, like therapy, and then you're launching another business that for many reasons, outside of just the legal stuff, needs to be separate, like a coaching business, then you definitely want to happen separated.

Lee: That makes a lot of sense, and so I love the image of the bubble because again, do you want to merge all of these things, knowing that if that bubble gets burst, it's all going to be affected? And so, especially for my therapist out there, if we think about not only is the approach you're taking different, but how you want to protect those businesses, keeping them separate is really in your best interest.

Braden: Yes, and especially for the therapy people since – I don't know how deep you want to go down this road – I'm assuming it’s state licensing bodies, Lee? 

Lee: Correct. 

Braden: So under your state licensing bodies, I'm sure that they have rules, regulations, internal policies, on what's considered practicing therapy. You might have a different word for it, but what's considered practicing therapy and when you start a coaching business, you're taking your therapy hat off, and you're putting your coaching hat on. Like I am, in my education business, have to take my lawyer hat off and give a lot of disclaimers. I'm not your attorney, you would say I'm not your therapist, and one way that you provide that separation is to maintain separate businesses. So aside from the legal protection, you really need to do it in order to provide the separation necessary for the licenses that you hold as well.

Lee: Yes, and I know that some of my therapists out there are going to be a little disappointed about this recommendation. And the fact is, you're free to do what's going to work best for your business but if you are concerned about how to maximize your legal protection, really separate businesses is such a smart strategy. You mentioned something that I wanted to come back to that a lot of times when you're transitioning from your attorney hat into your educator hat, there are disclaimers that kind of come with that, and I find that that's something that therapists also need to do when they're transitioning into coaching. And not just going over it verbally during a session with the client, but having it written down so that everyone's on the same page. And that kind of leads into what I think is probably another layer of protection, which are contracts. And so I'd love to kind of know from you, what are things that coaches should be aware of when looking at contracts? What should be included? Like, what's the Contracts 101 that we need to be aware of?

Braden: So Contracts 101, I always say your contract should answer the who, what, when, where, how, and sometimes why. So you know, just like we learned in school, when we're writing our first essay, or you know, however they teach that, I don't even know anymore, but you want to cover all those prongs. So who are the parties to the contract? What service are you providing? How are you going to provide it? When are you going to provide it? Like, how many sessions do they get? What happens if they miss a session? What happens if they cancel? You need to think about all these things, talking about the same subject we were a moment ago, when it comes to this separation, you certainly want to have a disclaimer as well, that you are not actively providing therapy, that you're providing coaching services, and maybe explain a little bit about how that's different.

Lee: Yes, and I would suggest that's probably important for all healthcare providers, and maybe even all professionals. So like, for example, if you're a financial planner, or if you are a physician's assistant, or if you're an occupational therapist, whatever your other professional background is, make sure in your contract, it's clear that you are not operating in that capacity, but you are operating in the capacity of a coach.

Braden: Yes, that's a really great tip because really, the way you should look at it is if you're ever providing a service that could in any way be mistaken for another service that requires a license, then you want to go ahead and disclaim that. So for those coaches, even if you don't have a therapy background, in your coaching, it would still be helpful to put in your contract that you're not providing therapy services, and that they should go see a licensed therapist if they need XYZ services. 

Lee: Excellent, and for all coaches, I highly recommend if you haven't already, check out the International Coaching Federation Whitepaper on when and how to refer a client to a therapist, it is a really helpful tool and ensures that we are practicing within ICF codes of ethics and also our own professional code of ethics as well. So just a little resource tip there. So what else do we need to be aware of when it comes to contracts? I have some coaches who are even asking, do I even need a contract at all?

Braden: Yes! Oh, my God, that's terrifying. 

Lee: Right?

Braden: Yes, everyone needs a contract. It's interesting, I find some newer business owners are resistant to having contracts. I think they feel that it's burdensome, maybe to their clients, but what I always tell people is whenever I'm hiring anyone, like it makes me second guess their level of professionalism if they don't have a contract, and I don't say that to be rude. But when I hire someone, I hired someone at a pretty hefty price to set up my whole Pinterest account as a very robust system, she recorded a bunch of training videos, and she had a very formal process, she onboard me, she sent me her contract, she sent me a questionnaire. And I did not look at those as, like hassles or obligations, I looked at this as, “Oh, this person takes their business very seriously, and they're going to take our working relationship very seriously”, and it made me more confident in what she would be doing as we went into the process.

Lee: I think that's such a helpful way of looking at it, that really what it does is it adds to your credibility not just as a coach or, but also as a business owner, and that you take your responsibilities seriously, seriously enough that you are having them in writing, so that both you and your client are on the same page. And truthfully, we all hope that everything will go smoothly with our client relationships, and more often than not, they do. But things happen, where you know, a client may want to postpone their services, or maybe they want to cancel, maybe something's come up. Well, when you've got a really strong contract you don't even have to ask, “What do I do now?” because it's already there, and it's already something that both of you have agreed to.

Braden: Yes, your contract really lays the ground rules for the relationship and for me, like I'll give you an example. I hired a brand photographer, she's one of my students, so I know her pretty well. And a lot of photographers have “number of outfit changes” in their contract because they don't want you, like spending the entire day changing your outfits. And I asked her, I was like, “Oh you say only three outfit changes, but I want to, I have like six different things I want to wear”, and she told me she was like, “Not a huge deal, I really just need you to know that the time that you spend changing, like counts against the time that I'm there like shooting you, like covering this thing”. So by having that in the contract, it allowed us to have just a really short discussion about it, so then when we went to our four hour shoot that I was paying good money for, I understood how this was all going to operate. And then this, of course, goes into, like much more serious issues as well, which like payment, cancellations, all that kind of stuff.

Lee: That's a really helpful example though, and I think it speaks to how having a really strong contract can also promote really open communication with your client, which is as coaches something that we definitely want to do. And for those of us who have a mental health or healthcare background, this should also sound familiar, because this essentially is comparable to an informed consent process. Even as therapists we have contracts, we may not call them that, but there is paperwork that our clients review and sign, it goes over our policies and expectations, it just makes sure that we're all on the same page. So even if having a formal contract feels kind of impersonal, or even a little intimidating, I would say this isn't actually anything new. It's just different language and maybe a different format. 

Braden: Totally. Yep.

Lee: Awesome. All right. I think we've talked a lot about contracts. I am curious, so going back to the layers of protection, what else do we need to talk about? We've talked about business entities, we've talked about contracts, what's another foundational layer that coaches need to be aware of?

Braden: So I have what I call the three essentials, and the three essentials are contracts, insurance, and actually taxes. And then I talked about business entities is, like the next step up. So we've talked about business separation earlier, technically, you could get that separation by having two sole proprietorships. The next step up would be LLCs, but before that, it's contracts, insurance, and paying your taxes.

Lee: Okay, let's talk a little bit about insurance, then and whether that's something coaches need, and if so, what they should look for.

Braden: Love it. Okay, so I talk about insurance from a very surface level, because I'm not an insurance person, I just from a legal perspective, I know that people need it. So I say, go get your insurance, go hire someone, or get a policy, whatever that's called. The main thing is, is that you want to make sure that you're working with an insurance agent who understands your business. I would assume that, Lee, when you talk to family and friends, who are not in your immediate sphere, they're probably like, “What is coaching? I don't even know what that is”, well, insurance agents are going to be the exact same way, they're going to be confused, they're not going to understand what the difference is between coaching and therapy, and that's not good. You need someone who really understands the difference and the nuances so that they can make sure that you are protected with the type of insurance that you need. And really, the only way to go about that is to get a referral from someone that you know, so that you can work with their insurance agent, because if they've already had the conversation with your friend, it makes your conversation a lot easier.

Lee: That's good to know. So making sure that you are with an insurance agent or a company that understands first off what coaching is, and secondly, what kinds of provisions need to be in your policy so that you are effectively covered.

Braden: Yes, so most insurance policies are going to come with a general liability as your default, I forget what they call that it's like the base ,or whatever. And then you add on additional types to the policy. So for most of us, we're going to want professional liability insurance policies. So this should be pretty routine for all of you therapists out there. I'm assuming you all have professional liability, yeah?

Lee: I hope so. Yes, you should. 

Braden: I know, as attorneys, it's like a big thing. You got to have professional liability insurance. But as coaches, if you just tell them, I have an online business or like a consulting business, the default is going to be general liability, and you have to add on professional liability. Where it's tricky, Lee, and what I'm not exactly sure on is how professional liability works when you're giving advice as a coach that's separate and distinct from therapy, because they're not going to give you a therapy, professional liability insurance policy for your coaching business. So that's just a conversation that you need to have with your insurance company to make sure you're protected from the advice you're giving as a coach.

Lee: Yes, and what I can add to this is that some malpractice insurance providers for therapists will offer a coaching rider, meaning that they will cover your coaching services kind of “in addition”, but what I strongly suggest, especially if you have two separate business entities, which we've talked about already, you need to make sure that that rider covers the other business, because they may just be thinking about if you're providing coaching services within the context of a therapeutic relationship. And so in my case, when I was doing both, when I had a PLLC for my therapy practice, and an LLC for my coaching practice, I had two separate insurance policies. I had one that covered my therapy work and then I had one that covered my coaching work. For me, that just brought me greater peace of mind, and I knew for sure, yes, this policy covers coaching because it's specified X, Y, and Z. And interestingly enough, and this, again, why you have to communicate with your insurance people. I had a coaching policy that covered my actual coaching services, but when it came to training and education, it didn't cover it, and I had to work with a different provider who would cover me for training and education. So again, you really want to read your policy documents, you want to ask questions, you want to talk to someone on the other end of that relationship to ensure that you are getting the coverage that you need.

Braden: Yes, love that. That's all great insight. The other thing is, it's fine if your insurance agents never worked with a coach, but you need to be able to gauge from the early outset, if they're the type of person that's going to take your phone calls and just really take the time to talk with you because some operate at a very high volume. So, like they're just not going to do that.

Lee: Yep. So it's okay to interview and ask questions to make sure that you're with the right person and the right company.

Braden: Absolutely.

Lee: Cool, all right. So the third layer that you mentioned was taxes, which is like the dreaded “T word”. I know a lot of people get super intimidated and concerned about taxes. And so what do we particularly as coaches need to know when it comes to paying our taxes, saving our taxes, remaining compliant and legal – what are your key recommendations?

Braden: So the first thing you have to do is actually save for taxes, and for some of you that may sound obvious, for others, it may not. But I would assume that most of your audience are like pretty savvy business owners, they know that they have to save their taxes, but you got to save them and you got to pay him quarterly, like that's the base level of what you need to be doing.

Lee: What happens if maybe I am a really smart person, and I have been saving, but oops, maybe I haven't been paying quarterly. Am I in big trouble? Am I going to jail like tax fraud? What's going on here?

Braden: Well, no, you're not going to be in big trouble but you are going to end up paying a little bit of penalties, and this is something that most people don't realize. Like I was just having an argument with my father about this a couple weeks ago, he said, “I've never paid quarterly taxes, and I don't get penalized”, and I said, “You probably are getting penalized”, but what happens is when you file your tax return, and you get your tax bill that says you owe $7,000, and you might say, “Oh great, I have the money saved, I'll pay it”, what you're not seeing is if you really look into the itemized parts of the return, it's probably saying that your tax due is $6,500 and your failure to timely pay quarterly taxes penalty is $500. So the penalty is not huge, like a lot of people don't even realize that they're paying it, but if you're already saving the taxes throughout the year, you might as well just pay them on time and not pay the penalty. Because then a lot of ways we can look at the quarterly tax penalty is like credit card interest, except it's actually a lot lower percentage wise than credit cards.

Lee: Oh, that's a good way of looking at it. And I'll say too, it's not a complicated thing to pay quarterly taxes, is it?

Braden: No, it's actually super easy. So you just go to irs.gov, like what I always do is I tell people just Google, “IRS Direct Pay”. Those are the kind of the keywords and then make sure you're going through the irs.gov website, don't pay through a third party, they'll charge you processing fees for no reason. And then you just select that you want to make a payment, tell them you're making an estimated tax payment, you type in the amount you want to pay and give them your credit card information.

Lee: Excellent. Now that amount we want to pay, is there a way for us to kind of figure out how much we owe or how much we should be paying?

Braden: Yes. So I mean, I could talk about this at length, I do like full hour long presentations on it. But in short, I do it a little bit differently than most CPAs. So if you have a CPA, they're likely going to give you tax vouchers or tell you a dollar amount to pay per quarter. The way I like to do it is tell people what their tax percentage is. So, Lee, if we looked at your tax return, and I'm just going to totally make up numbers so we don't get very personal with these personal finances. But let's assume that Lee makes $50,000, and Lee's husband makes $50,000. So jointly, they're making $100,000 like pretty simple math, right? And assume that at the end of the year, last year, they paid $18,000 in total taxes, well their household tax percentage is 18% – 18% of all the money brought into the household went back to the IRS for taxes, so what I would tell Lee to do is to set aside 18% of every single dollar that came into her business for taxes, you automate the tax savings, then every quarter, you just take whatever the balance is that you save, and you pay that towards your quarterly taxes.

Lee: I love that. You make it sound so easy, because it is and you can look at what you've paid in the past to maybe give you an idea of what you should be paying now. And if and when you're making more money, then that percentage will change and you can just change your allocations accordingly.

Braden: Yes, exactly.

Lee: I love it. All right. Oh my gosh, we have covered so much. We've covered business entities, and contracts, and insurance, and taxes, and this is just the beginning. And I think that's the other thing to remember, as coaches, this isn't like a one and done, got my contract, I'm good to go like, there are things we need to do to remain legally compliant and protected. And I'm curious what your recommendations are about that?

Braden: Well, you have to stay abreast of what's happening. So I always tell everyone, first you have to find a trusted professional to follow, and if you want that trusted professional to be me, I drop hot tips on Instagram all the time, so give me a follow. Then also just always, you need to audit your processes. So every few months, you should revisit your contract, you should also revisit your tax percentages, because, you already alluded to this, but if you were averaging $4,000 of income per month, but now it's Q3 and you've been bringing in $7,000, then you need to do adjust the amount that you're saving, and really just kind of think about these things every few months to update.

Lee: That's really helpful. Excellent. Braden, I am so grateful for you coming on the show today. I mean, I just feel like you have shared so much valuable information in a relatively short period of time, and I have a feeling people are gonna want to continue to follow you, definitely on Instagram, which you alluded to, but where's the best way for people to learn more about you and the work that you do?

Braden: So follow me on Instagram @BradenAdamDrake. That's Braden.  Adam, like the biblical figure. Drake, like the rapper. That's my full name, so Braden Adam Drake. And then they can also take my quiz, so I created a quiz called “What’s Your Legal/Tax-ality?”. Hopefully people like the name, I don't know, still working on it. But you can take the quiz. It's like five questions, and then it will tell you your next best step when it comes to all the things that we've talked about today. 

Lee: I love it, and I've made it really easy for the listeners. So you can just go to CoachwithClarity.com/legalquiz and that will take you right to Brandon's quiz. And you can connect with him and learn much, much more about everything he does. He's got some fantastic programs, and a book too. Is that right Braden?

Braden: Yeah, so at the time that we're recording this, the book is not out but once the podcast releases, it should be out. So fingers crossed. The book is titled, “Unf*ck Your Biz”, I have a podcast by the same name. So it's U-N-F, and then an asterisk for the U, finish spelling the word, “Unf*ck Your Biz with Braden” is my podcast. So if you liked all of these tips, you can come hang out there as well. 

Lee: And we will have links to all of this in the show notes, the quiz, the book, Braden's website, all of that, so you will be able to connect with him. And let me tell you, if you're following him on Instagram, follow his stories too because Braden, your stories are just on fire. 

Braden: I mean, my stories do get a little politica, so warning there. And obviously, as you noted, from my book title and my podcast title, I'm not very child friendly. Unless your children are used to hearing swear words, then go crazy,

Lee: Which mine totally are, so it's totally fine.

Braden: Love it. 

Lee: Braden, thank you again for coming on the show today. I really appreciate it.

Braden: Thanks for having me.

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I so loved doing that interview, and hopefully, you get a sense of just how smart and funny and wonderful Braden is, you'll definitely want to go check out his quiz again, just go to CoachwithClarity.com/legalquiz for more. And one of the things that we mentioned in the interview was how important it is for business owners to have a strong legal contract when they are engaging in services with the client. So if you are looking for a coaching contract that can support you and your client work, well then look no further, I've got one for you within the Coach with Clarity Membership. That's right, when you join Coach with Clarity you also get an attorney prepared individual coaching contract template that you can use with your clients. It's really easy to modify for use in your business, and it will give you the peace of mind knowing that you are moving forward in your coaching practice with that additional layer of protection that Braden was talking about. So in addition to that contract, of course, you get all of the other benefits of membership as well. The weekly live calls, the toolkit of other templates and guides, and most importantly, a supportive community of intuitive, heart-centered coaches, who are building and growing their practices right alongside you. So if you are not already a member of Coach with Clarity, there's never been a better time to join, just head to CoachwithClarity.com/membership to learn more. 

It has been so much fun spending another week with you. I'd love to hear your thoughts about the show. So come find me over on Instagram @CoachwithClarity and let me know what you think. I also hope you will join me next week for another episode of the Coach with Clarity podcast. Until then, my name is Lee Chaix McDonough, reminding you to get out there and show the world what it means to be a Coach with Clarity.