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According to reports, about 80%-90% of eCommerce businesses fail in their starting phase. Among many, one of the reasons for such failures is inadequate knowledge about the legal requirements to start an online business. Hence, it becomes very crucial to understand the legal know-how of an online tutoring business before stepping into it.
Starting a tutoring business has always been a lucrative proposition and nothing is more thrilling than starting your own online platform. But, before that one needs to meet certain legal aspects when starting a tutoring business. Like any business endeavor, an online tutoring business also requires proper compliance with the law.
Also, if the legal documentation is ready from the outset, it frees up time for business owners to focus on getting clients and tutors and building the business. Further, in this post, we cover all the legal requirements for the tutoring business, including licenses and insurance.
Do we need a license to start an online tutoring business?
Before deep diving into knowing the legal requirements for starting an online tutoring business, let’s address the most important question; whether starting an online tutoring business requires a license or not. So, the answer to this is “no”. There is no requirement for a license as such, however, a proper business structure is essential.
Apart from deciding proper business structure, business owners should file proper taxes and keep records of their income, expenses, etc. In the next section, let’s see how you can decide on the business structure of your online tutoring business.
Deciding A Business Structure
A business can be registered as a sole proprietorship, corporation, or LLC. These three options work best for small and mid-size businesses and help you avail certain tax advantages too. Your business structure will decide the tax and liability of your tutoring business. Once registered, a certificate of incorporation is issued by the government to prove you’re a legal trading company.
When establishing an online tutoring business, the first thing you need to decide is the structure of your business. A business can be registered as a sole proprietorship, corporation or LLC. These three options work best for small and mid-size businesses and help you avail certain tax advantages too. Your business structure will decide the tax and liability of your tutoring business.
Let’s know more about them.
Sole proprietorship
A sole proprietorship is an unincorporated business with only one owner paying personal income tax on profits earned from the business. This is the easiest type of business to establish due to the lack of government regulations and is most popular among small business owners.
S-Corp
Business owners pass their taxable income, credits, deductions, and losses directly to shareholders. This is available only to small businesses with 100 or fewer shareholders.
C-Corp
The income tax would be paid at an individual level instead of at a corporate level.
LLC
The limited liability company (LLC) is a corporate business structure that protects its owners from being personally pursued for repayment of the company’s debts or liabilities.
Important Legal Aspects To Consider When Running A Tutoring Business
Starting an online tutoring business requires a lot, and you don’t want to be on the wrong side of the law. Hence, knowing all legal formalities beforehand is crucial. Keeping that in mind, we are sharing all the important legal requirements you need to know before starting your own online tutoring business.
Do Comprehensive Background Checks On Tutors
In many countries, the law makes it mandatory for platform owners to conduct strict background checks on tutors. While this is not a strict legal requirement, tutoring businesses are highly recommended to do so. This not only ensures the safety of the learners but also helps in building a good reputation for your platform.
Know The Tax Laws Of Your Country
Knowing the taxation law of your country is essential for successfully running a tutoring business. Depending on your location, you are required to pay taxes in your country. Therefore, as an entrepreneur, it is your responsibility to keep a close eye on the tax regulations based on your business, and know things, like capital allowances, that can benefit your business.
Sign Confidentiality Agreement
It is always suggested to sign a confidentiality agreement also known as a non-disclosure agreement (NDA) with tutors on your platform. This adds an additional layer of confidentiality and professionalism to assure your learners. The agreement makes sure tutors will not disclose any confidential information about learners anywhere. And it is always recommended to notify tutors of their confidentiality obligation from the outset.
Draft The Employment Agreement
Drafting a service agreement for your employees is very crucial for the smooth functioning of your platform. This document should clearly state the terms and conditions of the job profile and responsibilities. You should get your employment agreement reviewed by a law expert to ensure that you have all bases covered. This doesn’t have to be expensive and will be a long-term investment if you have to hire multiple tutors on your platform.
Prepare Terms And Conditions For Learners
There should be transparency between you and the learners on your platform from the beginning. And, to ensure that, terms and conditions should be stated clearly to them even before the start of the free trial session. Terms and conditions should clearly define payment terms, tuition fees, cancellation, refund policies, etc. to your learners.
Additionally, a copy of the confidentiality agreement can also be included in this to illustrate the fact that you take their confidentiality seriously.
Data Protection
Data protection laws in some countries abstain businesses from using customer data and want them to obtain consent before using their data for marketing purposes. As your platform is using or holding personal information about your learners, tutors, etc., you are legally obliged to protect that information. So, it becomes important to know about the data policies of your country beforehand.
In addition to that, data protection laws are getting stricter all over the world and GDPR compliance has become a modern-day requirement for every online platform. Hence, it becomes essential for online businesses to implement GDPR into their online platforms. Launching a GDPR-compliant platform may seem a daunting task to start with.
However, opting for a ready-made software solution like Yo!Coach can make this process hassle-free for you. This solution is highly secure and is compliant with all regulations needed for an online learning platform. With Yo!Coach, business owners can assure their customers of their security and privacy.
Let’s get into the next important legal aspect of starting an online tutoring business – insurance.
Insurance for Tutoring Business
Although businesses are not obliged to get insurance for their tutoring business, it is highly recommended to do so. The risk involved in running a new business is quite high and getting insurance lowers the risk of unfortunate scenarios affecting your business. Also, these insurances could reimburse your legal expenses, in case the student’s parents or learners want to sue you for getting failed in the exam or for not making significant progress.
There are four types of insurance coverage you might want to consider:
- General liability insurance
- Professional liability insurance
- Commercial Property Insurance
- Workers’ Compensation Insurance
Conclusion
Starting an online tutoring business can help you reach a larger customer base and generate more revenue. However, when venturing into this digital world, there are certain fundamental laws and regulations that must be followed to avoid any legal disputes. Proper documentation will not only safeguard your business but also let you undertake other business activities without any legal hassles.
Hence, taking your time out to get familiar with these regulations can help you run a safe and successful online tutoring business.
