[00:00:00] Linzy: Hello and welcome back to a Feelings and Finances episode of the Money Skills for Therapists podcast. These are the episodes where I answer your questions, the lovely therapists, health practitioners, coaches, the listeners of the Money Skills for Therapists podcast. And today’s question is from Sara Walls.
[00:00:19] Here is Sara’s question.
[00:00:21] Sara: Hey, Linzy, this is Sara. Thanks so much for the opportunity to ask these questions. My question is regarding having multiple businesses. So maybe a therapy practice and a coaching practice or some other kind of business. What are some good things to keep in mind regarding the financial management of two businesses?
[00:00:43] Linzy: And within that, one of the questions that came up for me is, how do you handle business expense that might apply to both businesses. So something like a business lunch where you talk about both businesses. Any thoughts you have would be really helpful. Thanks so much. Okay, this is a great question. Thank you, Sara, for submitting this question. I know this is something that is on lots of therapists’ minds. I’m finding more and more therapists, especially, and health practitioners, are building, or thinking about building, that second thing, that coaching practice or that course.
[00:01:16] And the very first thing that comes to mind for me, Sara, the word that like, boop, pops up in my mind right away, always is separation. It’s all about separation and boundaries, right? Good boundaries are good for everybody, and they’re good for your businesses. And especially if you are practicing therapy, you want to make sure that your other work that you’re doing, your coaching work, your teaching work is legally distinct.
[00:01:41] So that’s the first thing is making it legally distinct. So if you’re in Canada, like I am, you know, I had my therapy business as a sole proprietor. I just practiced under my own name. I just filed it as part of my own taxes. But once I started doing this teaching business and actually realized I was going to keep doing this, I made a corporation, right?
[00:02:00] I created a corporation. So there’s a separate legal body. And in the United States, depending on where you are, your state, you’re going to be looking at creating an LLC, a PLLC. You want to make sure that there’s a different container that your second business is in so that it’s super, super clear to anybody who’s even remotely curious that your business as a therapist, what you’re practicing using your license, is not connected to this other work that you’re doing, this coaching work, this teaching work.
[00:02:28] For instance, with my license in Ontario, I am a social worker, and as a social worker in Ontario, you can’t use testimonials from clients. You can’t sell packages, right? And in my course business, in teaching, I do that all the time, right? Like I’m always using testimonials from students who talk about their experience in the course.
[00:02:47] I use those on my sales page. I use them in my masterclass, you know, where I talk about the course, and I sell things as a course. It’s a bundle; it’s a bulk. I’m not allowed to do that as a social worker, right? So I have to be super clear that what I’m doing over here is not me practicing social work as a registered social worker.
[00:03:05] Otherwise, I could be imperiling my license. So that’s the first thing. That’s the legal piece. So if you have any questions about that, if you have any concerns, definitely talk to your accountant, talk to a lawyer, do research for your province and state. Just make sure that you set up the container properly from the beginning.
[00:03:18] So there’s no possibility later for blurriness or questions about whether or not you’re properly using your license. The second piece, now we’re getting into more of the practical money pieces, is you want to create financial clarity between those two businesses without getting in the weeds, right?
[00:03:35] So we want to create enough separation that it’s clear what is what, right? You, those legal boundaries are being aligned with financial boundaries. So you’ve got different bank accounts for those different businesses, ideally at different institutions, just super clear, super separate. That allows you to see financially how each business is doing as well.
[00:03:52] Right? So like if the coaching business is new and it’s just starting at first, there might not be much happening in that bank account. Maybe you’ll get a couple hundred bucks here and there. Maybe the expenses for it are higher, but you can track your finances in such a way that you know, okay, so far this year, I’ve actually spent 500 more on running the coaching business than I have made. That lets you know how the coaching business is doing, right?
[00:04:13] Having those financial distinctions, those two separate bank accounts and two separate sets of records. Also, it helps you be clear on what’s happening in each business so that one business isn’t propping up the other. You might choose to have one business prop up the other for a while. You know, like while a course is getting off the ground, it’s fine that it’s not making that much money, but if this is something you’re going to do longterm, you want to make sure that there’s financial sustainability in both businesses, right?
[00:04:36] One is not leaning on the other one. So, that’s the one piece. But when we get to the second piece, like, as you mentioned, the great example of what if you go out for lunch and you have a conversation with a colleague about your therapy business and your coaching business, how do you write that off? I would suggest that that’s one of those, like, moments where it’s better to be practical than to get into the weeds.
[00:04:58] By getting into the weeds, I mean, you could, if you wanted to, write off half of that lunch to each business. But I don’t think that’s a great use of your time, right? So probably what I would think about instead, Sara, is like stay more zoomed out, more big picture. And it’s like, okay, this lunch, I talked to this colleague about both practices.
[00:05:16] I’ll write that off to the therapy business. But next time I go out for lunch with a colleague and we talk about both businesses, I’ll write it off to the coaching business. Like I’ll put it as a coaching business expense. That just keeps things simpler. There’s always the possibility of getting lost in the weeds, just getting into too much detail where you’re not really getting a lot of return.
[00:05:33] Frankly, the IRS or the CRA is probably not going to care whether you write off the 30 lunch here or there, right? But you can spend a lot of time and energy and waste a lot of bandwidth getting too into the details. So it’s like create enough clarity and separation that it’s clear how each business is doing.
[00:05:51] You can look at each business’s financial performance with clarity, but we don’t want to get into kind of splitting hairs to the point that you’re just creating a big headache for yourself. So you can ask your accountant when you come to filing, how they would suggest writing off certain things that you might share, like a home office, for instance, you can ask your accountant, how they would suggest you writing that off.
[00:06:09] Do you write it off just for the one business? Do you write it off split? There’s things like that, that are bigger that you can chat with your accountant about, but little things like that, I would suggest making your life simple. Because ultimately you’re going to get more return on your energy on focusing on getting some new clients, having another networking lunch with somebody else, doing some great marketing, figuring out a new way to talk about what you do, or to like package up a coaching offer.
[00:06:33] That is going to be a much better use of your energy and bandwidth ultimately than getting into kind of like very small details, like splitting a 50 expense into two and then having on both businesses and having to remember that you did that. I think that that’s not a great use of your time.
[00:06:46] So I would think about evenness and splitting, but in a more general, light way that allows you to focus your energy where it really needs to go, which is going to be on building that second business. Cause I’m going to guess that the second business, which is exciting to hear that you’re talking about having a second business, that second business I’m sure could use more of that growth focus and energy, than you need to be in the weeds with the finances on that.
[00:07:07] So thank you so much, Sara, for your question. For listeners, if you also have a question, you can do exactly like Sara did and leave a question. We’ll put a link in the show notes. You will just go onto our podcast website. You’re going to see a link there to record. All you need to do is literally press record, and record your question.
[00:07:24] Just introduce yourself. If you have a little bit of context that’s
[00:07:27] important, you’re welcome to give that context. And then ask your question. And then I can answer your question on one of these feelings and finances episodes of the Money Skills for Therapists podcast. Thank you so much for joining me today.
