Become an official company

One of the early decisions you need to make is whether your entity will be a non-profit organization or a for-profit company. Contrary to what the name might imply, non-profit companies can still make money. The difference is that the profit they make (profit = revenue – expenses) goes back into the work the non-profit does, rather than into the pocket of the owners. Owners of non-profits can still earn a salary, but their salary does not directly depend on how much profit the company makes. In contrast, the owner of a for-profit founds the company with the goal of earning money from the profit the company creates. A for-profit company can eventually be sold, while a non-profit is held in trust by its trustees and can’t be sold for value. Of course, a for-profit company can still achieve plenty of good for society; it’s just a different way to set up the company.

Another difference between non-profit companies and for-profit companies is how they’re set up. While for-profit companies can be run by a single founder, non-profit companies are required to form a board that runs the company. Essentially, the board has the final decision rather than the founder, which can be a drawback for some founders. However, non-profit corporations have their own advantages; they can apply for 501c3 status, which often makes it easier to accept donations and grants – and of course you won’t have to pay corporate taxes!

Whichever you choose, you’ll probably want to formally organize your company as either an LLC (limited liability company) or a non-profit organization. The benefit of organizing yourself in one of these two ways is that in the eyes of the law, the school becomes a separate entity from you. That means the school can have its own bank account and do business separately from your personal accounts. It will also give you protection against legal liability; if there is a problem, it will be the company’s problem and not your personal problem. The paperwork you need to file differs by state, so look up your state’s laws to know which forms you need to complete. Making the right decision for you can be complicated and depend on many factors, including your specific state’s laws. It’s always a good idea to consult a CPA or an attorney before you file legal paperwork.

Protect yourself with company insurance

Most businesses are required to have business insurance, which gives you some protection from any problems that the school might encounter. Those requirements may change depending on your state and what type of space you decide to rent, so check with your landlord to see if there are any specific requirements. The world of insurance can be difficult to navigate, so we recommend that this is something you look for outside help on rather than trying to do it yourself. Look up a local insurance broker that specializes in private schools.