How Do I Minimize My Legal Risk For My Healing Business?
By Barbara J. Zabawa, JD, MPH
Attorney and Founder of Wellness Law, LLC
When you start your own healing or wellness business, you might wonder how to do so in the least risky way possible. Some topics that impact your legal risk include:
Whether to establish a legal entity
Insurance
Special licenses or permits
Legal documents
Disclaimers and Liability Waivers
This blog covers some best practices for minimizing your legal risk when starting a wellness business.
Do I Need to Form a Legal Entity?
No, you do not need to form a legal entity. If you don’t form a legal entity (i.e., file any paperwork with your state) and just start practicing wellness, the government will view your business type as a “sole proprietorship” (or a “partnership” if you go into business with someone else and don’t register the business with a State). Any income you earn from your sole proprietorship will be reported on your personal income tax return. So, having a sole proprietorship is easy. No paperwork and no government filing fees. But that’s where the advantages of having a sole proprietorship end, in my experience.
Here are three reasons why it’s a good idea to form a legal entity for your wellness business. First and foremost, it protects your personal assets should anything go wrong with your wellness business. Without a legal barrier between you and your business, which is the case with sole proprietorships, if your business get into legal or financial trouble, your home, car, or personal savings could be at risk to pay off any claim or debt owed by your business. By forming a legal entity, the only assets that are exposed are those that belong to your business. So, when you set up separate bank accounts or buy assets in the name of your business, those accounts and assets could be tapped to pay off a financial or legal claim, but not your personal bank accounts or assets. Your personal credit score also is impacted if you don’t separate your business from you as an individual.
Second, if you are looking for any financing for your business, having a legal entity will help. Business lenders may prefer to loan money to businesses rather than sole proprietors. Creating a legal entity requires you to create legal documents, like Articles of Incorporation/Organization and Operating Agreements that lenders and other financial institutions like to see.
Third, forming and operating a legal entity isn’t really as hard or expensive as you might think, at least in most states for the most popular legal entity: the Limited Liability Company (LLC).[1] Compared to corporations, LLCs have much fewer formalities. With an LLC, there is no need to have annual meetings, detailed minutes of those meetings, or concerns about issuing stock . Also, setting up LLCs is straightforward in most states. The typical steps, which for many states can be done online, include:
Choosing a name for your business;
Filing Articles of Organization (which requires minimal information like name and address of registered agent and whether the business will be managed by members or managers); and
Pay a filing fee (which in many states is no more than a few hundred dollars).
There are plenty of resources to help you navigate legal entity formation as well. In addition to this blog, your lawyer or accountant, legal entity formation services such as ZenBusiness and LegalZoom can guide you through the legal entity formation process if you are uncomfortable doing it yourself. Also, purchase the book Quick & Easy Wellness Law on Amazon for more guidance.
Which Type of Legal Entity?
If you decide to create a separate legal entity, the next question to consider is which type. The different types of entities include LLCs, Limited Liability Partnerships (LLPs), C-Corporations, Service Corporations, Professional Medical Corporations, S-Corporations, and Not-For-Profit Organizations. The most popular legal entity that I see wellness clients form is the Limited Liability Company (LLC). This type of legal entity makes a lot of sense for wellness businesses that do not depending on a health care professional’s license to deliver services. If your services do require a health professional’s license, then your state’s law might limit the type of legal entity that you can form. For example, in California, medical services cannot be delivered through an LLC but instead California-licensed physicians must look to form a Professional Medical Corporation.
But, if you plan to deliver wellness services that don’t require a license (such as coaching, consulting, or doula services for example), you have more options with regard to legal entity type.
There are many considerations when deciding legal entity type. One consideration is whether you plan to have investors. If you do, then you probably want to create a C-Corporation, as those entity types have the most appeal to investors.
Another big consideration is taxation issues. How your legal entity is taxed is a separate decision you must make from deciding which legal entity best suits your business. A business entity can be taxed as a:
Disregarded (or “pass through”) entity
C-Corporation
S-Corporation
Partnership
Often, LLCs and S-Corporations, are taxed as “pass-through” or “disregarded” entities, which means any income generated by the company gets “passed” onto the owner. The owner then reports that income on their personal tax return. This is similar to the sole proprietorship mentioned above. In contrast, C-Corporations are taxed at the corporate tax rate. So any income earned by the C-Corporation is taxed, and then any money provided to the owner of the company in the way of income is also taxed on the owner’s personal income tax return. In those cases, then, the owner is taxed twice. So, for smaller companies that don’t envision needing investors, a pass-through company may seem like a better deal. Regardless of your situation, it’s always a good idea to involve your legal and accounting partners in your decision making.
How do I form my legal entity?
Forming your legal entity requires filing forms with your state’s secretary of state, unless you plan to be a sole proprietor, in which case you do nothing but get to work. Partnerships should have a written partnership agreement, but do not need to file anything with the secretary of state. Note: your state may not call the agency in charge of corporate filings the “secretary of state.” Case in point: the agency in charge of corporate filings and records in Wisconsin is called the Department of Financial Institutions. A good resource to get you started with finding your state agency can be found at https://www.nolo.com/legal-encyclopedia/form-llc-in-your-state-31019.html. It is typical for the same state agency to be in charge of all types of corporate entities.
Do I Need Insurance?
You may wonder whether you need liability insurance, especially if you go through the trouble of setting up a legal entity for your wellness business. Legal entity and liability insurance protections do not overlap. Rather, these protections work together. Establishing a legal entity separates your personal assets from your business assets, exposing only your business assets should something go wrong in your business. Liability insurance protects your business assets from being depleted should something go wrong. Thus, if someone makes a financial or legal claim against your business, you don’t have to dip into your business accounts or assets to pay the claim.
Unlike licensed health care professionals, who may be required to have professional liability insurance under state law, wellness practitioners usually are not so required. But just like forming a legal entity, it’s a good idea to have it. Buying professional liability as well as other types of insurance for your practice can cover some, if not all, of the costs related to legal or financial claims made against your business (should they occur). Without liability insurance, you may need to use your own funds (like money stashed in your business bank accounts) to pay for lawyers or fees associated with defending your business against a claim. As a result, purchasing adequate liability coverage can help you feel more confident about your wellness practice, just in case something goes wrong in the future. Also, you don’t necessarily need a separate legal entity to purchase liability insurance. Some liability insurers may issue a policy to a sole proprietor, but their rates may be different. You will want to ask potential liability insurers about that before purchasing a policy.
What Type of Insurance?
There are several different types of insurance a wellness practitioner should seriously consider purchasing. Below is a summary of four types to consider:
1. Professional Liability (or “Errors and Omissions”) - Unlike a lot of licensed health care professionals, who may be required to carry professional liability insurance under state law, wellness practitioners are not so required. Nevertheless, having such insurance is a good idea because it covers you should you make a mistake in the advice or services you provide to clients. Professional liability insurance will cover the legal and settlement costs of any claims brought against you in your wellness practitioner capacity. There are several liability insurance companies that specialize in offering wellness practitioner professional liability insurance. Three companies that offer affordable and valuable insurance products for wellness practitioners are Alternative Balance, CPH & Associates, IDEA Fit Insurance Services, and Philadelphia Insurance Companies, but there are others as well. It is best for you to do your research and see which company and insurance product works best for your particular wellness business and situation.
2. General Commercial Liability Insurance– a commercial policy will typically include protection from personal injury claims and property damage. If you operate a brick and mortar wellness business, having this type of insurance will protect your business assets should someone get injured on your premises. Injuries might occur from “slip and falls” or problems with the building or its components. This type of insurance also protects against property damage that occurs because of the premises and even advertising injuries caused by your business. General liability insurance can pay for legal fees, settlements, and court judgments. If your wellness business involves an online tool you developed, general liability insurance can cover claims that occur if a user is injured because they relied on the information provided by the app (e.g., by performing a suggested exercise, changing their diet in a certain way, or selecting a provider through the locator feature who subsequently caused them injury). A commercial policy may also cover property damaged if the app were to malfunction and damage equipment to which it was downloaded.
3. Cyber Liability Insurance - If you plan to electronically collect sensitive personal and/or health information from your clients, such as through website registrations, email or text communications, or virtual platform use, it’s probably a good idea to purchase cyber liability insurance. This type of insurance can protect you if there is unauthorized access, theft or destruction of that sensitive data. Data breaches are commonplace and increasing. Your clients’ data is very valuable not only to you, but to hackers as well. If a data breach occurs, your clients may hold you liable for the breach and seek compensation from you or require you to spend a lot of money to fix the problem that led to the breach. Cyber insurance can help you pay for those costs.
4. Product Liability Insurance - If you sell wellness products and a client gets injured from using those products, product liability insurance could cover the legal and compensation costs that result from the client’s harm.
Before purchasing any of these liability insurance products, speak to agents who sell these products to determine which best fit your wellness practice needs.
Licenses and Permits
Whether your wellness practice needs a business license or permit will depend upon the laws of your state and locality. If you plan to sell nutritional supplements or other products (and possibly some services), you will likely need a sales permit from your state. Check with your state Department of Revenue to determine whether you need a sales permit and the process by which you apply for one.
Whether you need a general business license to operate is another question to address. Most licensed health care professionals only need their occupational licenses to deliver health services within the scope of their license. But, a lot of wellness practitioners don’t need an occupational license, so the question becomes whether you need a general business license to operate. You may need a general business license if you have a “store front” or deliver certain health services such as medical spa or aesthetic services. Such licenses ensure you comply with state health department standards. If you plan to work from your home, you may or may not need a permit from your local government to do so. A good place to start your research on whether you may need a license to operate your wellness business is the City Applications website.
Legal Documents
Another way to protect yourself and your wellness practice is to have proper legal documentation. The cornerstone document for a wellness practice is the client services agreement or “informed consent” document. This agreement sets the expectations between you and your client and fully explains the risks and benefits of your services. This document should describe the services you wish to provide, any risks the client may face with receiving those services, any benefits the client may receive from the services, and any alternatives that the client may consider instead of your services. The agreement should also explain your role as a wellness practitioner, such as what you can do (describing your wellness services), what you cannot do (that you cannot practice medicine, dietetics, or psychology, for example)), and what you expect from the client (scheduling, promptness, payment, following up with their licensed health care professional). The services agreement can also include liability waivers, assumption of risk, and disclaimer language. See below for more discussion on liability waivers and disclaimers.
Other documents that can help reduce your risk include:
Client authorization forms to use and disclose their personal information (such as for social media purposes, or sharing with other professionals);
Arbitration agreements (to avoid conducting disputes in public courtrooms)
Policies and procedures regarding client confidentiality
Group coaching or education agreements
Website Privacy Policy and Terms & Conditions
This list is not meant to be exhaustive, but it does offer a good start for the legal documents that will help your wellness business avoid legal entanglements. A lot of these documents can be purchased online. Visit www.wellnesslaw.com for more resources and legal templates tailored for wellness businesses.
Disclaimers and Liability Waivers
A lot of people use the words “disclaimer” and “waivers” interchangeably, but the two words mean different things, at least in the context of wellness service contracts. Black’s Law Dictionary, a staple resource for lawyers, defines “disclaimer” as “the rejection, refusal, or renunciation of a claim, power, or property.” In the context of most wellness business contracts, a disclaimer is something you are clarifying to your client about your products and services. For example, a disclaimer may renouncing your client’s idea or assumption that you practice medicine, psychology or dietetics. Thus, disclaimers set the record straight about what your wellness services are, or are not. It is important to remember that if you say one thing in your disclaimer (such as you don’t practice medicine), but then elsewhere in your client communications you suggest that you can diagnose or treat illness and disease, this contradiction basically erases the effectiveness of your disclaimer.
Nevertheless, having a disclaimer is probably good idea to mitigate your legal risk. Disclaimer language can be built into your client services agreement, but it can and should also appear on your website and any marketing communications, such as on social media. Your disclaimer language should emphasize that as a wellness practitioner, you are not practicing medicine, dietetics or psychology. It should specify, to the extent it is true, that your services are for information and education purposes only and not to be construed as diagnosing, treating, or curing a medical condition. You should also inform your clients that you cannot guarantee any specific results from your services.
As for liability waivers, Black’s Law Dictionary defines “waiver” as “the intentional or voluntary relinquishment of a known right.” Unlike a disclaimer, which functions as an important announcement to your clients about the contours of your products and services, a liability waiver is asking your client to give up their legal right to sue you if you should be negligent in the delivery of your wellness services or products. In other words, a liability waiver “releases” you, the business owner, from liability for your client’s personal injuries or damages that may occur when you provide wellness services or products. Usually liability waivers will not protect you if you are extremely careless with your wellness practice (i.e., “grossly negligent” or “reckless”), or if you intentionally harm your client. But liability waivers may be able to protect you from honest mistakes that end up causing some kind of damage (either personal or property) to your client.
Whether a state will enforce your liability waiver is another matter. Louisiana and Virginia refuse to enforce liability waivers for personal injuries. Other states like New York, Connecticut, Hawaii, and Vermont do not enforce liability waivers for public, recreational activities.
To improve the chances that a court will enforce your liability waiver, it’s a good idea to make your waiver language clear, concise, and noticeable within your contracts. To make your liability waiver more noticeable, you can use a larger-font typeface, capital letters, or bold typeface or italics. Also, try not to bury your liability waiver inside another document where one would not expect to see it. Make the liability waiver language prominent. Your liability waiver should also make your client aware of the risks involved with your services or products so that they can judge the likelihood that harm may occur. The waiver should notify the client that they are giving up claims of “negligence” against you. Your liability waiver should not excuse your intentional or reckless conduct. Only negligent conduct. The client should also sign an acknowledgment that they read and understood your liability waiver and agree to its terms.
One other way you can make a court more likely to enforce your liability waiver is to give your clients a choice to sign the waiver or not. If the client chooses to sign the waiver, you could offer your products or services at a lower rate. But if they refuse to sign the waiver, then you could charge them a higher rate. If your client refuses to sign the waiver, cross it out, have both you and the client initial the change, and then revise your rate accordingly.
NOTE: Because the law views licensed health care services as essential public services, hospitals and doctors are usually unable to use liability waivers in their contracts.
For More Help:
Wellness Law, LLC is a law firm dedicated to helping wellness practitioners and organizations navigate the murky waters of wellness regulation. Book a consult with us today by visiting https://wellnesslaw.com/pages/contact.
To order the Quick and Easy Wellness Law book, visit Amazon.
Sources:
Medical Board of California Website at https://www.mbc.ca.gov/FAQs/?cat=Applicants&topic=Fictitious%20Name.
Moscone-Knox Professional Corporation Act, s. 13401.
Choice of Entity: Tax Issues, Practical Law Practice Note 1-382-9949 (2025)
John Tucker, LLC v. Sole Proprietor: How to Make the Right Choice for Your Business (Dec. 3, 2019), available at https://www.nav.com/blog/llc-sole-proprietor-18376/#:~:text=One%20of%20the%20key%20benefits,debts%20incurred%20by%20the%20business. (last visited June 14, 2020).
LLC & S Corp Beginner’s All-in-One Guide, Finance Knights Publications (2025)
Black’s Law Dictionary, 6th Ed. (1990)
Enforceability of Liability Waivers: Overview, Practical Law Commercial Transactions (2025) (citing La. Civ. Code Ann. art. 2004 and Hiett v. Lake Barcroft Cmty Ass’n, 418 S.E.2d 894, 896-97 (Va. 1992); N.Y. Gen. Oblig. Law s. 5-326; Reardon v. Windswept Farm, LLC 905 A.2d 1156, 1160-61 (Conn. 2006); Dalury v. S-K-I, Ltd., 670 A.2d 795 (Vt. 1995); HRS s. 663-1.54(c)(3)).
City Applications Website, available at https://www.cityapplications.com/business-licenses.html
[1] You should check with the state in which you want to incorporate your business (which is usually the state in which you reside, but it doesn’t have to be). Three states require LLCs to publish notice of formation in the local newspapers: New York, Arizona, and Nebraska. See e.g., https://www.llcuniversity.com/states-with-llc-newspaper-publication-requirements/#:~:text=There%20are%20only%203%20states,New%20York; see also AZ Stat. s. 29-3201; Neb. Stat. s. 21-193; and NY LLC Act s. 206. This can get expensive. But most of the states I have encountered with forming LLCs make the process relatively easy and inexpensive.
Disclaimer: This blog post was written by an affiliate of the INHA. INHA makes no claims to the content, and cannot verify or authenticate its veracity. Always check with your doctor or medical professional before starting a new health protocol.