How incorporated are you?

[Dana Sheets]

I'd be curious to hear from other dojo owners how or if they are incorporated, how much liability they carry, if any, (hmmm...may not want to say that one on an open forum) and how many tries it took you to figure out your business plan.

If you run a club out of your home do you have to incorporate?
Does it matter if you charge monthly tuition or not?
What about testing fees? Can you charge those if you're not a business?

Just realized I didn't know rock-solid answers to some of these.

happy training,
d

[Norm Abrahamson]

Hi Dana:

I'm not a dojo owner, but I represent many small businesses. You raised some good questions regarding liability. As for lisencing, I am going to assume that your state does not require a special license to teach martial arts.

"I'd be curious to hear from other dojo owners how or if they are incorporated,"

Conducting business as a corporation or llc (limited liability company) does provide some protection from personal liability if someone is hurt in your dojo. The general rule is that only corporate assets could be used to satisfy a judgment against you. There is an exception however if you personally cause an injury to a student. If you seriously hurt a student by "demonstrating" an eye strike, your personal assets will be on the line. If two students of equal rank and ability are sparring, and one is seriously hurt, your personal assets will probably be protected.


". . . how much liability they carry, if any, (hmmm...may not want to say that one on an open forum)"

Liability insurance is much better protection than the use of a corporate form. A good liability policy should not only provide coverage of up to $1,000,000.00 (less a deductible), it should pay for your legal defense. A dojo owner that uses other instructors should make sure that the policy covers them as well.


"If you run a club out of your home do you have to incorporate?"

The place you run the business has no bearing on whether incorporation makes sense for you. If you are truly running a business, then incorporation could make sense to provide some personal protection. Also, if you are running a business in your home and someone gets hurt, your homeowner's insurance may not cover it. Check your policy and buy a rider if necessary.

"Does it matter if you charge monthly tuition or not?"

If you don't charge any fees, then you aren't really running a business. That is more in line with a hobby unless you are running a non-profit organization. If you are just working out with friends, even if they are your students, then incorporation wouldn't make sense. An umbrella policy on your homeowner's policy would likely cover you for causing an unintentional injury.

"What about testing fees? Can you charge those if you're not a business?"

If you start charging fees, that makes you a business. It doesn't matter if you are incorporated or not.

Hope that is helpful.

Sincerely,

Norm Abrahamson

[gmattson]

If you have any assets worth protecting, best to get the liability insurance. Our landlord required us to get 2 million in liability insurance... I guess to protect him from being sued by an injured student.

I would think anyone teaching out of his home would be taking a big risk, simply because their homeowners' insurance will be looking for an out, in case you get sued. If they could prove you are in business, you would find yourself without coverage.

Now.... what is being in business? Lots of garage dojo believe they are not but do charge money for their lessons. I would think if you charge anything, you would be considered (by the insurance company) as running a business out of your home.

What value is your "certified" instructor diploma? In a court, would you be asked to prove you are qualified to teach? Is the bruising and mild injuries caused by your teaching considered to be "state of the art" instruction or will the plaintiff's attorney try to prove you are just a tough guy taking out your aggression on your students and you haven't a clue what you are doing????

[Norm Abrahamson]

George brought up some additional points for discussion.

"Now.... what is being in business? Lots of garage dojo believe they are not but do charge money for their lessons. I would think if you charge anything, you would be considered (by the insurance company) as running a business out of your home."

If you charge for a service, you are in business. It makes no difference if the business is profitable, well run, in a home or commercial building, big or little. Even if in the mind of the teacher he is merely covering expenses, he's running a business.

"What value is your "certified" instructor diploma? In a court, would you be asked to prove you are qualified to teach? Is the bruising and mild injuries caused by your teaching considered to be "state of the art" instruction or will the plaintiff's attorney try to prove you are just a tough guy taking out your aggression on your students and you haven't a clue what you are doing????"

A diploma could be evidence that the teacher did know what he was doing. In any event, negligence must be proved for the particular injury that is the basis of the civil complaint. A diploma or lack of diploma will not carry the day one way or another. BUT this brings up the idea of a waiver and release. Adult students should be required to sign a release acknowledging that martial arts is a contact activity, injury is possible, and the student will not sue in the event of injury. This type of waiver/release is enforceable. The parent or guardian of minor students should also sign a release. Students that start as minors and continue on after reaching age 18 should sign a release as well.

Sincerely,

Norm Abrahamson

[Dana Sheets]

So even if you never make yourself a business and do not collect dues - if you issue a diploma to someone you can be seen as a liable party because you are the "instructor" even if you not getting paid to be one?

[f.Channell]

What about serving on a test board? Would you be seen as liable if an injury occurred?

Teaching at a camp?

As a visiting instructor teaching a class?

Back in the old Uechi days there were some real looney roaming Uechi teachers Karate chopping necks, groin kicks, and other crazy things I won't get into.

I can't understand anyone not charging for classes. Goes against the American way. If nothing else charge and give the money to a charity.

F.

[Stryke]

I can't understand anyone not charging for classes. Goes against the American way. If nothing else charge and give the money to a charity.

Why does this not surprise me .

Why does the artist paint or the flower bloom

[f.Channell]

Why does the artist paint or the flower bloom

Artists paint so they can sell them and flowers bloom so they can be made into arrangements and sold.

When colleges stop charging and my kids can go for free I will offer free Karate classes. I actually charge half of anyone else in the area so I could easily lose this argument.

I'm not the hard core capilist I'm pretending to be .

F.

[Norm Abrahamson]

So even if you never make yourself a business and do not collect dues - if you issue a diploma to someone you can be seen as a liable party because you are the "instructor" even if you not getting paid to be one?

Verrrrrrry interesting. IMO, if you are teaching somebody privately, not collecting ANY compensation, and you give them a diploma saying "black belt," then you aren't running a business. That doesn't excuse gross negligence on your part, but you would should not be liable for an injury caused by one student to another.

If you run a school, and some students pay, then you are a business.

If you hold yourself out as a "Karate School," but do not charge anything, you are in a gray area. To fall back on an old chestnut, this would have to be viewed on a case by case basis. However, if you personally do something negligent or dangerous, you will be held liable.



Sincerely,

Norm Abrahamson

[Norm Abrahamson]

What about serving on a test board? Would you be seen as liable if an injury occurred?

Teaching at a camp?

As a visiting instructor teaching a class?

F.

Good questions Fred. As I said before, a person is always liable for his own negligence, or for that matter, criminal act. So the extra risk here is borne by the sponsor of the camp, test or school. If you invite me to teach a class at your school, and I negligently break the arm of one of your students, then YOU may be held vicariously liable for the injury I caused.

If I sit on a test board at your school, but I am not paid and I do not run the test but only watch and grade, I should be safe from liability if a student testing is hurt. However, if I'm paid to be on the test board, that could change my status.

Sincerely,

Norm Abrahamson

[Stryke]

When colleges stop charging and my kids can go for free I will offer free Karate classes. I actually charge half of anyone else in the area so I could easily lose this argument.

I'm not the hard core capilist I'm pretending to be .

I know Fred and I have nothing against anyone who charges .

Just dont see it as anything but another choice .