Tutors are crucial in helping children and students enhance their skills and educational development. Tutors provide various services, including online, in-person, one-on-one tutoring, and personalized instruction based on student needs and learning styles.
Starting a tutoring business requires little overhead, making it a profitable business venture.
If you want to start a tutoring business, read our step-by-step guide.
Step 1: Discover your unique selling position (USP)
The tutoring market is competitive. To succeed, you’ll need a clear understanding of the market, a clear value proposition, and the ability to deliver consistent, high-quality service.
A USP is a reflection of this. It’s a marketing statement that defines what makes your tutoring business and services unique. Perhaps you offer the lowest cost, the most experience, or a dynamic mode of delivery. Whatever your USP, it should embody what you do better than your competitors. Remember that your competitors can also include AI tools such as ChatGPT and other online services.
As you craft your unique selling proposition, consider the needs of your audience – students, their parents, and schools and colleges. How will your tutoring business stand out and resonate with each group?
Try to link your USP to your core values. Consider what truly matters to you, motivates you, and influences your teaching.
Step 2: Have a business plan
A business plan defines what your tutoring business is about, the services you offer, and how your company will operate and expand. It can also help you make important decisions, set goals for growth, and spot any potential risks. Plus, a solid business plan can make getting financing easier or bringing in new business partners.
Here’s a suggested outline for your tutoring business plan:
- Executive summary: A brief overview of your business and why it will be successful.
- Company description: Include detailed information about your business and explain your competitive advantages.
- Service and product offerings: List the tutoring services you will offer.
- Organization and management: Outline how your tutoring company will be structured and who will run it. For example, will it be a partnership, LLC, or S-Corporation? Who will be responsible for day-to-day management?
- Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against?
- Financing plan: Include a description of your funding requirements, your detailed financial statements, and a financial statement analysis.
- Marketing strategy: What is your overall plan for reaching potential consumers and converting them into customers for your products or services? How will you communicate your advantages over potential competitors?
Step 3: Choose a business structure for your tutoring business
How you structure your tutoring business will impact operations, taxes, and the liability risk you’re willing to take with your personal assets. Choose a structure that balances legal protection and benefits.
The four most common are:
- Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
- General partnership: A general partnership is the most straightforward variety of partnerships and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
- Limited liability company (LLC): One of the most popular forms of business entity among tutoring businesses. An LLC offers limited liability protection (shielding your assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by its shareholders, protecting owners from personal liability for corporate debts and obligations.
For more information on business entity structures, read Comparing company types.
Step 4: Understand the legal requirements for a tutoring business
Depending on your business structure and location, your tutoring business may be subject to various legal requirements.
- Business licenses and permits: Most businesses must obtain licenses and registrations regardless of the business entity type. For a tutoring business, this may involve obtaining a general business license at the local or state level. In some jurisdictions, even if you operate your business from home, you may still need to obtain a home occupation permit. Also, check with your Homeowner’s Association (HOA) or landlord to see if they have any restrictions on operating from your home.
- Sales tax: While most tutoring businesses aren’t subject to sales tax, rules vary by state and can change over time. You may also need to register your business with the Department of Revenue in your state and any other state where you have a nexus.
- DBA filing: If you do business under an assumed name or trade name, you must make a DBA filing with your state or local jurisdiction.
- Hiring employees: There are various requirements when hiring employees, such as obtaining an EIN and registering with the Department of Labor in your state. You will also need an EIN if you form an LLC or corporation.
- BOI filing: You may need to fulfill other requirements, such as getting a registered agent and filing a Beneficial Ownership Information Report with FinCEN.
There may also be additional legal requirements and considerations depending on the type of tutoring service you will be offering. For example,
- Tutors hired for homeschooling may need to meet state certification requirements.
- Online tutors must be aware of data privacy and protection laws. These include:
- Family Educational Rights and Privacy Act (FERPA): FERPA is a federal law that helps protect students' educational records. It sets rules about who can access records, for what purpose, and what guidelines they have to follow when they do.
- Children’s Online Privacy Protection Act (COPPA): A federal law that specifically addresses the protection of data for children under the age of 13. COPPA regulates how online service providers, including online tutoring platforms, collect, use, and disclose personal information from children.
- California Consumer Privacy Act (CCPA): This grants consumers extensive privacy rights. While it does not apply to all educational institutions, many companies in the education sector, especially if you provide online services, should be aware of its requirements.
For more information, see What are the legal requirements for starting a small business?
Step 5: Open a business bank account and credit card
Corporations and LLCs must, by law, separate their business and personal finances. The best way to do this is by opening a bank account and obtaining a business credit card. These should be used exclusively for business expenses to maintain liability protection in case of legal action against your tutoring business. A business credit card can also help you build credit and negotiate good terms with vendors and suppliers.
Consider opening a business bank account as soon as your tutoring business starts incurring expenses or accepting money.
Step 6: Obtain the appropriate insurance
It may be beneficial to obtain insurance for your tutoring business. While establishing an LLC or corporation can safeguard your personal assets, it typically does not shield your business from most risks.
Liability insurance can protect you from various risks, including damage or injury to yourself or your property, as well as any injury caused to others. If you plan to hire employees, you’ll also need to obtain unemployment insurance from your state’s Department of Labor.
Step 7: Create policy statements and contracts
Creating your own content, like lesson plans, online resources, and study materials forms an important part of your tutoring business. Consider creating a confidentiality and non-disclosure agreement to keep your proprietary materials safe and to make sure they aren’t shared without your authorization.
Having contracts is essential because they establish clear expectations between you and your clients. Your contract should include aspects such as the services you will provide, the goals for the student, the schedule and duration of the services, pricing and payment details, as well as cancellation policies. It may be beneficial to have a legal professional review these documents for you.
Frequently asked questions for starting a tutoring business
Do you need a license to start a tutoring business?
Most states don’t require specialty licenses to start and operate a tutoring business. However, your tutoring business may be subject to general business licensing requirements. These may include:
- Basic business operation license: This is a license from the city in which your business will operate or from the local county (if the business will be operated outside of the city's legal boundaries).
- Home occupation permit: This permit for home-based tutoring businesses prevents businesses from causing a lot of extra traffic, noise, or other nuisances.
- Zoning permit: Some states require proof of proper zoning for cleaning businesses.
- Building permit: If you plan on remodeling or building a commercial space, you'll need a building permit.
- Sign permit: Many local governments require a permit for sign displays and installations
- Sales tax license/sellers permit/resellers permit: You need a license or permit to sell almost anything, and the name of this document varies by state.
- Certificate of occupancy: This document outlines the purpose of the structure and its suitable applications and ensures compliance with building codes.
How do you start an online tutoring business?
Starting an online tutoring business involves many of the same steps as starting any business. However, it’s often easier, faster, and less costly than opening a business with a physical presence.
Keep in mind that most businesses – even online ones – must obtain business licenses or permits. Make sure you have registered your business with the appropriate state or local agencies as required in your state or jurisdiction and that you are meeting all licensing and permit requirements.
Your online tutoring business will also need to obtain a federal tax ID number, register with its state taxing authority, pay state and local sales taxes, and meet unemployment and workers’ compensation requirements.
Online tutors must also be aware of various data privacy and protection laws, such as Family Educational Rights and Privacy Act (FERPA), Children’s Online Privacy Protection Act (COPPA), and California Consumer Privacy Act (CCPA).
