Theory Exam #6 Review
Business & professional practice. This review is aligned directly to the 50-question website exam and the intent of the original Theory Exam #6.
What this exam is testing
Work settings, client value, retention, pricing and sustainable practice.
Public protection, credential distinctions, legal limits and appropriate claims.
Professional, general, product, property, interruption and workers compensation.
Employee vs independent contractor and why actual working conditions matter.
Sole proprietorship, partnership, LLC, S-corp tax election and C corporation.
W-2, 1099-NEC, 1040-ES, Schedule C, Schedule SE and pass-through concepts.
Licensure, certification & scope
Licensure is legal permission from a government jurisdiction to practice a regulated profession. Its central purpose is public protection. Certification is a credential demonstrating that specified standards have been met and is not automatically the same thing as legal permission to practice. Scope of practice defines what a massage therapist is legally and professionally permitted to do.
Massage therapists can gather information, provide massage within scope, educate clients and recommend appropriate follow-up. They don't diagnose disease, prescribe medication, promise cures or represent massage as a substitute for medical care when medical evaluation is indicated.
Insurance: know what problem each policy solves
Claims alleging negligence or harm arising from professional services. Often called malpractice liability.
Premises and ordinary business liability, such as a client slipping in reception.
Claims involving products sold, supplied or used by the business.
Covered loss or damage involving business property/equipment.
May replace qualifying lost business income following a covered closure.
Generally addresses employees injured in the course of employment, subject to applicable law.
Employee vs independent contractor
Don't memorize “W-2 = employee, 1099 = contractor” as the whole rule. Those forms are clues and reporting mechanisms. Classification depends on the actual working relationship. Important themes include behavioral control, financial control and the nature of the relationship.
Business controls hours, methods, prices, procedures and important details of how work is performed.
Worker has meaningful independence, business decision-making, financial risk and control over how services are provided.
A contract calling someone an “independent contractor” doesn't override the facts. Misclassification can create tax and legal consequences.
Business structures
Simple one-owner form, but the business isn't a separate liability shield from its owner.
Two or more owners. Responsibilities, authority, profit sharing and exit plans should be clearly addressed.
A state-law legal entity often chosen for liability separation and flexibility. Forming an LLC doesn't make every business debt or personal act disappear.
A federal tax election/status for an eligible entity, not a massage-specific business entity.
Separate taxable corporation. Traditional taxation can create tax at the corporate level and again when profits are distributed as dividends.
Legal entity and tax treatment are related but aren't the same question.
Tax vocabulary
Reports employee wages and withholding.
Commonly reports qualifying nonemployee compensation.
Used in planning/paying individual estimated taxes.
Commonly reports sole-proprietor business income and expenses.
Calculates self-employment tax when applicable.
Business tax items pass through to owner(s) rather than being taxed only as a separate C corporation.
Tax rules change and individual circumstances matter. The course goal is to recognize the concepts and know when a qualified tax professional is appropriate, not to turn massage therapists into accountants.
Business sustainability
Revenue is money earned before expenses. Profit requires accounting for expenses. A full calendar isn't automatically a healthy business if pricing can't cover rent, supplies, taxes, insurance, unpaid administrative time and reasonable compensation for the therapist.
Retention is supported by consistent service, appropriate treatment planning, professional communication, easy scheduling, clear policies, ethical follow-up and delivering value. It isn't supported by fear, pressure, false medical claims or endless discounting.
Exam-style reasoning
A client slips on a rug before treatment. Professional or general liability?
General liability. This is primarily a premises incident, not an allegation that massage technique caused harm.
A therapist injures a shoulder through negligent massage technique.
Professional liability is the most directly relevant category.
A clinic calls someone a contractor but controls their schedule, uniform, prices and procedures.
The facts look substantially employee-like. The label alone doesn't settle classification.
What's wrong with advertising that massage “cures diabetes”?
It's an inappropriate medical claim and exceeds the therapist's professional role.
Why isn't every dollar collected by a solo therapist take-home income?
The business still has expenses, taxes and other obligations. Revenue isn't the same as profit or personal take-home pay.
Why might someone choose an LLC?
Liability separation and organizational/tax flexibility may be useful, depending on circumstances. Students should understand the concept without assuming an LLC is automatically best for everyone.
What makes retention ethical?
The client returns because the service is valuable and professional, not because the therapist uses pressure, dependency, fear or false promises.
Ready check
Before taking Theory Exam #6, you should be able to explain these without notes: scope of practice; licensure vs certification; professional vs general vs product liability; employee vs contractor; W-2 vs 1099-NEC; sole proprietor vs LLC; LLC vs S-corp election; C-corp double-taxation concept; 1040-ES; Schedule C; Schedule SE; pass-through taxation; sustainable pricing; client retention; and ethical professional communication.