The 65-year-old admitted one count relating to sexual communication and one count relating to attempted sexual activity with a child under 16 between August and December 2021.
Appearing at Wolverhampton Crown Court on Thursday, Judge Michael Chambers took into account his time spent in prison since his original arrest in December when he was entrapped by vigilante paedophile hunters.
Coughlan was handed an 18-month community order and will be required to undertake 30 days of rehabilitation.
There will be a five-year restriction placed on Coughlan concerning contact with children and his use of equipment which could be used to contact children.
Judge Chambers said: "There are mitigating circumstances, you have reached 65 without a criminal record. And letters of support were written for you by your wife and daughter who said they are standing by you. I am also taking into account the psychiatric report, and that you were remanded in custody for your own protection in December and classed as a suicide risk."
"Significantly, you served your community well. Becoming leader of your political party. You tried to help others. The character references all were supportive. In your own letter you rightly said 'I helped hundreds of people over the years but this is what I will be remembered for'."
He added: "Yours is certainly a fall from grace."
Coughlan sent pictures of himself to who he thought was a 14-year-old girl and asked her to touch herself. Between August and December last year he sent regular messages of a sexual nature to "Darcy" who was in fact a decoy.
The judge added: "There was no harm in this case because this was a vigilante decoy, it was an attempt."
Prosecutor Antione Muller described how Coughlan had set up his own private Facebook group Our Private Place to which he invited "the girl" to join and would frequently message her asking to to carry out various sexual acts and ask how it felt.
Before his arrest Coughlan was preparing to be Santa Claus at three Christmas fairs around Walsall, a role he will now be unable to perform due to his court set restrictions keeping him away from children.
Coughlan, of Martin Drive, Short Heath, Willenhall, was the elected representative for the Willenhall South ward but resigned in December following his arrest after being caught in an internet sting.
Self-styled paedophile hunters confronted Coughlan and posted a 30-minute video of them questioning the Labour politician on social media. He was then arrested and charged by West Midlands Police and spent Christmas behind bars.
A spokesman for Walsall Council said at the time: "The council received Councillor Sean Coughlan’s written notice of resignation from his office as a councillor. His resignation was formally and immediately accepted. He is no longer a Walsall MBC councillor.”
He was first elected in 1995 and has successfully defended the seat on a number of occasions, the latest being in May this year.
During his career he rose to become deputy leader and then leader of both his party and Walsall Council, which he was in charge of between 2016 and 2018.
He stepped down as leader of the Walsall Labour Group in 2019.
It is understood that Councillor Coughlan was also suspended from the Labour Party following his arrest.