16 Jun Choosing the Legal Structure of A Practice
This is a guest post by Iris Kimberg, MS PT OTR
There are many forms that a private practice or therapy business entity can take, ranging from a solo practitioner to a corporate practice with shareholders. The legal entity you choose should be determined by the laws of your particular state( that varies tremendously from state to state), and what you want to offer or provide in your entity. Find out the rules and regulations within your state and make sure you conform. The best place to look for information is with the division that issues your professional licenses, usually the State Education Department.
It is important to remember that you can start your business in one format and later on transfer it into another format with little difficulty. The two broad categories that your business can fall under is either as a corporation or an unincorporated business entity.
The most common way to initially organize a practice is as a sole proprietorship. This is an unincorporated business entity and involves filing a certificate of conducting business at your local county clerk’s office. You can file your sole proprietorship under your own name, or under an assumed name or DBA, which stands for “doing business as.”
Legally and financially, the therapist and the business are one in the same. Your profit from the business is treated as your own income for tax purposes, and you have full control as well as unlimited liability.
You can get both malpractice and general liability insurance as a sole proprietorship. This is how most private practices start out and end up. You do not necessarily need the assistance of a lawyer to set up a sole proprietorship.
When two or more therapists want to open a joint practice, the business entity they form is often a partnership. You share control and profits but also have shared personal liability for all the business debts and expenses. Here it is essential to research the laws of your particular state and follow the existing partnership laws.