We wish starting a therapy practice in Washington was as simple as getting a few clients and slapping an “open” sign on the door. Unfortunately, that’s just not the case. From insurance and licenses to accounting software, you’ll have a lot of ducks to keep in a row.
Let’s take a look at your to-do list.
Decide Your Business Entity: LLC vs PLLC
First things first: Which business entity should you choose?
Most small businesses that want to incorporate form standard limited liability companies (LLCs). These protect them from financial and legal liability in the event their businesses fail.
However, if you’re in Washington State and your industry requires a license or certification, you should form a professional limited liability company (PLLC) instead. A PLLC operates similarly to an LLC but doesn’t protect you from malpractice lawsuits.
A quick question you can ask yourself is: Do I require continuing education each year? If the answer is “maybe,” you should talk to a lawyer to confirm whether you should register as a PLLC or LLC.
By the way, if you’ve already chosen an LLC and you’re a therapist in Washington State, don’t worry! You can always submit a PLLC certificate of formation to get this corrected.
Apply For a Business License
Washington uses a tool called the “Business Licensing Wizard” for license applications, and true to its name, it’s easy to set up your business online. Applying for a business license will cost $50, and there are annual $5 processing fees every time you renew.
Basic online applications take about 10 business days to process. However, they’ll take longer if you apply via mail or if your application requires city or state endorsements.
You can start your application here.
Set Up Your Trade Name and Domain Name
Even if you just use your legal name, you have to register your business name, or “trade name,” in Washington. You’ll pay $5 for every trade name you register. If you plan on using any variations or shortened versions of your business name, register them early.
Next, you’ll need a domain name for your business website. This name should be short, specific, and easy to remember. For example, if your trade name is “John Doe’s Therapy, Counseling, and Mental Health Services,” you could potentially use “johndoehealth.com.”
Unfortunately, determining a domain name can be more challenging and expensive than setting up a trade name. This is because your domain name must be unique. Your best options may already exist or be owned by domain registrars. Our advice? Establish your domain name as early as possible, and have a few backup names ready.
Sort Out Your Bookkeeping Software
Next on our list is accounting software. And if you’re thinking to yourself, “Do I really need bookkeeping software when I first set up a therapy practice in Washington?” — the answer is yes.
Bookkeeping and accounting software are critical for sending out invoices, tracking expenses (hello tax deductions!), and making sure your finances line up at the end of the year. Search for software with automated organization, a user-friendly interface, and dependable security.
If you’d prefer to be less hands-on with your bookkeeping, you can always team up with an accounting firm. They can recommend software that works with their systems and your practice’s needs. At TL;DR, we like QuickBooks Online. You can read our article about our tips for using it here.
Understand Your Tax Obligations
You may be surprised to know that the state of Washington doesn’t collect personal or corporate income taxes. Instead, your PLLC will be charged business and occupation (B&O) taxes determined by your gross receipts. Specific tax rates vary by business, and depending on your revenue, the state might require you to file more than once per year.
You can’t deduct typical expenses from B&O taxes like you can with standard income taxes. You can deduct refunds, unpaid debt, and other missing revenue, though — as long as you maintain appropriate records. Check out our helpful guide to B&O taxes in Washington to learn more.
Consider Retirement Savings and Other Self-Employed Essentials
Unfortunately, when going out on your own, many to-do items will inevitably become your problem. Retirement planning is one of them. As a therapist in private practice, it’s generally up to you to contribute to your retirement fund and other essentials.
Consider opening a SEP-IRA, Roth IRA, or Solo 401(k) plan for regular retirement payments. Here at TL;DR: Accounting, we usually recommend the SEP-IRA.
Next, consider your insurance coverage and any other benefits you’d receive from a nine-to-five job. Some of the best Washington health insurance providers for self-employed individuals include:
- Aetna
- Assuris
- Health Net
- Lifewise
- Premera Blue Cross
- Regence
- United Healthcare
Work With an Accountant For Questions and Resources
While this list may seem overwhelming at first, we promise it’s not as difficult as it looks. And the good news is that there are people such as accountants and business advisors who can walk through a lot of this stuff with you.
Here at TL;DR: Accounting, we help therapists in their first year of private practice get their ducks in a row regarding bookkeeping, taxes, and other important financial matters. We even created a First Year in Private Practice Course that you might want to check out.
If you have questions, it never hurts to lean on professionals. An accounting firm can help you make the most of your therapy practice by handling your B&O taxes, deductions, bookkeeping, and more.
Beyond that, experienced accountants can answer questions and guide you through the toughest aspects of business ownership. TL;DR can help you choose business income insurance, professional liability insurance, and other plans your practice may need. Plus, we perform frequent financial health checks to guarantee all numbers look ideal.
Start A Therapy Practice in Washington State
TL;DR: Opening your own therapy practice can feel overwhelming, especially if you’re not acquainted with the state’s unique tax laws. Fortunately, you don’t have to do this alone. An expert accountant from TL;DR can help you start a therapy practice in Washington State. If you need help getting started, get in touch with us. We’re always here to help. In the meantime, you may find extra help in our First Year in Private Practice Course.
If you need any help throughout this process, we are more than happy to help. Just reach out and schedule your first appointment, here!
