10 Steps to Opening Your Private Practice LLC

To see this content in video form check this out:

This is not legal advice. This is just what I discovered in my own practice.

I’m a psychologist but I think these suggestions would probably hold for any professional service.

You can definitely do this yourself. But if you look through these steps and decide it's too overwhelming, you can also typically find someone to do it all for you for less than $1000, depending on your situation. Also, you do not have to take my advice on every step. Some people, for example, opt to use their personal phone or not open an business banking account. I am advising on what I think is the cleanest divide and I think each step is well worth the effort but everyone needs to make their own decisions about whether each step works for your situation.  

Why do you want an LLC?

If you follow these steps it puts a layer of protection between your business and your personal assets so that if someone sues your company they can bankrupt you professionally but not personally. Not sure if you want an LLC or an S-CORP? Go here first.

So it’s going to be a bit counterintuitive, but I’m going to recommend that your first few steps actually are not filing business paperwork.

Step 1. Decide on a system for financial tracking.

You’ll find that as you start out you’re in a loop where you can’t really separate business and personal finances, because you can’t make money in your business until you get through these 10 steps and you can’t get some of these 10 steps done without money. Set aside somewhere between $200-2000 for startup costs. The number depends where you are and what you’re trying to do. You’ll call it an owner/investor drawing, and you get a lot more than this as a write off for startup costs in the first year of your business (make sure to tell your accountant about your LLC and if you do your own taxes, make sure you account for this).

If you’re planning to be in solo practice you can keep this tracking relatively simple. I started off with a google sheet – I like that over excel because I could log in and update it anywhere, including my phone. So I initially just tracked the date, amount, expense type or category, and income. That was it. Four columns. But quickly I decided I was more comfortable with tracking software, and for that I use Wave Apps – it’s a free application and they make it very easy to link bank accounts and print reports at tax time so I just send my P&L to the accountant and call it a day. If you plan to do private billing, you can use them for invoicing too if you want. Alternatively, if you already use QuickBooks or Quicken or something like that for your personal ventures, that would work too.

Step 2. Get a phone number.

You need this on everything you file and it’s a good way to get some momentum going. It’s exciting to get a number, and it’s a fairly easy, discrete task. I used Openphone because I wanted the cheapest option that allowed texting. At the time of this writing, it's $13/mo. It could be that pricing changes or better options come available, and I’ll also say in hindsight I might have considered something that allowed phone and fax through one account. As it is, I had to add fax later. I will spare everyone the rant about fax as an antiquated system and just say that it is still a necessary evil for most records exchanges, even though these trends are slowly changing. 

Step 3. Get a mailing address.

All the places you have to put a phone number, you have to put an address. I recommend either USPS or ipostal1. Both of those allow for a “real” street address (you don’t have to put “PO” on your mailing address. Anything public facing, or license related, you will use this address and not your personal one.

Step 4. Get an email address (and name).

I recommend gmail, because in my experience they make it easiest to funnel website traffic into the same place if you end up with a website and want to be [email protected].

Now, this is also the point you have to choose a business name. That isn’t one of the steps, technically, but I found it to be the hardest part of this entire process. You’ll want to think about hopes and goals. If you know for certain you want to stay in solo practice, your name is easiest. Its unlikely to be taken, depending on what it is. But if you think you may ever expand to anything else then you’ll want a name that can grow with you. I was amazed at how many things were taken by the time I was working on a name, even some things I thought were really obscure.

I’m a painfully thorough human, so for me the name involved searching for domain availability, running a trademark search, and then following up with google to see if I could find others using the name across the web. So I went through everything I could think of and finally landed on something that I just knew in my bones was right when I landed on it.

Once I had it, I started the trademark process, which took more than a year from start to finish but could be done faster than that. I didn’t put trademarking on this 10-step list because it’s not strictly necessary, but I can do another post about that if people are interested.

Anyway, once you’ve finalized your name you can work out your email address, either through an email service or your website domain, if you purchase one. 

A lot of questions come up about whether you need encrypted email, which is an additional service/expense. The answer to that will depend on the nature of your work. If you do anything clinical, this will be a necessary layer of protection for both of you. If you do strictly Court-Ordered work and your emails are purely administrative/scheduling, you can go a long way before encryption is necessary as long as you have HIPAA compliant fax because many will send records there, and the ones that send via email will send you through their own secure system for retrieval. 

Step 5. Register with your state.

The fun begins! You’re getting more and more official. I can’t run contingencies on paperwork in all 50 states so I’ll just say that I searched “register my LLC” and my state name, and then the first government website (Secretary of State) that came up, I navigated there. One quick account later using your fancy new Step 4 email address, and you’ll be ready to go. So begin the application and get ready to pay any fees.

There are some very professional sounding scams out there that will make you believe you need a 3rd party to file this for you. Anything, including your annual renewals, can all be done directly with your state. 

Step 6. Finalize your forms.

There is a false separation here from Step 5 because you need these forms as part of your registration. Depending on your state, they may require you to file them with your application or they may ask you to attest that you have and will keep them.

The first form you need is an Operating Agreement. You can find blank forms for this if you search that term; again, since I’m a painfully thorough human, I also watched YouTube videos of lawyers advising how to fill these out. If its just you then it’s just hard to imagine it matters much, unless you plan to sue yourself later. I’m sure there are attorneys reading this cringing but I couldn’t help but take a common sense approach here and say because I wasn’t involved with other people (in that case most definitely hire an attorney and do not do this yourself), I decided to save myself some cash and draft these docs myself.

The second form you need to fill out is called your Articles of Incorporation. That’s your name, contact info, number of people, category of your LLC, possibly the average work hours, and anticipated gross revenue. 

Once you fill this out and pay your fees, you are likely to receive a Certificate of Organization. That's your confirmation that you’re a real entity.

And that’s it. These 3 documents make up your corporate veil.

Step 7. File with the IRS for a federal EIN.

You’re in the home stretch! Use the info from steps 2-5 to go to the IRS and fill out an application online for a federal tax ID number. If you have a social security number it’s a pretty fast process and most of the time they’ll issue you a letter immediately. Again, don't get caught by scammers - you should be directly on a government site here. 

Step 8. Apply for your state tax ID number.

Again, every state is going to be different here. Some of them will make it easy and some may be absurdly antiquated. But basically, you are going to owe federal and state income taxes for the money your business brings in, and this is a great time to mention that we talk more about the different kinds of taxes here for those of you who aren’t very numbers oriented.

Step 9. Open business checking account.

It’s going to be cleanest if you open this in your business name with your EIN from Step 7. It will keep the finances clearly separated and gives legitimacy to your veil. Again, you’ll need the info from steps 2-5 for your application. Depending on your bank, I was able to do this all online. I chose a bank where I also have personal accounts to get certain account fees waived. And while I was at it I also opened a business credit card. I chose one with no interest for 20 months, which helped me feel a lot less pressure around startup costs because I could take a few months to get money coming in before clearing those balances.

Step 10. Check licensing obligations.

Hooray! you made it to the last step. You should check with your board to see if they require you to register your business with them. Ours does - we have to file an initial registration and then renew it (and pay a fee of course) annually.

Then…give yourself a huge celebration because you’re a real, independent entity! Good luck! If you need any more tips, encouragement, or support feel free to connect!

In sum, here are your 10 steps to open your LLC:

1. Financial tracking system
2. Phone number
3. Mailing address.
4. Email address.
5. State registration.
6. Forms: Operating agreement, Articles of Incorporation, Certificate of Organization.
7. Federal EIN.
8. State tax ID.
9. Business bank account
10. Check licensing body