The Ultimate Financial Checklist for Therapists Starting a Private Practice

As a therapist, your expertise lies in guiding others toward clarity and well-being. But when you decide to start your own private practice, you suddenly take on a second role: that of a business owner. It’s a rewarding journey, but the financial side of things can feel overwhelming and unfamiliar.

Don’t let it be.

Think of this checklist as your roadmap. By tackling these financial steps methodically, you can build a strong, sustainable foundation for your practice, giving you the peace of mind to focus on what you do best: caring for your clients.

Phase 1: Establishing Your Business Entity

This is the official groundwork for your practice.

• [ ] Choose a Business Structure: Decide if you will operate as a Sole Proprietorship or form an LLC (Limited Liability Company). An LLC is often preferred as it provides a legal separation between your personal and business assets. It's wise to consult with a legal professional for this step.

• [ ] Register Your Business: Register your practice name with the state of Utah and any required local authorities.

• [ ] Get Your EIN: Apply for an Employer Identification Number (EIN) from the IRS. It’s free, and it’s like a Social Security number for your business. You'll need it to open a business bank account.

Phase 2: Building Your Financial Foundation

This is about creating a separate financial home for your practice.

• [ ] Open a Business Bank Account: This is non-negotiable. All income from your practice should be deposited here, and all business expenses should be paid from this account. Do not co-mingle your personal and business funds.

• [ ] Get a Business Credit Card: Use this card exclusively for business expenses (e.g., office supplies, marketing, professional fees). This makes tracking your deductions incredibly simple.

• [ ] Set Up Accounting Software: Start with a professional, cloud-based accounting software like QuickBooks Online from day one. A spreadsheet will not be able to grow with your practice.

Phase 3: Managing Your Money

Now you'll set up the systems for cash flow and compliance.

• [ ] Set Your Rates: Determine your session fees. Research what other therapists in your area are charging to ensure your rates are competitive.

• [ ] Plan for Taxes: As a self-employed individual, you must pay your own taxes. Plan to set aside 25-30% of every payment you receive into a separate savings account specifically for your quarterly estimated tax payments to the IRS and the state.\

• [ ] Secure Insurance: Obtain professional liability (malpractice) insurance. This is essential for protecting you and your practice.

Phase 4: Creating Your Practice Systems

These are the repeatable processes that will keep your practice running smoothly.

• [ ] Choose a Practice Management System: Select an EHR/practice management software (like SimplePractice or TherapyNotes). These tools are vital for scheduling, notes, and billing, and many integrate with accounting software.

• [ ] Create a Simple Budget: List your expected monthly business expenses (rent, software, phone, insurance, etc.). This will help you understand the minimum income you need to generate each month.

• [ ] Consider Professional Help: You wouldn't advise a client to manage their mental health alone, and you don't have to manage your financial health alone either. Professional bookkeeping for therapists is a specialized service. A bookkeeper who understands the nuances of a private practice—from insurance payments to HIPAA compliance concerns—can be an invaluable partner on your journey.

Building a practice is a marathon, not a sprint. Take it one step at a time, and you will create a thriving business that is as financially healthy as the clients you serve.

Ready to get professional support for your practice's finances? Contact Ivory Balance Books today. We specialize in helping therapists build successful practices from the ground up.