You've built your clinical skills, logged your hours, and earned your license. Now you're ready to open your own practice - but the non-clinical side feels overwhelming.
Here's the thing: starting a private practice doesn't require an MBA or a miracle. It requires a clear roadmap and the willingness to build one system at a time.
This guide walks you through the legal, clinical, and operational essentials you need to launch safely and sustainably. You'll learn how to set your foundation, choose your tools, price your services, and avoid the most common pitfalls that derail new practice owners.
TL;DR
- Verify licensure and scope: Confirm you can practice independently in your state, understand telehealth and cross-state rules, and stay within your competencies.
- Formalize your business structure: Choose an entity (LLC, PLLC, sole proprietor), obtain an EIN and NPI, and secure professional liability insurance with cyber and HIPAA protections.
- Price transparently and decide your payer mix: Set fees based on your market and expertise, decide whether to panel with insurers or be private pay, and follow the No Surprises Act for Good Faith Estimates.
- Build simple systems from day one: Use a separate business bank account, a HIPAA-compliant EHR, a card-on-file policy, and clear client agreements to reduce administrative chaos.
- Protect your time and your license: Write enforceable policies for cancellations, no-shows, and after-hours contact, and schedule regular consultation to stay sharp and compliant.
Check Your Fit: Readiness and Vision for Private Practice
Before you file paperwork or sign a lease, pause and clarify why you're doing this.
Starting a private practice offers autonomy and flexibility, but it also demands discipline and self-direction.
Ask yourself whether you're ready to handle your own marketing, billing, scheduling, and risk management - or willing to outsource and pay for support.
Define Your Clinical Focus
Start by naming your clinical strengths and the populations you serve best. Identify your ideal client and the issues you're most competent to treat.
A clear niche makes marketing easier, referrals more targeted, and clinical work more satisfying.
Decide your service mix early:
- Individual, couples, family, or group therapy
- In-person, telehealth, or hybrid
- Standard 50-minute sessions or longer formats
- Specialty modalities like EMDR, DBT, or perinatal work
Set boundaries for your weekly capacity, your availability windows, and your fee structure.
When starting a private therapy practice, you also must plan to maintain ongoing consultation or supervision for complex cases, even after you're fully licensed.
Licensure, Supervision, Scope, and Telehealth Rules
Once you’ve got a clear vision for your private practice, the next step is considering licensing issues.
Practice Authority
Confirm you hold independent practice status in your state.
Some states require post-licensure supervision for a defined period, even after you're fully licensed. Create a system to keep written documentation of any supervision or consultation arrangements you maintain.
Cross-State and Telehealth Compliance
Telehealth is governed by the state where your client is located at the time of service, not where you're sitting. You must hold an active license in that state unless you're authorized under an interstate compact.
For interstate practice, review eligibility for:
- Counseling Compact for LPCs
- Social Work Compact for LCSWs and LMSWs
- PSYPACT for psychologists
Check state-specific telehealth consent requirements, documentation standards, and any restrictions on modality or population.
Some states require you to establish a treatment relationship in person before offering telehealth.
Scope and Consent
Practice only within your license scope and documented training.
Maintain clear, state-compliant informed consent that covers fees, confidentiality limits, telehealth risks, cancellation policies, and emergency procedures.
If you're billing insurance, document medical necessity and functional impairment for every session.
Business Structure and Registrations for Starting a Private Practice
Here’s what you need to know about the business and tax registration side of starting your private practice.
Entity Choices
Most therapists start as a sole proprietor, an LLC, or a professional limited liability company (PLLC).
Each structure offers different levels of liability protection and tax treatment. Some states require licensed professionals to form a PLLC or professional corporation rather than a standard LLC.
Compare your options:
- Sole proprietor: Simple, low cost, no separation between personal and business liability.
- LLC or PLLC: Liability protection, flexible tax treatment, required in many states for licensed professionals.
- Professional corporation: More complexity, required in some states, offers a liability shield.
Always consult a CPA or attorney in your state before you file.
Choose a business name that complies with state professional naming rules and check availability with your Secretary of State.
IDs and Filings
You'll need an Employer Identification Number (EIN) from the IRS when starting a private practice, even if you don't have employees. Use it to open a business bank account and file taxes.
Apply for a National Provider Identifier (NPI) Type 1 as an individual clinician. If you plan to bill as a group or hire other providers, you'll also need an NPI Type 2.
Register with your state and local agencies as required. This may include business registration, professional licensing boards, and tax authorities.
Choose a registered agent if your state requires one for your entity type. You’ll also want to choose an accounting software program for therapists.
If you're credentialing with insurance panels, start a CAQH profile early and consider using a credentialing service for mental health providers - it takes time.
Risk Management, HIPAA, and Insurance Coverage
Getting set up for HIPAA compliance and insurance coverage is a vital step in starting a private practice.
Coverage Types
Professional liability insurance is non-negotiable. Standard policies offer $1 million per claim and $3 million aggregate.
If you maintain a physical office, add general liability to cover slips, falls, and property damage.
Cyber liability protects you from data breaches, ransomware, and HIPAA violations.
HIPAA Essentials
HIPAA's Privacy and Security Rules apply to all protected health information (PHI), whether you're a solo clinician or a group practice.
You must sign Business Associate Agreements (BAAs) with every vendor that handles PHI, including your EHR, telehealth platform, email provider, and e-fax service.
For record keeping, use encryption for email and file storage, strong passwords with two-factor authentication, and access controls that limit who can view records.
Follow state record retention timelines, create a written breach response protocol, and train yourself and any staff on minimum necessary access.
Pricing, Payer Strategy, and Client Financial Transparency
Now, let’s take a look at money considerations. These steps are vital, as financial challenges are common in the first few years of setting up a private therapy practice.
Set Your Rate
Here are some tips for setting and communicating your rate:
- Price your services based on your training, expertise, local market rates, and operating costs.
- Research what other therapists in your area charge for similar services and experience levels.
- Publish your fees on your website or discuss them transparently during intake calls.
Under the No Surprises Act, you must provide a Good Faith Estimate to uninsured and self-pay clients before their first session. The estimate should include your session fee, frequency of care, and expected duration of treatment.
Insurance vs. Private Pay
Decide early whether you'll accept insurance, stay private pay, or operate out-of-network.
Each model has trade-offs in cash flow, administrative burden, and client accessibility.
If you're paneling with insurers:
- Complete your CAQH profile with accurate credentialing data.
- Submit applications to each payer individually.
- Set up EDI (electronic data interchange), ERA (electronic remittance advice), and EFT (electronic funds transfer) for claims and payments.
- Verify Medicare eligibility (if you're an LCSW, LMFT, or LMHC and want to serve older adults).
If you're staying out-of-network or private pay, provide superbills so clients can submit for reimbursement.
Write clear sliding scale and financial hardship policies if you offer reduced fees, and apply them consistently.
Client Payments in Private Practice
It’s best practice to collect payment at the time of service using a card on file. This reduces unpaid balances and simplifies your accounts receivable.
Be sure to use a HIPAA-compliant payment processor integrated with your EHR or practice management system.
Document your cancellation, no-show, and late payment policies in your informed consent and enforce them consistently.
Banking, Bookkeeping, and Taxes
Managing accounts and taxes isn’t the most enjoyable part of running a private mental health practice, but it must be done!
Here are some tips to get you started right.
Money Systems
Open a separate business bank account and use it exclusively for practice income and expenses. Don't mix personal and business transactions.
Use simple bookkeeping software like QuickBooks or Wave to track income, expenses, and mileage. Be sure to reconcile your accounts monthly and monitor your accounts receivable.
Tax Basics
Set aside 25-35% of your income for quarterly estimated taxes, including federal and state income tax and self-employment tax.
Understand which business expenses are deductible, including office rent, liability insurance, continuing education, and software subscriptions. If you work from home, review IRS rules for the home office deduction - it requires exclusive, regular business use of a defined space.
You may want to consult a CPA who works with therapists to discuss S corporation election, payroll setup, and retirement contributions. An S corp can reduce self-employment tax if your income supports it, but it adds payroll complexity.
Stability and Benefits
Choose a retirement plan such as a SEP IRA or Solo 401(k) to build long-term financial security.
It’s always best to maintain an emergency reserve of three to six months' operating expenses, so you’re prepared to handle any unexpected life events.
Documenting a written budget to track fixed and variable costs can help to maintain a predictable cash flow.
Space and Tech Stack for Private Practice
One of the best parts of starting a private practice is that you get to set up your workspace and tech just how you like it.
Physical Office
If you're leasing office space, review lease terms carefully. Clarify rules for subletting, signage, and shared waiting areas.
Ensure you provide a calming office space that offers privacy, soundproofing, and ADA-compliant access. Consider safety features like controlled entry, lighting, parking proximity, and an exit plan for high-risk situations.
Shared office suites and sublet arrangements can reduce overhead, but verify that your lease allows you to practice independently and that the space meets HIPAA security requirements.
Telehealth Setup
Choose a HIPAA-compliant telehealth platform and sign a BAA with the vendor. Also, be sure to use a high-quality webcam, external microphone, and stable internet connection.
Set telehealth-specific informed consent that addresses technology risks, emergency protocols, and cross-state licensure.
Document your emergency response plan for telehealth sessions, including how you'll verify the client's location and contact emergency services if needed.
Core Software Tools for Private Practice
Select an EHR for mental health practice that includes scheduling, progress notes, e-claims submission, appointment reminders, and secure messaging.
Use a HIPAA-compliant phone line (or a service like Google Voice configured with a BAA) and a secure e-fax provider. Set a professional voicemail disclaimer that clarifies you don't monitor messages in real time and directs callers to emergency services if needed.
AI scribes like Supanote are a great way to reduce the time you spend on administration.
Supanote is an AI scribe designed specifically for therapists, counselors, and behavioral health clinicians. It captures session content and generates structured progress notes that meet payer and compliance requirements, reducing documentation time and note backlog without compromising clinical quality.
Clinical Operations: Intake, Notes, Coding, and Safety
Now, let’s take a more detailed look at note-taking and operational issues to consider when starting a private practice.
Intake Workflow
Define your intake process from first inquiry to first session. A typical flow includes an initial phone call or email, a scheduling link, and pre-session paperwork sent through your client portal.
Collect informed consent, HIPAA notice, financial agreement, demographic and insurance information, and payment method before the first appointment.
Automate as much as possible using EHR intake forms, online scheduling, secure document signing, and an AI scribe for therapists. This reduces manual data entry and ensures you have everything you need before the client walks in or logs on.
Documentation and Coding
Use structured templates for intake assessments, progress notes, and treatment plans.
Structured templates ensure that you always document the chief complaint, mental status, risk assessment, diagnosis, interventions, client response, and the plan for the next session. They also help you apply ICD-10 codes accurately based on clinical presentation and medical necessity.
Use the correct CPT codes, for example:
- 90791: Diagnostic interview (no medical services)
- 90834: 38-52 minutes of psychotherapy
- 90837: 53+ minutes of psychotherapy
Include the appropriate place of service (POS) code - 02 for telehealth or 11 for office - and telehealth modifiers (95, GT, or state-specific) when billing remotely. Review payer-specific rules, as telehealth coding varies by insurer and state.
Risk and Legal Duties
Assess suicide risk at intake and any time a client's presentation changes. Use validated tools like the Columbia Suicide Severity Rating Scale (C-SSRS) to document risk level and create safety plans with escalation steps.
Follow your state's mandated reporting laws for child abuse, elder abuse, and dependent adult abuse. Understand the rules around breaking confidentiality when a client poses a serious threat to an identifiable third party.
If you treat substance use disorders, you must comply with 42 CFR Part 2, which imposes stricter confidentiality protections than HIPAA. Don't assume that standard HIPAA rules apply to SUD records without reviewing relevant federal regulations.
Special Populations and Sharing Information
Define confidentiality boundaries clearly in couples and family therapy. Clarify what information you will and won't share if one partner contacts you individually.
For minors, understand your state's rules on parent access to records, minor consent for treatment, and confidentiality protections for adolescents.
Set clear policies for coordinating care with psychiatrists and primary care providers, and obtain signed releases of information (ROIs) before sharing clinical data.
Policies and Boundaries that Protect You and Clients
Following policies and enforcing boundaries is important in group and agency practice. However, when you start your own private therapy practice, setting these ground rules is entirely your responsibility.
Scheduling and Caseload
Here are some tips for managing scheduling and caseload:
- Set a realistic weekly capacity based on your clinical hours, admin time, and personal needs.
- Use scheduling buffers between sessions to reduce note backlog and prevent therapist burnout.
- Create a waitlist protocol for when you're at capacity, including referral options and estimated wait times.
Financial and Attendance
Write clear cancellation and no-show policies in your informed consent. Standard practice is to require 24-48 hours' notice for cancellations and to charge the full fee for missed appointments.
Require a card on file and collect payment at the time of service. Outline your policies for refunds, deposits, and late fees, and apply them consistently.
Communication Boundaries
Best practices for communication boundaries in private practice include:
- Define your response times for messages and the secure channels clients should use to reach you.
- Set expectations for after-hours contact and provide clear crisis instructions, including local emergency numbers and crisis hotlines.
- Write a social media policy that prohibits sending friend requests or engaging with clients online.
- Clarify if and how you will accept client testimonials or reviews.
Ethical Marketing for Private Practice
Lots of therapists feel uncomfortable with marketing. But if you want a profitable practice, you’ll need a detailed plan for getting clients.
Below are some basic tips. For more detailed instructions, see our Complete Guide to Marketing for Therapists.
Positioning and Message
Positioning and messaging are about telling prospective clients what you do and why they should choose you.
Here are some guidelines to get you started:
- Define your niche and the outcomes your clients seek.
- Use plain, accessible language and avoid jargon or clinical acronyms.
- Write inclusive, trauma-informed marketing copy that reflects the populations you serve.
- Never guarantee specific results or make claims you can't support clinically.
Visibility Basics
Create a simple website with clear information about your services, fees, availability, and contact details.
Set up a Google Business Profile so you appear in local search results, and list your practice in one or two therapist directories, like Psychology Today or TherapyDen.
You might like to add location-specific pages to your website if you serve multiple cities or neighborhoods and want to improve local search engine optimization (SEO).
Referrals and Outreach
Referrals are one of the best ways to fill your books.
Effective outreach strategies to encourage referrals include:
- Build relationships with primary care providers, psychiatrists, school counselors, and community organizations that serve your target population.
- Share de-identified information about the kinds of clients you work with and the issues you specialize in.
- Secure signed ROIs when coordinating care or sharing clinical updates.
- Track your referral sources and send thank-you notes or follow-ups to referrers who send clients your way.
Quality Improvement and Professional Growth
While the initial stages of starting your private practice will be focused on daily operations, it’s important to set a strong foundation early on for long-term growth.
These three strategies will help you keep moving on an upward trajectory.
Measure Client Progress
Use brief outcome measures like the PHQ-9 for depression, GAD-7 for anxiety, and PCL-5 for trauma symptoms. Administer them at intake and periodically throughout treatment to track progress and adjust your treatment plans.
Keep Your Edge
Join a peer consultation group to discuss complex cases, ethical dilemmas, and practice challenges. Choose continuing education that matches your current caseload and fills gaps in your training.
Sustainability
Watch for burnout cues like irritability, exhaustion, and reduced empathy. Adjust your caseload, raise your fees, or reduce your weekly hours if you're consistently overwhelmed. Clarify vacation and coverage plans in your informed consent, and give clients advance notice when you'll be unavailable.
Avoidable Pitfalls When Starting a Private Practice
Here are some frequent mistakes made by therapists starting a private practice, and how you can avoid them.
Common Missteps
The most common missteps made by therapists new to private practice include:
- Underpricing services or overpaneling with low-reimbursement insurers (strains cash flow and leads to resentment.
- Open doors without finalized informed consent, financial agreements, and office policies.
- Ignoring telehealth and cross-state licensure rules (this can result in fines or licensure complaints).
- Upcoding or undercoding CPT and ICD-10 codes (creates audit risk and payment errors).
- Letting no-shows and late cancellations erode your schedule (reduces income and creates gaps you can't fill).
Simple Fixes
Many of the things we’ve discussed throughout this guide avoid the problems described above:
- Collect payment at the time of service with a card on file and a clear financial policy.
- Use only HIPAA-compliant tools with signed BAAs.
- Schedule regular consultation and admin time to stay on top of documentation, billing, and professional development.
- Verify insurance benefits and deductibles before the first visit to avoid surprise bills and client dissatisfaction.
State and Specialty Nuances to Watch
The final thing to note when starting a private practice is to always double-check state and specialty-specific aspects of starting a private therapy practice.
State Variations
Licensure titles, independent practice requirements, and supervision rules vary widely by state. Telehealth consent, place-of-service codes, and telehealth modifiers can also differ by payer and state regulations.
Record retention timelines and minors' confidentiality rights are state-specific, so consult your licensing board and a healthcare attorney when in doubt.
Specialty-Specific Considerations
If you provide psychological testing, treat substance use disorders, or offer perinatal mental health services, expect additional regulatory and documentation requirements.
Modalities like EMDR and ERP may affect session length and CPT coding.
Forensic evaluations and custody assessments require distinct informed consent, fee structures, and documentation standards separate from standard therapy work.
Clarity is Key
Starting a private practice is doable when you break it into clear, sequential steps.
Set your legal and clinical foundations first - licensure, business structure, liability insurance, and HIPAA compliance. Then, choose simple systems you can maintain without a full-time assistant, and write policies that protect both you and your clients.
Keep learning, consult often, and measure what matters. Build your caseload slowly, serve your clients well, and adjust your systems as you grow. The rest follows.
FAQs About How to Start a Private Practice
Do I need an LLC to start a private practice as a therapist?
Not always. You can operate as a sole proprietor, but many states require licensed professionals to form a PLLC or professional corporation for liability protection. Consult a CPA or attorney in your state to choose the right structure.
How much does professional liability insurance cost for therapists?
Most therapists pay $500 to $1,500 annually for professional liability insurance with $1 million per claim and $3 million aggregate coverage. Rates vary by state, specialty, and claims history.
Can I see clients in another state via telehealth?
Only if you hold an active license in the state where the client is located during the session. Interstate compacts like PSYPACT, the Counseling Compact, and the Social Work Compact allow some clinicians to practice across member states without additional licenses.
Should I accept insurance or stay private pay?
It depends on your financial goals, target population, and tolerance for administrative work. Insurance panels offer steady referrals but involve credentialing, claims management, and lower reimbursement rates. Private pay offers higher fees and simpler billing but requires stronger marketing and a client base that can afford your rates.
Do I need to verify insurance benefits before every session?
Yes, especially for new clients. Verify coverage, deductible status, copay amounts, and session limits before the first appointment. Many policies require preauthorization for ongoing therapy, and benefits can change mid-year. Verifying upfront prevents surprise bills, claim denials, and frustrated clients who thought they had coverage.
What CPT code should I use for a 50-minute therapy session?
Use 90834 for a 38-52 minute individual psychotherapy session. For sessions lasting 53 minutes or longer, use 90837. Always document the start and end time in your progress note to support the code you bill.
Do I need a separate business bank account for my private practice?
Yes. Mixing personal and business finances creates accounting headaches, complicates tax filing, and weakens liability protection if you've formed an LLC or PLLC. Open a dedicated business account as soon as you have your EIN.
What's the best EHR for a solo therapist?
This article breaks down the 8 best EHRs for solo practitioners. Look for scheduling, secure messaging, progress notes, e-claims submission, and telehealth integration. Choose one that fits your workflow and budget.
How do I handle a client who doesn't show up for a session?
Enforce your no-show policy as written in your informed consent. Most therapists charge the full session fee for missed appointments without advance notice. Use a card on file to process the charge and document the no-show in your EHR.
What's a Good Faith Estimate under the No Surprises Act?
It's a written estimate of expected charges that you must provide to uninsured and self-pay clients before treatment begins. Include your session fee, expected frequency, and estimated duration of care.
How do I protect client confidentiality when working from home?
Use a private room with a closed door, a white noise machine, and headphones if others are home. Ensure your telehealth platform and EHR are HIPAA-compliant with signed BAAs. Lock your computer when not in use and encrypt all devices that store PHI.