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Starting your own practice

3 min read

A practice opens safely when the legal structure, startup budget, working capital, staffing, location, equipment, and technology all support the same operating model.

BUILD IN SEQUENCE

1 · Entity and permissions. Business formation is governed by state law, and professional-practice rules can limit which entity types or owners are allowed. Federal tax classification is a separate decision: the IRS generally treats a one-owner domestic LLC as disregarded and a multi-owner LLC as a partnership unless it elects corporate treatment. Form the state entity first, then obtain the EIN; the IRS issues EINs free. Use a health-care attorney and CPA to coordinate ownership, governance, tax treatment, contracts, licensing, and liability coverage.

2 · Economics and financing. Build a source-and-use schedule for one-time launch costs, equipment and deposits, pre-opening payroll, professional fees, technology, marketing, insurance, and working capital. Then model monthly fixed costs, variable costs per visit, expected collections by payer, debt service, and owner pay. The SBA treats cash needed to cover early operating deficits as part of startup funding—not as an afterthought.

PeopleDefine the first roles from the actual workflow: scheduling, registration, clinical support, prior authorization, coding, billing, collections, and practice management.
PlaceTest patient need, referral access, payer mix, competition, commute, visibility, accessibility, zoning, lease obligations, and expansion options.
EquipmentSeparate must-have clinical and safety equipment from capacity that can be leased, shared, outsourced, or added after demand is proven.
SystemsSelect an EHR, practice-management platform, clearinghouse, phones, payments, cybersecurity controls, and reporting that work together.

3 · Hire deliberately. An employee requires payroll, withholding, employment-tax reporting, onboarding, supervision, and applicable state and federal compliance. The IRS says the practice must correctly classify each worker before treating someone as an independent contractor. Budget the full role cost—not wages alone—and preserve backup coverage for billing and front-desk functions.

No universal startup-cost numberSpecialty, build-out, equipment, staffing, ownership model, and market can change the capital need dramatically. Replace online averages with written bids, a negotiated lease, insurance quotes, a payer-specific collections model, and a working-capital reserve sized to your launch plan.

Your next steps

  1. Create a one-page model: services, patients, payers, location, staffing, and owner role.
  2. Build a launch budget plus monthly downside, base, and upside cash-flow cases.
  3. Set written go/no-go gates for licensing, credentialing, financing, lease, insurance, staffing, systems, and cash reserves.

Check your understanding

Select each question to reveal the answer.

✓ No. State formation and federal tax classification are related but separate decisions.
✓ Working capital to cover early operating deficits before collections reliably cover expenses.
✓ No. Worker classification depends on the facts and applicable law.
✓ Its own written bids, lease terms, staffing plan, insurance quotes, payer assumptions, and cash-flow model—not a national average.

Planning questions

  1. What are your one-time launch uses, financing sources, monthly fixed costs, variable costs, and working-capital reserve under three scenarios?
  2. Which launch gate is currently least developed: entity, license, credentialing, financing, location, staffing, equipment, insurance, technology, or cash reserve?

Sources