Every guide to starting a private practice is a checklist, and every checklist has the same problem: it presents twenty items as though they are equally urgent. They are not. Some take five minutes and some take six months, and the only thing that really matters in the first week is knowing which is which.
So here it is ordered by lead time rather than by category.
Start these now, because they take months
Insurance credentialing, if you intend to take insurance. Three to six months per commercial payer is realistic, and Medicaid and Medicare often run longer. It is also almost entirely out of your hands once submitted, which is exactly why it should be the first thing you start and not the thing you get to after the website.
The sequence inside it matters too. Get your NPI early, because payers will require it on your CAQH profile before they process anything, and a complete CAQH profile is what every application pulls from. We went through the three routes, what each costs, and who ends up owning the contract in insurance credentialing for therapists.
Anything your state licensing board or state law requires of a practice rather than a person. This varies enormously and it is the one area where general advice is actively dangerous. Some states restrict which entity types licensed professionals may use. California is the clearest example: its corporations code bars limited liability companies from rendering professional services, and the definition covers professions licensed under the Board of Behavioral Sciences, so an LMFT, LCSW or LPCC there cannot use an LLC. That does not mean you must incorporate. Sole proprietorship remains available, and most solo California therapists use it. If you do want a corporate entity in California, it has to be a professional corporation. Check your own board and your own secretary of state before you file anything.
A lease, if you want a physical room. Not because signing takes long, but because finding a room that is quiet, private, accessible and near where your clients actually live takes longer than people expect, and the alternative is committing to a bad room for a year.
The things that take an afternoon
These get treated as milestones and they are closer to admin.
An EIN from the IRS is free and issued immediately through the online application, with two caveats worth knowing before you sit down to it: the online tool is only open during set hours rather than around the clock, and you get one EIN per responsible party per day in a single uninterrupted session. You need it to open a business bank account and it keeps your social security number off your paperwork.
An NPI through NPPES is free. A Type 1 NPI is you, the individual clinician. A Type 2 is the organisation, which you need if you incorporate and bill as an entity rather than as yourself. Sole proprietors hold only a Type 1, but if you form an entity and bill under it you will want both.
A business bank account. Separate from personal, from day one, with no exceptions. Mixing them is the single most common way a therapist loses the liability protection they paid to set up, and it makes the first tax return significantly worse.
Malpractice insurance. Quotes come back quickly and for a solo therapist it is often a few hundred dollars a year, with some carriers advertising rates under $200 for counselors. Get it before you see anyone.
What it actually costs
Published estimates vary a lot, which is itself the useful finding: the range is driven almost entirely by whether you rent a room and how much you outsource.
| EIN | Free, issued immediately |
| NPI | Free |
| CAQH profile | Free |
| Entity formation | State filing fee, commonly under $500 and in some states well under |
| Malpractice insurance | Often a few hundred a year for a solo therapist; some carriers advertise under $200 |
| EHR and practice management | Roughly $30–$80 a month solo |
| Credentialing service, if used | Around $100–$200 per payer |
| Website | $100–$300 a year for domain and hosting, more if built for you |
| Telehealth-only, first year | Anywhere from about $500 to $7,000 depending on the source and the choices |
| With a physical room, first year | Roughly $5,000–$16,000, higher for a dedicated office |
Treat the bottom two rows as very wide ranges, because the published estimates disagree with each other and in one case with themselves. Heard puts telehealth-only startup at $1,500–$3,000 and in-person at $5,000–$10,000. Allyssa Powers’ 2026 breakdown gives $2,600–$6,900 telehealth and $6,900–$16,200 for a shared in-person office in one table, while a second table in the same article puts telehealth-only at $500–$3,000 for an insurance-based practice and $1,000–$5,000 for private pay.
The middle rows are the more useful part, and note that most of them trace to a single source. The genuinely unavoidable costs are small: a state filing fee, malpractice cover and an EHR subscription. Everything above that is a decision about how much you outsource.
The HIPAA parts that are not optional
Solo practice does not exempt you from anything, and the traps are mostly in ordinary tools.
Any service that handles protected health information on your behalf needs a business associate agreement. That covers your EHR, your email, your video platform and your fax.
Payments are a more nuanced case than most guides suggest. HIPAA carves out the activity of authorising, processing, clearing and settling payments, so a processor doing only that is not automatically a business associate. What matters is whether the tool is also touching appointment or clinical information. Some processors do sign BAAs, Square among them; others do not, PayPal among them; and for several popular consumer apps there is no clear published position either way, which is its own reason not to use them.
The practical version: choose an EHR that bundles scheduling, notes, telehealth and payments under one agreement, and resist the urge to bolt consumer tools onto the edges of it. If you do use a separate processor, confirm in writing whether it will sign a BAA rather than assuming either way.
What you can defer
A logo. Branded stationery. A second location. A group practice structure. An email newsletter. Any software you are buying because it is what an established practice uses.
One thing worth doing earlier than most people do, though, is claiming your name. Register the domain and, if you will be seeing clients in person, set up a Google Business Profile even if the website is one page for now. Both take an afternoon, both accumulate value slowly rather than instantly, and both are more annoying to sort out later when the name you wanted has gone.
Common questions
How long does it take to start a private practice?
Two to four months is a reasonable estimate for a private-pay practice. If you intend to take insurance, the timeline is set by credentialing rather than by anything you control, which commonly runs three to six months per commercial payer and longer for Medicaid and Medicare. Start credentialing first and build everything else while it sits in a queue.
How much does it cost to start a private practice?
Published 2026 estimates vary widely, from around $500 at the low end to about $7,000 for a telehealth-only first year, and roughly $5,000 to $16,000 or more in person with a dedicated office. The spread comes down to whether you rent a room and how much you outsource. The genuinely unavoidable items are small: a state filing fee, malpractice insurance and an EHR subscription.
Do I need an LLC or a PLLC?
It depends on your state, and this is the part where generic advice causes real problems. Some states restrict which entities licensed professionals may use. California bars limited liability companies from rendering professional services, which covers professions licensed under its Board of Behavioral Sciences, so a California LMFT, LCSW or LPCC cannot use an LLC. That does not force you to incorporate, since sole proprietorship remains available and is what most solo California therapists use. Check your licensing board and your secretary of state before filing.
What is the difference between a Type 1 and Type 2 NPI?
Type 1 is you as an individual clinician. Type 2 is the organisation. A sole proprietor holds only a Type 1. If you form an entity and bill under it, you will generally want both. Both are free through NPPES.
Do I need malpractice insurance as a solo therapist?
Yes, and get it before your first session. For a solo therapist it is often a few hundred dollars a year, and some carriers advertise counselor rates under $200, which makes it one of the cheapest risks you will ever retire.
Should I take insurance or go private pay?
Insurance fills a calendar faster because the client pays less at the point of care and the payer directory does some of the finding. Private pay generally pays more per session and gives you control of your rate, but the client has to choose you specifically, which takes visibility you have to build. Many practices run both and shift the mix over time.
The part nobody schedules
Everything above gets you licensed, insured, compliant and able to be paid. None of it produces a single client.
That is the gap most new practices fall into. The administrative work has clear steps and visible completion, so it absorbs all the attention, and then the practice opens to an empty calendar and the owner starts thinking about marketing from a standing start with no runway left.
The fix is to run the two in parallel. While credentialing sits in a queue for four months, that is the time to get the website up, the profile claimed, and a first directory listing written properly. All of those take weeks to start working, which means starting them during the wait costs you nothing and starting them after costs you a quarter.
We wrote about the order that actually fills a caseload in how to get clients as a therapist, and about which directories are worth paying for in the directory comparison. If you would rather have someone else build that side while you get the practice open, that is what we do for private practices, and the audit is free.
A note on scope
We are a marketing agency for mental health clinics, not lawyers or accountants. Entity structure, tax treatment, HIPAA obligations and licensing requirements are state-specific and change, and most of the figures above come from two published 2026 guides rather than from quotes for your situation. Check anything structural with your own attorney, your accountant and your licensing board before acting on it.
Sources
Timelines and cost ranges from Heard’s guide to starting a private practice and Allyssa Powers’ 2026 startup cost breakdown, which are the two sources compared above. California entity restrictions from California Corporations Code section 17701.04. EIN process from the IRS online EIN application. NPI entity types from CMS form 10114. Last reviewed August 2026.
