Starting a Practice

How Much Does it Cost to Start a Therapy Practice?

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August 11, 2022
Bryce Warnes
Content Writer
Modern interior of therapy office

The cost of starting a therapy practice varies widely, depending on whether you’re going into private practice part-time or full-time, as well as the cost of certain expenses in your area (namely, office rent).

This article covers all the different one-time, monthly, and annual expenses you can anticipate paying to start a therapy practice, and the price range for each. Many of these expenses are tax deductible.

It starts with core expenses (must-haves) and moves on into optional expenses (nice-to-haves). 

Core expenses for starting a therapy practice

These core expenses apply to virtually every therapy practice—you really can’t do without them.

Office rent

If you’re starting a fully virtual therapy practice—meaning you’ll conduct all sessions over video chat—you may not need to rent an office outside of your home.

The number one priority should be your clients' privacy. If you’re doing sessions in a space shared with other members of your household, that could be compromised. 

But if you’re able to set up a room in your home or apartment dedicated to your online therapy practice, and offering adequate privacy, it’s a viable option. You’ll be able to take advantage of the home office tax deduction.

Otherwise, you’ll need to rent an office outside your home. The cost will depend upon whether you’re going into business part-time or full-time.

If you’re starting a part-time practice, you may be able to sublet furnished office space in your area on a part-time basis—either by the hour, or one day out of the week. Your best resource in this regard is your network. Do you know any local therapists with their own full-time practices? They may be willing to sublet their space to you part-time. 

Otherwise, you’ll need to rent your own full-time office space. Rent varies widely depending on location, and the best way to gauge the cost is to check online rental listings in your area.

Just a heads up: commercial landlords usually require a security deposit. Be prepared to pay the equivalent of one month’s rent as a deposit upfront, plus the cost of your first month’s rent.

Professional website

The cost of hosting a website with your own custom domain name starts at around $15 per month. This assumes you’re able and willing to design the site yourself using the web hosting service’s built-in design tools.

If you pay someone else to design your website for you, be prepared to pay considerably more—from hundreds to thousands of dollars—to have it built. If you do go this route, however, you may be able to lump in additional marketing services—such as a custom logo, SEO, or branded images for social media—when you hire a designer.

Business entity formation

By default, if you go into business for yourself, you are creating a sole proprietorship. For the purpose of taxes, debt, and legal liability, you and your business are identical.

Many therapists choose to create separate business entities. Having a separate legal entity—typically a limited liability company (LLC) or a single-member S corporation—may help protect your personal assets in the case of court proceedings or unpaid debt.

If you form an LLC, you’ll do so at the state level. Then, when it’s time to file federal taxes, you choose how your business will be treated by the IRS. A lot of therapists who form LLCs elect S corporation status when filing their taxes. 

The cost of forming an LLC depends upon which state you do business in. It can be as low as $40 (Kentucky), up to $3,000 (Tennessee, in certain cases). Generally, though, it’s in the $50 – $200 range. Find your state on this complete list of LLC filing fees.

Liability insurance

The cost and coverage of liability insurance varies widely. Some providers offer low-priced insurance to therapists who are just starting out. These options start at around $400 per year. Be prepared to pay the full cost of one year’s coverage up front.

According to Dr. Marie Fang, liability insurance can range to $1,000 per year and up. It will likely be your biggest expense, after rent.

Records management

To comply with HIPAA laws, you must securely store patient records.

 

Depending on personal preference, you may keep paper records, or use practice management software like SimplePractice that offers an electronic health record (EHR).

EHRs start at around $30 per month, and increase depending on the pricing package.

For HIPAA-compliant physical record storage, records must be stored under lock and key, safe from theft or tampering. If you have a part-time practice and you sublet your office space, you’ll need a portable file case with a lock that you can take home with you at the end of the day. Cases start at around $20, and a lock shouldn’t cost more than a few dollars.

If you rent your own office space, you may opt for a standup filing cabinet that can be locked. These start at around $100.

Optional expenses for starting a therapy practice

The expenses below are technically “optional,” meaning you could conceivably start a practice without them. But some of these items—such as a professional email account—come close to being indispensable.  

Bookkeeping and accounting

Hiring a bookkeeper to manage your day-to-day financials, plus an accountant to take care of your annual tax return, is one of the best investments you can make in your new business. 

A bookkeeper records and categorizes all your business transactions, and prepares reports that show you how your practice is performing. An accountant uses that information to help you file your taxes and take advantage of as many tax deductions as possible.

For a full explanation of these roles, and their cost, see our article on how to hire an accountant for your therapy practice.

Office furniture and decor

If you rent your own office for a full-time practice, you’ll need to furnish it. The cost of office furniture varies widely, from less expensive options—IKEA, Wayfair, and buying used—to pricey name brands. 

Whatever your tastes in furniture, be prepared to spend at least $1,000 setting up your office with key furnishings. Even if you aren’t able to buy everything you’d like for your office now, you can add furniture later on.

For the sake of getting started, focus on key pieces, like:

  • Waiting room chairs 
  • A waiting room table
  • Office chairs 
  • Office side tables
  • A desk (for doing remote sessions)
  • Cabinets or shelves (for storing books and therapeutic aids)

In addition to furniture, a few simple pieces of decor can make your office more comfortable, so clients feel at home. 

You may want to include:

  • Framed pictures or posters
  • Pillows and throw blankets
  • Rugs
  • Lamps
  • Potted plants
  • Scent diffusers

For basic decor, a budget of $100 - $200 should be enough.

Business phone line

Many therapists consider it essential to have a business number distinct from their personal number for calls with clients. The cost of an additional phone line starts at around $15 per month. 

If you’re not sure about making this purchase right away, consider tools like Google Voice to provide call forwarding, so you don’t need to make your personal number public.

HIPAA compliant email

With a few simple tweaks, you can make a professional gmail account compliant with HIPAA, and suitable for handling emails with clients. 

A professional gmail account through G Suite starts at $5 per month. If you have your own domain name, you can link it to G Suite (e.g. MyName@MyDomain.com).

Online directory listing

Listing your practice in an online directory like Psychology Today can help bring new clients to your practice, while making you easier to find through Google search results. 

A listing on Psychology Today starts at $30 per month, and comes with six months of free service for new members.

Business cards and flyers

Business cards and hand flyers are less important today than they were in the past. If you have a professional website, and if you’re listed in therapy directories, a potential client should only need to google your name to find you and get in touch.

However, if you feel business cards are necessary, they shouldn’t be a major expense. With services like VistaPrint frequently offering 50% off sales, you can spend as little as $10 to have a small set of business cards printed and delivered. 

While some costs associated with starting a therapy practice are one-time expenses, others—like rent—are monthly. A budget helps you plan your expenses, and make sure you always have enough cash on hand to cover costs. 

Learn more about how to build a budget for your therapy practice.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

Bryce Warnes is a West Coast writer specializing in small business finances.

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