Planning to start your own physical therapy practice? Consider creating a “to do” list as the first step.

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Even for a simple solo practice based in your home, startup is complex. You’ll need to form and register your business, build a budget, and put in place all the back office processes—like bookkeeping, accounting, and billing—that keep revenue flowing smoothly.

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If you’re planning to rent or buy a brick-and-mortar location and hire staff, you can expect more complexity, more work, and more expenses.

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The good news? Your “to do” list keeps everything in order. And by outsourcing tasks like bookkeeping and accounting, you can free up more time to focus on getting your practice off the ground.

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Here’s how to get started.

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Before you begin

Before diving into technical details—like business structures, bookkeeping, and billing—take time to decide on the fundamentals of how your practice will run.

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That includes: 

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• What your niche is. Your niche determines your target market. Will you focus on post-surgical rehabilitation, workplace injuries, pediatrics, geriatrics, sports injuries, or any other particular form of treatment? Deciding that now helps you make important decisions, like where you will locate your PT practice and what type of equipment you’ll buy. It also shapes how you market your practice later on.

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• Whether you’re going solo or starting a group practice. Generally, this guide assumes you’re starting your practice without employees or business partners. But if you are planning to hire practitioners or partner with other PTs, plan on more time setting up payroll, staff management, and a multi-member structure like an S corp or a partnership.

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• Your location. If you intend to run your PT practice out of your home, plan on making renovations to create a space where you can see clients. If you plan to rent a space, that will affect your startup budget and add new steps like signing a lease. Even if you launch a mobile practice and see clients in their homes or care facilities, you must plan on using a business vehicle.

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• How you’re paying for it. You may be able to launch a simple, home-based practice with limited services for as little as $10,000. But launching a full-fledged practice in a rented space may run your launch budget up to six figures. Before starting, consider your options in terms of loans, lines of credit, and other funding sources. 

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If you’ve considered these factors but you’re still hazy on the details, it could mean you’re not quite ready to launch your own practice. Take more time to research the market and assess your professional goals. You may benefit from hiring a consultant to help you make concrete plans.

Build a startup budget for your physical therapy practice

Your startup budget will vary widely depending on the size of your practice and the services you will offer. 

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Some major expenses to consider:

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• Rent
• Renovations
• Furniture
• Equipment

• Insurance

• Bookkeeping and accounting fees

• Legal consultation
• Business registration
• Banking fees

• Electronic health records (EHR), scheduling, invoicing, and other software subscriptions
• Marketing, advertising, and signage 
• Continuing education requirements
• Membership in professional organizations 
• Payroll services
• Wages and salaries (if you hire employees or contractors)
• Professional website
• Directory listings
• A business vehicle (if travelling to treat clients)

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Create two budgets:

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• One for startup expenses you need to cover immediately, such as first and last month rent and damage deposit, equipment, business registration, and insurance;
• Another for monthly fees, including rent, financing or loan payments, and accounting and bookkeeping fees.

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It’s good practice to calculate both the amount you need to launch your practice and the amount you will need to spend during your first 12 months in operation.

Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is necessary even if you don’t have employees. You will use it to open a business bank account and register a business entity.

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You can think of an EIN like an SSN for your business. The IRS uses your EIN to track your tax filings and payments.

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Luckily, an EIN costs nothing, and you can apply for one online.

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Get an National Provider Identifier number (NPI)

Your National Provider Identifier number (NPI) is essential if you plan to become credentialed and bill insurance.

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However, even if you plan to launch a cash-pay-only practice, you will need an NPI for out-of-network billing. 

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An NPI number is a ten-digit code, and you can apply for one online.

File a Doing Business As name (DBA), if necessary

If you plan to operate under your own name alone, you do not need a doing business as (DBA) name. If you plan to add anything on to your name, or operate under a business name, you must register a DBA.

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For example, you would not need to register a DBA in order to operate as “Juan Perez,” but you would need to register a DBA in order to operate as “Juan Perez Physiotherapy” or “West Hills Physiotherapy Clinic.”

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The cost of registering a DBA varies from state to state. For more info, see your Secretary of State’s website.

Set up a legal entity that protects you

The moment you start working as a self-employed physiotherapist and earning and income, the IRS considers you a sole proprietor.

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As a sole proprietor, your person and your business are identical. You file one tax return for both you and your business, reporting business revenue and expenses on Schedule C of Form 1040.

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Because you and your business are one and the same, if your business owes any debts, you are personally liable for those debts. Similarly, if someone sues your business, they sue you personally.

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Registering a separate business entity gives you added protection. Your person and your business are then considered legally separate entities. 

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In theory, if a lender tries to collect on one of your business’s debts, or if someone sues your business, they will only impact your business and its assets. Your personal assets remain protected.

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In practice, this protection is provisional. Your assets are only protected if you meet the requirements of liability protection by keeping your business and your personal assets separate—with separate bank accounts, separate books, separate credit accounts, etc.

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You can register a limited liability company (LLC) with your Secretary of State. The cost of registering varies according to your state, as do the annual fees you must pay to maintain your separate business entity.

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Many states require physical therapists and other professionals to register professional LLCs (PLLCs). These business structures typically require you to maintain a certain amount of professional liability insurance coverage.

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Once you have registered your LLC or PLLC, you can then elect your tax status. You may choose to be taxed as a partnership, a C corporation, an S corporation, or a disregarded entity (which operates similarly to a sole proprietorship).

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Don’t procrastinate on registering a business entity. If you decide to skip this step now, it may be complicated to make the switch later. You can learn more about registering an LLC or a PLLC from your Secretary of State’s website.

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Get a business license and apply for permits

In most cases, your state requires you to obtain a business license before your practice can start operating. The process varies from state to state. Your Secretary of State or your local branch of the Small Business Association (SBA) can provide you with the necessary steps.

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A business license allows you to operate within the bounds of your city or municipality, and the cost of obtaining one ranges from $80 – $200. 

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In addition to a business license, you may need to obtain operating permits in order to set up shop, particularly if you are operating out of a rented commercial space as opposed to your home. Contact the city or the municipality where your PT practice will be based to find out which permits you need.

Purchase liability insurance

Professional liability insurance protects you in the event you are sued for malpractice or if a client files a complaint against you with your licensing board. It can cover the cost of legal fees as well as any damages you are required to pay.

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In most cases, your licensing board will require you to have professional liability insurance in order to operate.

Open a business bank account

A small business bank account isn’t just a necessity—it’s a powerful tool for running your practice’s back office.

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Most accounting and bookkeeping software—as well as financial platforms like Heard—sync with your bank account. Each transaction in your account is imported to your bookkeeping system, where it is categorized.

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Your bookkeeper—whether that’s you, using software, or the professional team at Heard—must categorize each transaction. When personal and business transactions are mixed in one account, the process becomes much more complicated and labor-intensive. And if you do your own bookkeeping, it can lead to costly errors.

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Even more importantly, in order to maintain the liability protection offered by an LLC, you need to keep your personal and business finances separate. It’s impossible to do that without separate bank accounts.

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Heard has partnered with BlueVine to offer online business checking accounts for wellness practitioners. When you register with BlueVine, you avoid a lot of the business checking fees banks typically charge. There are other perks, too—like earning 1.5% interest on your account balance if you meet certain minimum banking requirements. Learn more about Heard and BlueVine.

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Choose an electronic health record (EHR) system

An electronic health record system (EHR) gives you a secure, centralized location for all your client information. That includes contact information, treatment notes, and insurance billing information. When you use an EHR, you help to guarantee HIPAA compliance for your practice.

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Before you see your first client, shop around and register for an EHR designed for PT practices. It’s much easier to use an EHR system from the start than to transfer or transcribe the information later, and an EHR will help you stay HIPAA-compliant from Day One. 

Determine how you’ll bill clients

If you are credentialed and you plan to bill insurance directly, a software-as-a-service (SaaS) billing solution will save you time and money, and reduce the likelihood of claims being rejected. (You can purchase insurance billing services as an integrated add-on when you sign up with Heard.)

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For cash pay, your options include:

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• Your EHR or practice management solution, with built in billing
• Payment processors like Stripe or Square
• Electronic fund transfers via online bank accounts
• A combination of the above

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In most cases, EHR systems or payment processors will collect funds from clients, then send them to your bank account via ACH transfer. 

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Make sure you understand how they will show up on your bank statement. That’s important for tracking gross income when you set up your bookkeeping system.

Set up your bookkeeping system

Bookkeeping is the day-to-day task of recording and categorizing your business transactions.

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Each time your practice is paid cash by a client or reimbursed by an insurance company, it’s recorded as revenue on the books. Each time it pays rent, purchases new equipment, or spends money in any other way, the transaction is recorded on the books as an expense.

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Based on these recorded transactions, you can generate financial reports like the profit and loss report (P&L), which tells you how your practice is spending and earning money, and how much; and the balance sheet, which summarizes your assets and liabilities.

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Without bookkeeping, it’s impossible to get a clear view of how your practice is operating financially. 

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You need an accurate set of books and financial reports in order to accurately file your taxes. Inaccurate books lead to inaccurate tax filing, which could result in penalties from the IRS. It could also result in your business failing to take advantage of money-saving tax deductions.

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DIY software like QuickBooks allows you to record and categorize your transactions by hand; it’s up to you to make sure your books are accurate before bringing them to an accountant for tax filing.

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A professional bookkeeper can do your bookkeeping for you, typically by using software like QuickBooks. But unless they are already familiar with how a PT practice is run, you may spend as much time explaining to them how to categorize different transactions as you would doing the books yourself.

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Heard is the only financial platform built for physical therapists and other wellness professionals. Our in-house bookkeepers import and categorize transactions for you, and then hand off your books to qualified tax preparers to guarantee you an accurate tax return that takes advantage of deductions. Learn more about Heard.

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Set fees for your physical therapy practice

The fees you charge for each type of treatment will depend upon:

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• Competitors’ fees
• Your operating costs
• Your target profit margin
• Supplies costs (eg. for dry needling)
• Staff wages or salaries
• Whether you primarily bill insurance or accept cash payment

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Also, location has an important role to play. Average fees for physiotherapy vary according to state, city, and municipality. 

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For a detailed guide, check out Determining How Much to Charge for Your PT Services.

Choose a location for your physical therapy practice

If you’re planning to operate your PT practice in a rented commercial space, you will need to find the right location before you open your doors.

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Some factors to take into account:

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• The location of referral sources. If you expect to receive referrals from particular medical clinics, fitness centers, or other businesses, it could benefit you to have a practice based nearby.

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• Visibility. Foot traffic can be a powerful driver of new business. This may affect whether you choose a streetfront location.

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• Parking. If your rented space does not include parking, take into account street parking and other options nearby. 

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• Space size. How much space do you need to start operating now? How much will you need in the future if you have plans for your practice to expand? Your commercial lease is likely to last at least five years, so keep future expansion plans in mind.

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• Length of lease. While a typical commercial lease lasts at least five years, you may be able to find a landlord who will agree to a three-year lease. A shorter lease offers greater flexibility in case you decide to move locations, but may also create future uncertainty for your practice.

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• Necessary renovations. If you are taking over a space previously used by a wellness practitioner, your rental may already include a front desk and waiting area, multiple treatment rooms, and accessibility aids. But if the space was used by a different type of business, you may need to make renovations before you can start seeing patients. Factor in the cost of renovations when considering rentals.

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• Proximity to competitors. Opening your practice across the street from another PT clinic could mean losing business to competitors. Alternatively, it could open you up to new business if your competitors have full schedules, limited service options, high fees, or other qualities that make your own practice more attractive to clients. 

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Commercial leases can be complex. Consider hiring a lawyer to review the terms of your lease before signing.

Purchase equipment

The types of equipment you use in your practice will depend on the services you offer. That will also impact your startup budget and your space requirements. 

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Typical PT equipment includes:

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• Assessment and diagnostic tools, including goniometers, dynamometers, algometers, reflex hammers, and tape measures
• Electrotherapy and pain management devices, including TENS units, EMS machines, ultrasound therapy machines, IFT machines, and laser therapy machines
• Rehabilitation and mobility aids, including parallel bars, walking aids, exercise balls, resistance bands and tubes, balance boards, and CPM machines
• Manual therapy tools, including foam rollers, massage guns, cupping therapy sets, and kinesiology tape
• Strength and conditioning equipment, including therabands and theraputty, weights, pulley systems, and stationary bikes and treadmills
• Recovery accessories, including hot and cold packs, compression garments, and orthopedic pillows and supports
• Specialized equipment, including cervical and lumbar traction devices, hydrotherapy tanks, VR rehabilitation systems, and PEMF devices

Begin marketing your physical therapy practice

Before your business launches, create a marketing plan. It should include:

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• Who you’ll market to
• Which channels you’ll use to reach potential clients (e.g. SEO, social media, digital or print ads, referrals)
• How you’ll measure the effectiveness of your marketing
• How much you will spend on marketing for your PT practice

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Creating a marketing plan and setting a budget before your practice opens helps ensure you are attracting new clients from the moment you go into business. 

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The alternative is to launch without a plan and wait for new clients to come through the door. If you already have an established clientele (from working as an employee of another practice) or if you have a particularly strong referral network, that might work. 

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But it’s better to be overprepared than underbooked. Aim to have the bare minimum in place before you launch:

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• A professional website with online booking and signup for email updates
• One or more social media accounts
• Listings in popular directories for PTs

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You should also take a moment to register your business with Google, so it will show up in local search results, and so that new clients can find your practice easily using Google Maps.

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Once your practice is up and running, it’s time to start planning your finances. The first step? Keeping records of tax deductions for your physical therapy practice.

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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.

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

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