State Guide

How to Start a Therapy Practice in California

Headshot of Bryce Warnes
March 9, 2024
January 26, 2023
Bryce Warnes
Content Writer
Golden Gate Bridge

To start a therapy practice in California, follow these seven steps.

  1. Check local zoning regulations
  2. Register a business name
  3. Choose a business structure
  4. Register your business
  5. Obtain relevant licenses
  6. Get insurance
  7. Start paying taxes

If you’re moving your practice from a different state, there’s an eighth step you’ll need to follow: Learn how to pay taxes in multiple states.

This article covers the bare essentials needed to get your therapy practice up and running in the Golden State. 

For more on budgeting, marketing your practice, and billing your clients, check out our general guide, How to Start a Therapy Practice.


Check local zoning regulations in California

California boasts 58 counties and 482 municipalities. Before you settle on a location for your therapy practice—even if that location is your own home—you must make sure the local zoning allows you to operate there.

In cases where you aren’t typically allowed to operate a business in a certain area—for instance, a home business in a residential area—you can apply for a zoning variance. A variance is more or less an exception to zoning laws. 

For information on whether you need to apply for a variance, what types of zoning your town or city recognizes, and what kind of business you can perform there, contact your local municipality.

Register a business name in California

In California, business names are registered and managed at the county level.

If your therapy practice is a sole proprietorship, and you’d like to operate under your own name (e.g. “Jane Smith”) you may do so without registering a business name. 

If you want a name different from your own (e.g. “Jane Smith Counseling”) or if you switch to a different business structure (a professional corporation), you’ll need to register a doing business as name (DBA), also called a fictitious business name (FBN).

Don’t let “fictitious” mislead you. Once it’s registered, your DBA/FBN is the name your business is legally entitled to operate under.

To get a DBA for your therapy practice:

  1. Do a name search to make sure your name isn’t already taken.
  2. File a fictitious business name (FBN) statement with the county clerk. Your county clerk’s office can provide an FBN statement. Be prepared to provide your personal name and address, the DBA/FBN you’re registering, your practice’s address, your state ID number, and the business type.
  3. Publish the new business name. Within 30 days of filing, you must publish your FBN statement in a county newspaper. The ad must run for four consecutive weeks. Your county clerk’s office can provide you with a list of approved publications. They will also sign an affidavit within 30 days of the announcement running as proof that you published your name.
  4. Pay filing fees. The cost of filing an FBN varies county by county.
  5. Renew every five years. After five years, you must file your FBN statement again. Typically, you are not required to publish it again.

As an optional step before registering, if your professional corporation, you may also file a business name reservation at the state level. Your business name will be reserved for up to 60 days.

California requires licensed therapists to abide by certain naming conventions.


Choose a business structure recognized by the state of California

Each state recognizes—and registers—different business structures (aka “entity types”). Your practice’s business structure affects how its income is taxed and who may own shares of the practice.

The state of California puts limits on which business structures licensed mental health professionals may choose for their private practices. You have two options to choose from:

  • Sole proprietorship
  • Professional Corporation 

Note you cannot operate as an LLC or PLLC as a therapist in California. This list is just an introduction. Before settling on a business structure, talk to your accountant—and, if necessary, a lawyer—for help choosing the right one. 

For more information, check out our article How to Choose a Business Entity for Your Therapy Practice.

Sole proprietorship

When you go into business for yourself, you’re considered a sole proprietor by default. As a sole proprietorship, your business is identical with your person: all revenue is your revenue, all losses are your losses.

Sole proprietorships are the simplest form of business structure, but offer nothing in the way of legal or financial protection.

Professional Corporation 

Like a regular corporation, a professional corporation exists separately from its owners, who own shares in it. There are two types: C corporations and S corporations. C corporations may elect S corporation status by filing IRS Form 2553.

C corporations have their income taxed separately from the income of the shareholders. S corporations pass on the tax liability to each shareholder. For a variety of reasons, Heard recommends its clients form S corporations at the federal level.

The professional corporation business structure makes each shareholder in the corporation personally liable for any malpractice lawsuits brought against them, while protecting the corporation as a whole from liability.

Register your therapy practice in California

To register your business in California, you need to do two things:

  1. File the business registration with the state.
  2. Pay the filing fee.

Here’s a breakdown for each of the business structures covered above.

Register a sole proprietorship in California

Filing fees: $26 for one registrant/name

Aside from registering a DBA/FBN, there are no extra steps you need to take in order to form a sole proprietorship in California. 

Incorporate in California

Filing fees: $200 to incorporate, plus $800 annually (franchise tax)

  1. Choose a business name.
  2. Appoint a registered agent. This person must be over 18 and have an address within the state. They’re responsible for receiving all official communications from the State.
  3. Draft and file your Articles of Incorporation.

You can file all the necessary forms online using the Secretary of State’s bizfile service.

Once you’ve incorporated in California, you can elect S corporation status by filing IRS Form 2553.

Get business licenses and permits for your therapy practice in California

To operate in California, your therapy practice may require licenses or permits. These are handled at the federal, state, and local levels.

Luckily, therapy practices do not need any special federal permits or licenses to operate in California. They also do not require permitting or licensing at the state level beyond the typical licensure individual therapists require.

At the local level, meaning your county and/or municipality (town, city, etc.), you may be required to purchase a business license to operate. Check with local government bodies. 

At the low end of the scale, a county or municipal business license costs $15 – $30. At the higher end, one may cost several hundred dollars. Some counties or municipalities may charge you a percentage of your business income instead of a flat fee, but this typically only applies to larger businesses.


Get business insurance for your therapy practice in California

The following types of business insurance are highly recommended for therapy practices operating in California:

  • General liability insurance
  • Commercial property insurance
  • Business income insurance
  • California worker’s compensation insurance

While shopping for insurance, look for a business owner’s policy (BOP). A BOP typically includes the three core types of insurance coverage: general liability, commercial property, and business income.

General liability insurance protects you in case of any damages you cause to someone else’s property or person. Since the state of California puts no cap on liability lawsuit rewards, it’s important to make sure you’re well-covered. Aim for at least $1 million coverage.

Commercial property insurance protects property your therapy practice owns, like computers, business phones, or office furniture. It also protects the building where you operate, whether owned or rented.

Business income insurance covers you for loss of income due to specific circumstances. These include natural disasters, such as fire or storm damage; and man-made disasters, like theft.

If you have employees, you’re legally required to cover them with California worker’s compensation insurance. This pays for medical expenses, lost wages, and ongoing care in the event one of your employees is injured on the job.

Prepare to pay taxes in California

Every business earning income in California is required to pay state taxes. If you owe over $500 in state taxes, you’re required to pay that amount in quarterly installments.

Wondering how to get started? Check out How to Pay Income Tax in Every State as a Therapist.

Learn how to pay taxes in multiple states

If you started your therapy practice in a different state, and you’re moving to California—or if you operate in California, and you’re planning to move to a different state—you’ll need to figure out how to pay taxes in multiple states.

The rules vary depending on which states you operate in over the course of the year, and how long you spend in each. Check out How Moving to a Different State Impacts your Taxes as a Therapist.

Want to learn more? Check out our guide on how to start a 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 their 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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