Key Takeaways
- A therapist in New York can’t register an LLC—they must form a PLLC instead
- Plan to spend at least $1,000 and as much as $4,000 forming a PLLC therapy practice, depending on your needs
- Registering a PLLC in New York takes four to six months, plus an additional three to six months for insurance credentialing
Planning to start a PLLC therapy practice in New York State? Here’s a private practice startup checklist, with a complete breakdown of costs and time required.
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Do you need a PLLC to start a therapy business in New York?
As a therapist in New York, you do not strictly need to form a professional service limited liability company (PLLC) in order to operate. You can run your solo therapy business as a sole proprietor.
But if you want the added liability protection of a limited liability company (LLC), as well as the option to elect S corporation status, you’ll need to file Articles of Organization with the New York Department of State (DOS) and form a PLLC.
Therapists in New York are not permitted to form regular LLCs. As members of a profession managed by the New York State Education Department (NYSED), they’re required to form PLLCs instead.
A PLLC provides more liability protection compared to an LLC, particularly when it comes to malpractice. For a deeper dive, check out Difference Between LLCs and PLLCs For Therapists.
Professional corporations and limited liability partnerships
Technically, therapists in New York are not limited only to forming PLLCs. You can also choose to form a professional corporation (PC) or a limited liability partnership (LLP).
These also offer extra liability protection, but they are registered, managed, governed, and taxed differently from a PLLC.
Because they’re the most popular option for therapists in New York, this guide focuses on forming a PLLC practice.
Starting a private practice therapy business in New York
1. Register an EIN with the IRS
The IRS uses your employer identification number (EIN)—also known as a Federal Employer Identification Number or a Federal Tax Identification Number—to track your business for tax purposes.
More importantly, you need one in order to open a business checking account—the next step on this list.
You can register an EIN for free directly through the IRS website.
For more about EINs, check out What Is an EIN and Do You Need One for Your Practice?
2. Open a business checking account
Opening a business checking account now makes it easier to track your tax deductible expenses. You’ll be paying fees to file your Articles of Organization and publish your PLLC notice. You will also need to purchase malpractice insurance before you can start seeing patients.
If you use your personal checking account to pay business expenses, you not only make it harder to track them and take advantage of tax deductions—you could pierce the corporate veil and compromise some of the liability protection a PLLC grants you.
3. Draft your Articles of Organization
Your Articles of Organization include your PLLC’s:
- Name
- Members
- Purpose
- Relevant licenses of members (ie. LCSW, LMHC, LMFT, etc.)
- Effective registration date
- Registered agent
- Contact information
To draft your Articles of Organization, use the form supplied by the Division of Corporations.
You’ll file your Articles with the New York Department of State (DOS) to form your PLLC. You’ll also request a business name at the same time.
But before you can do either, you must first submit your Articles of Organization to the Office of the Professions’ Division of Professional Licensing for consent.
4. Get a Certificate of Authority from the Office of the Professions
The Office of the Professions’ Division of Professional Licensing Services handles professions licensed under Education Law Title VIII, which includes all mental health workers, psychologists, and counselors.
Once they receive your Articles of Organization, the Office of the Professions checks to make sure that you and any other proposed owners of the PLLC are licensed to practice in New York and that you qualify for ownership of a PLLC.
Then—assuming there are no problems with your application—the Department sends you a Certificate of Authority. You will file this, plus your Articles of Organization, with the DOS to form your PLLC.
Send a hard copy of your Articles of Organization, along with the application fee ($10 per owner, check or money order), to:
NYS Education Department
Office of the Professions
Division of Professional Licensing Services
89 Washington Avenue
Albany, NY 12234-1000
If you have questions or if you need to check on the status of your submission, you can contact the Department at (518) 474-3817, ext. 400.
5. File Articles of Organization with the New York Department of State
After you receive your Certificate of Authority from the Office of the Professions, attach it to a copy of your Articles of Organization and file it with the DOS.
The filing fee is $200, payable to the New York Department of State.
When filing, you must clearly indicate that you would like to receive a Certified Copy of your application after it’s processed. You will submit this later to the Office of the Professions.
To file by mail, send the forms and fee (either check, money order, or credit/debit authorization) to:
New York State Department of State
Division of Corporations
State Records and Uniform Commercial Code
One Commerce Plaza, 99 Washington Avenue
Albany, New York 12231
To file in person, go to the same address. The office is located on the 6th floor of the building, and typically open weekdays, 9am to 4:30pm.
To file by fax, send the relevant documents, along with payment information, to (518) 474-1418.
6. Send a Certified Copy to the Office of the Professions
Once your application has been approved by the DOS and your PLLC is officially registered, you must send a Certified Copy to the Office of the Professions.
This confirms with the Office that you have completed the PLLC formation process. You must complete this step in order for your PLLC to operate.
Send the Certified Copy to the same address where you originally submitted your Articles of Organization and requested consent:
NYS Education Department
Office of the Professions
Division of Professional Licensing Services
89 Washington Avenue
Albany, NY 12234-1000
7. Publish your PLLC notice
In New York State, all limited liability companies, including PLLCs, must formally announce their formation to the public. You have up to 120 days filing your Articles of Organization to do this.
Contact the county clerk’s office in the county where your psychotherapy private practice is based. They will give you a list of designated newspapers. You must publish your Articles of Organization or a notice of formation in at least two of these newspapers.
Publication fees vary widely from one newspaper to the next. After submitting your information for publication, each newspaper will give you an affidavit proving that the notice was published.
Once you have your two affidavits, file them both, plus a Certificate of Publication, with the DOS. There is a $50 filing fee.
8. Obtain NPIs
By this point, you’ve officially registered your PLLC, and you’re ready to begin operating your therapy business in New York State.
Now it’s time to get national provider information numbers (NPIs). You need these in order to identify your practice to insurance companies.
Even if you don’t plan on accepting insurance, you require NPIs to prepare superbills for clients filing out-of-network claims.
There are two types of NPI:
- A Type 1 NPI identifies an individual practitioner
- A Type 2 NPI identifies an organization (your practice)
You may not need a Type 2 NPI if you’re the only clinician at your practice. But getting one now sets you up to hire employees or supervise associates later on.
You can register both types of NPI online, for free, via the NPI application page.
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9. Purchase New York malpractice insurance
You need malpractice insurance in order to legally practice as a mental health clinician in New York.
If you’re transitioning your practice from a sole proprietorship to a PLLC, you may already have malpractice insurance. But it’s important to carefully review your policy to make sure you’re fully covered while operating as a PLLC.
If you’re forming a group practice or hiring employees, each clinician must have personal malpractice insurance, and the PLLC as a whole must have its own policy.
For more, see Do Therapists Need Professional Liability Insurance?
10. Create a DataSpring (CAQH) profile
If you’re planning to join insurance panels, DataSpring (formerly CAQH) is essential.
Your DataSpring profile is a central source for all your professional information. Rather than completing multiple applications for multiple insurance panels, you can simply authorize different insurers to access your DataSpring profile. DataSpring has become the standard credentialing service used by most insurers.
You can create your profile for free. Before you do, make sure you have the necessary information on hand:
- Your basic personal information
- A history of your education and training, including graduate school and internships
- Your license type and board certification
- Your practice name, address, and contact information
- Your practice’s services and hours of operation
- A list of colleagues
- Malpractice insurance information
- Work history with references
- Disclosure and malpractice history
Each clinician at your practice needs to create their own individual profile in order to be credentialed.
It takes some time to set up, but once your DataSpring profile is live, you’re ready to apply to insurance panels.
Heads up: Every 120 days, you’ll need to confirm that your DataSpring profile info is accurate. Mark the dates in your calendar so you won’t forget.
11. (Optional) Enroll in eMedNY and PECOS
In order to charge Medicaid and Medicare, you first need to enroll in eMedNY (state level) and the Provider Enrollment, Chain, and Ownership System (PECOS) (federal), respectively.
Here’s a quick step-by-step guide for each:
How to enroll in eMedNY (Medicaid)
- Confirm your license qualifies. LCSWs, LMHCs, and LMFTs are all eligible. LMSWs cannot enroll individually—they can only provide services under the supervision of an LCSW, licensed psychologist, or psychiatrist.
- Make sure you have both NPIs. You’ll need a Type 1 NPI for yourself as an individual and a Type 2 NPI for your practice.
- Complete your individual enrollment. You’ll complete a Certification Statement for Provider Billing Medicaid, certifying you’ve adopted a compliance program that qualifies you. You can complete enrollment through eMedNY’s online portal.
- Complete enrollment for your practice. Complete a separate enrollment for your practice via the online portal. As part of this, you’ll need to apply for an Electronic Transmitter Identification Number (ETIN) for your PLLC. This is the ID your PLLC uses to file claims.
- Link your personal and practice accounts. Log in to your Practitioner Maintenance Portal for your individual account and complete a Group Member Affiliation/Disaffiliation Request. This links you and your practice.
- Get approved. Once your enrollment is approved, you’ll receive a Medicaid provider ID (MMIS number or PID), your effective enrollment date, and other related enrollment info.
- Mark your calendar for revalidation. Medicaid-enrolled providers must revalidate their accounts every five years.
How to enroll in PECOS (Medicare)
- Make sure you meet federal requirements. Medicare requires you to have 2,000+ hours of supervised clinical experience before you can enroll. This is different from NY state licensure requirements.
- Set up your Identity & Access Management (I&A) account. It’s free to open an account, and approval typically takes one to three days. Have your NPIs on hand before starting.
- File CMS-855I as an individual. To file online, log in to your PECOS account, select “New Enrollment,” and select your license type.
- Upload necessary documents. To finish filing CMS-855I, you’ll need a copy of your state license, malpractice insurance certificate, W-9, your degree, and documentation of your supervision hours.
- Enroll your PLLC as a group and reassign benefits. To enroll your practice, file CMS-855B online. You’ll need to list yourself as an individual on CMS-855B, then update Section 6 of your individual CMS-855I to include your group info.
- Choose participating or non-participating status. If you choose to be a participating provider, you’ll accept Medicare’s full rate and be paid directly. If you’re non-participating, you can charge more; this produces some friction with billing—in most cases, new providers choose participating status.
- Wait for approval. Once both CMS-855I and CMS-855B have both been submitted, plan on waiting 60–120 days for approval. You can use your application control number (ACN) to track the status of your submission. Do not attempt to bill Medicaid until you have been approved.
12. Set up EHR, billing, accounting, and other backoffice systems
Your backoffice includes all the behind-the-scenes systems and procedures your practice needs to run effectively. Your exact backoffice needs will depend on your practice—its size, number of clinicians, and plans for the future. But, at minimum, plan on setting up:
Bookkeeping
This is the day-to-day practice of recording revenue and expenses. You may decide to do your own bookkeeping, or have it handled by the experts at Heard. Check out The Complete Guide to Bookkeeping for Therapists.
Accounting
Accounting is one level up from bookkeeping. You take your records of revenue and expenses and use them to prepare financial statements, track performance, and file taxes. You can hire a professional accountant to do this, or use an all-in-one bookkeeping service designed for therapists (Heard). For more, see What's the Difference Between an Accountant and Bookkeeper?
Electronic Health Records (EHR) and billing
In order to remain HIPAA compliant, you need to securely store clients’ electronic health data. The easiest and most effective way to do so is with an EHR system, which typically also includes tools for billing. Learn more from HIPAA-Compliant Payment Methods for Private Practice
Payroll
If you elect S corporation status and pay yourself a salary, or if you hire employees, you’ll need to handle tax withholding and remittance, benefits, paid time off, and other details. The simplest way to do so is with a payroll service like Gusto (Heard comes integrated with Gusto for handling payroll).
How long does it take to start a therapy practice in New York?
Plan on spending six to 10 months forming your PLLC and getting credentialed with insurance companies before you start treating clients in New York.
If you don’t plan on accepting insurance, it should take about four to six months to get your PLLC registered so you can legally treat clients and bill them directly.
PLLC Therapy Practice in New York — Timeline
In order to start practicing legally, the longest wait comes from the NYSED application for a Certificate of Authority.
In terms of billing insurance, the longest wait time comes from getting credentialed with insurers and enrolling in eMedNY and PECOS.
How much does it cost to start a therapy practice in New York?
To start a PLLC therapy practice in New York, plan on spending $1,000 minimum to register your business, publish your PLLC announcement, and buy malpractice insurance.
If you hire an attorney to help with PLLC formation, and if you include the cost of basic backoffice tools (like an EHR), expect a total expense of $1,500 – $4,000.
Publication costs can significantly increase depending on your location. If your practice is based in New York City, newspaper publication alone can cost $1,000 – $2,000.
Here’s a breakdown of each expense. Some (like general liability insurance) are not covered in this state-specific guide, but you can learn more about them from How Much Does It Cost to Start a Therapy Practice?
PLLC Therapy Practice Cost in New York
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Once you form a PLLC, you may be able to significantly reduce your tax burden by electing S corporation status. For details, check out The Complete S Corp Guide for Private Practice Therapists
Summary
- Therapists in New York are not allowed to form LLCs, and must form PLLCs instead
- The PLLC structure gives you added liability protection, plus the option to elect S corp status at the federal level
- Before filing your Articles of Organization, you must apply for a Certificate of Authority from NYSED, proving you are eligible for PLLC status
- Requesting a Certificate of Authority is the longest step in PLLC formation—expect to wait three to five months to receive one
- Once your PLLC is registered, budget three to four months for insurance panel application processing and Medicaid/Medicare enrollment
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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