LLC, PLLC, or Sole Proprietor? Legal Structures for Therapists Starting in Private Practice
- drstephaniesimon
- 5 days ago
- 3 min read
Starting your own therapy practice is a major step—but before you order business cards or choose an EHR, one of the first (and most important) decisions you’ll need to make is choosing your legal business structure.
If you’re a therapist in New York looking to start a private practice, you’ve likely come across terms like LLC, PLLC, and sole proprietorship—but what do they mean, and which one is right for you?
In this post, I’ll break down the key differences between these common legal entities for mental health professionals and offer guidance based on both legal definitions and real-world experience as a psychologist and group practice owner in NYC.
🔍 What Are Your Options as a Therapist Starting a Practice in NYC?
1. Sole Proprietorship
This is the default structure if you start practicing without forming a formal business entity.
Pros:
Easiest and cheapest to set up
No formal registration needed (except for filing a DBA if using a business name)
Cons:
No legal separation between you and your business
You are personally liable for debts, lawsuits, and other liabilities
Best for: Therapists testing the waters or operating on a very small scaleNot recommended long-term due to liability risks
2. LLC – Limited Liability Company
An LLC offers limited liability protection—your personal assets are typically shielded from business-related legal or financial issues.
However, in New York State, licensed professionals (like psychologists, social workers, counselors, etc.) cannot form a standard LLC. Instead, they must form a PLLC.
3. PLLC – Professional Limited Liability Company
This is the most common and recommended structure for licensed therapists in New York.
Pros:
Offers legal protection for your personal assets
Signals professionalism to clients and referral sources
Easier to scale if you want to hire or bring on partners later
Cons:
Requires approval from the NYS Education Department
Slightly more paperwork and fees compared to a sole proprietorship
Best for: Therapists looking to grow a private or group practice responsibly and sustainably
📌 How to Set Up a PLLC in New York (Overview)
Get approval from your licensing board (e.g., NYS Office of the Professions)
File articles of organization with the NY Department of State
Publish notices in two newspapers (yes, still required in NY!)
Apply for an EIN from the IRS
Register for any necessary state/local taxes
🔗 Pro Tip: If this sounds overwhelming, you’re not alone. Many therapists choose to work with an attorney or business consultant to make this process smoother. I help clinicians navigate these exact decisions in consultation sessions.
🧠 So... Which Structure Should You Choose?
For most licensed therapists in NYC, a PLLC is the safest and most sustainable option. It protects your assets, adds legitimacy to your business, and supports your growth as a clinician-entrepreneur.
A sole proprietorship may be tempting at the beginning due to its simplicity, but the legal and financial risks often outweigh the benefits in the long run.
🙋 Need Help Starting Your Practice?
As a clinical psychologist and the founder of a thriving group practice in Manhattan, I’ve been through this process—and I now help other therapists do the same.
If you’re starting or growing your therapy practice in NYC and want personalized guidance on legal structure, fees, systems, or hiring, I offer 1:1 business consultation for therapists.
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