How To Start A Mental Health Practice In New York

1. Local Zoning Laws and Regulations in New York

• New York has a total of 62 counties, 933 towns, and 61 cities. If you’re planning to open a therapy practice, it’s important to ensure that your chosen location is zoned for that purpose, even if it’s in your own home.
• If you want to operate a business in an area that is not zoned for it, such as a home business in a residential area, you can apply for a zoning variance. A variance is essentially a way to request an exception to the zoning laws.
• To determine if you need to apply for a variance, the type of zoning your town or city recognizes, and the type of business allowed, reach out to your local municipality.

2. Business Name Search in New York

• In New York, the management of business names depends on the business structure and is carried out at both the county and state levels.
• Sole Proprietorships and General Partnerships are required to file a Certificate of Assumed Name with the county clerk’s office.
• Businesses such as LLCs and Corporations are required to file their Certificates of Assumed Name with the Department of State.
• For example: If you are running a sole proprietorship therapy practice and want to use your own name, you do not need to register a business name. However, if you want to use a different name, such as “Jane Smith Counseling,” or switch to a different business structure like an LLC, you will need to register an assumed name.
• To get an assumed name:
  1. Do a name search to make sure your name is not already taken.
  2. If you plan to operate a sole proprietorship or a general partnership, you need to file a Certificate of Assumed Name with the County Clerk. You can contact your County Clerk’s office to get instructions on registering an assumed name for your sole proprietorship. If your business will be a corporation, LLC, or another entity, you need to file a Certificate of Assumed Name with the Department of State. The Department of State provides a detailed guide on how to file this certificate for both domestic and foreign business corporations.
  3. To register your business, you will need to pay a fee. If you are registering with the County Clerk’s office, the fee will depend on the county you are registering in. If you are registering with the Department of State, you will need to pay $25 to file a Certificate of Assumed Name, plus an extra $25 for each county where your company will operate.
  4. Don’t worry about renewals. Unlike in some other states, DBAs registered in New York do not expire.

3. Business Structure in New York

• *Professionals, including mental health practitioners, who wish to form a limited liability company (LLC) or incorporate are typically required to form a professional limited liability company (PLLC) or a professional service corporation, respectively. This is because certain professions are subject to additional regulations that require them to form a specialized type of business entity. You can find more information on which professions require a PLLC or a professional service corporation on the New York State Education Department’s website.
• This list serves as a starting point, but it’s important to seek professional advice from an accountant and, if needed, a lawyer to determine the most appropriate business structure for your needs.
• Sole Proprietorship
  • By default, when you start a business on your own, you are a sole proprietor. This means that your business and personal finances are the same: any income is your income and any losses are your losses. Sole proprietorships are the most basic business structure, but do not provide legal or financial protection.
• Business Corporation
  • A business corporation is a distinct entity from its owners, who own shares in it. There are two types of corporations: C corporations and S corporations. C corporations can elect to be treated as S corporations by filing IRS Form 2553.
  • C corporations are taxed on their income separately from the income of their shareholders. S corporations pass on the tax liability to each shareholder. Due to various reasons, we recommends its clients to form S corporations at the federal level.
• Non-For-Profit Corporation
  • A not-for-profit corporation is typically created for charitable purposes, although this is not a requirement for being classified as not-for-profit. In New York, not-for-profit corporations are subject to compliance with the Not-for-Profit Corporation Law (NPCL), which is a highly complex area of law. It is crucial to seek the guidance of an attorney with expertise in NPCL before pursuing the formation of a not-for-profit corporation.
• Limited Liability Company (LLC)
  • The Limited Liability Company (LLC) structure provides protection from liability, similar to a corporation. However, you have the option to be taxed differently, such as an S corporation or a partnership, as recommended by your accountant.
• Professional Services Limited Liability Company (PLLC)
  • In New York, therapy practices that want to become an LLC must typically form a PLLC. This type of company offers additional protection if your therapy practice is sued for malpractice. Only the individual member of the PLLC who is being sued is liable, and the liability doesn’t extend to the company as a whole. For more information about PLLCs, please visit the Department of State’s website, or read this detailed article from UpCounsel.
• Professional Service Corporation
  • Professionals who are recognized by the State of New York are usually required to establish professional service corporations. These corporations function similarly to regular business corporations, but with the added benefit of protecting shareholders in case of malpractice lawsuits.
• General Partnership (GP)
  • When starting a partnership, all members in a general partnership share legal and financial liability equally. However, therapists who want to form a partnership in New York must form a limited liability partnership (LLP).
• Limited Liability Partnership (LLP)
  • An LLP is different from a limited partnership in that none of its members are considered limited partners. The term “limited” refers to the overall liability of the partnership in the event that one of its members is sued for malpractice. Essentially, an LLP is a type of professional service corporation or PLLC, but in the form of a partnership.

4. Register Your Business in New York

• To register your business in New York, you need to do two things:
  1. File the business registration with state
  2. Pay the filing fee
• Sole Proprietorship
  • Filing Fees: No cost to form, fees apply to register an assumed name.
  • There are no extra steps you need.
• Incorporate
  • Filing Fees: $125.
  • First, choose a business name.
  • Second, appoint a registered agent, who is over 18 years old and has an address within the state. The registered agent is responsible for receiving all official communications from the state.
  • Last, draft and file the Certificate of Incorporation.
  • You can also file most forms online using the Department of State’s online filing service.
  • Once you have incorporated in New York, you can elect S corporation status by filing IRS Form 2553.
• Professional Services Limited Liability Company (PLLC)
  • Filing Fees: $250.
  • First, choose a business name.
  • Second, appoint a registered agent, who is over 18 years old and has an address within the state. The registered agent is responsible for receiving all official communications from the state.
  • Third, obtain a Certificate of Authority (Form PLS709) from the New York State Department of Education.
  • File the Article of Organization.
  • To fulfill the legal requirement of publishing a copy of your Articles of Organization, you must place the ad in two newspapers in the county of operation. This should be done within 120 days of the Articles of Organization being effective. Once the ads are placed, each newspaper will provide you with an affidavit. If you are unsure of where to publish, do not hesitate to seek guidance from the County Clerk’s office or an attorney.
  • Last, submit a Certificate of Publication to the New York Department of State and pay the $50 filing fee.
  • There are more forms you can find on the Department of State’s online filing service.
• Professional Service Corporation
  • Filing Fees: $125.
  • First, choose a business name.
  • Second, appoint a registered agent, who is over 18 years old and has an address within the state. The registered agent is responsible for receiving all official communications from the state.
  • Third, Complete and file an Application for Authority with the Department of State.
  • Fourth, obtain a Certificate of Authority (Form PLS709) from the New York State Department of Education.
  • Last, draft and file your Certificate of Incorporation.
  • There are more forms you can find on the Department of State’s online filing service.
• Limited Partnership (LP)
  • Filing Fees: $250.
  • First, choose a business name.
  • Second, appoint a registered agent, who is over 18 years old and has an address within the state. The registered agent is responsible for receiving all official communications from the state.
  • Third, file a Certificate of Limited Partnership.
  • Draft a partnership agreement. This isn’t required by law in the State of New York, but it will help you stay organized and settle any disputes between partners.
  • Within 120 days of your LLC’s Articles of Organization becoming effective, you must publish an announcement of your LP’s formation or your Certificate of Registration in two newspapers in the county where you operate. The newspapers will provide you with an affidavit. If you are unsure where to publish, consult with the County Clerk’s office or an attorney.
  • Last, submit a Certificate of Publication to the New York Department of State and pay the $50 filing fee.
• General Partnership (GP)
  • Filing fees: None, except the cost of registering an assumed name
  • You aren’t required to file any forms with the state to form a GP in New York. However, you should draft a General Partnership Agreement, which all partners sign. This may help to settle legal disputes in the future.
• Limited Liability Partnership (LLP)
  • Filing fees: $250 total
  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. File a Certificate of Registration
  4. Draft a partnership agreement. This isn’t required by law in the State of New York, but it will help you stay organized and settle any disputes between partners.
  5. Publish either your Certificate of Registration or an announcement of your LLP’s formation in two newspapers in the county where you operate. This must be done within 120 days of your Articles of Organization becoming effective. Each newspaper will provide you with an affidavit. If you’re unsure where to publish, consult with the County Clerk’s office or an attorney.
  6. Submit a Certificate of Publication to the New York Department of State and pay the $50 filing fee.

5. Business Licenses & Permits in New York

If you plan on operating a therapy practice in New York, you may need licenses or permits at the federal, state, and local levels. However, therapy practices do not require any special federal permits or licenses to operate in New York, and besides standard licensure requirements for mental health practitioners, they also do not require permitting or licensing at the state level. At the local level, which refers to your county or municipality, you may need to obtain a business license to operate. The specific requirements for business licenses vary by municipality and by the type of business. For example, while billiard parlors and sightseeing buses in Buffalo require licenses to operate, therapy practices do not. The cost of a county or municipal business license can range from $25 to a higher amount depending on the municipality.

6. Business Insurance in New York

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

• General Liability Insurance
• Commercial Property Insurance
• Business Income Insurance
• Professional Liability Insurance
• New York 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 New York 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.

Professional liability insurance covers you in case you are sued for libel or slander, for mishandling patient records, for providing inaccurate advice, or for otherwise causing harm in the process of practicing your profession.

If you have employees, you’re legally required to cover them with New York 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.

7. Business Taxes in New York

Every business earning income in New York is required to pay state taxes. If you owe over $300 in state taxes, you’re required to pay that amount in quarterly installments. Tax preparation involves understanding tax laws and regulations, organizing financial records, determining filing status, calculating taxable income, exploring deductions and credits, reviewing tax forms and instructions, considering tax planning strategies, estimating tax liability, setting aside funds for tax payment, filing tax returns, and seeking professional assistance if needed. The process requires attention to detail and careful planning to ensure compliance with tax laws and to minimize tax liability.