How To Start A Mental Health Practice In North Carolina

1. Local Zoning Laws and Regulations in North Carolina

North Carolina boasts 100 counties and 532 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.
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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.
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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.

2. Business Name Search in North Carolina

If your therapy practice is a sole proprietorship, general partnership, or limited partnership, and you intend to do business other than your own (or yours and your partners’), you’re required by law to register an assumed name in North Carolina.

Here’s a step-by-step guide:

1. Complete your Assumed Business Name Certificate
2. File the certificate with your local register of deeds
3. Pay the $26 filing fee
4. Don’t worry about renewals. Your assumed name remains valid indefinitely.

3. Business Structure in North Carolina

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.

In North Carolina, the business structures you can choose from are:

• Sole proprietorship
• General partnership
• Business corporation
• Professional corporation*
• Limited liability company (LLC)
• Professional limited liability company (PLLC)*
• Limited partnership (LP)
• Registered limited liability partnership (RLLP)*
• Limited liability limited partnership (LLLP)*

Only individuals working in regulated professions—including mental healthcare workers—may be members or shareholders.

For a side-by-side comparison, see North Carolina Secretary of State’s business structure comparison chart.

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.

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

General Partnership (GP)

In a general partnership, all members are general partners—meaning, they all share legal and financial liability equally.

Profit Corporation

A profit corporation is a typical corporation as we know it: It 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.
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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, we recommends its clients form S corporations at the federal level.)

Professional Corporation

Those practicing professions in the state of North Carolina are typically required to form professional service corporations. A professional service corporation functions like a business corporation, with added protections in case a shareholder is sued for malpractice. All shareholders in a professional service corporation must be licensed and practicing the same professions.

Limited Liability Company (LLC)

The LLC business structure offers liability protection similar to a corporation, but with the option to be taxed in different ways. Your accountant may recommend you elect to be taxed as either an S corporation or a partnership.

Professional Limited Liability Company (PLLC)

The PLLC business structure is identical to the LLC, except for the fact that every member must be a professional licensed by the State, and provide proof of certification when the PLLC files its articles of formation with the Secretary of State. Therapists qualify as professionals licensed by the state.

The PLLC business structure provides extra liability protection for all members in case of legal proceedings brought against the organization (eg. a patient suing for malpractice.)

Limited Partnership (LP)

A limited partnership offers some liability protection for some of its members. To operate as a limited partnership, at least one individual acts as a general partner, who heads the company and makes major decisions, while at least one other individual acts as a limited partner, who does not.

General partners have unlimited liability—they are personally liable for the partnership’s debts, legal proceedings, and so on. Limited partners are only liable for their controlling share of the partnership.

Limited Liability Partnership (RLLP)

An LLP is similar to a general partnership, but with extra protections; it’s typically favored by professionals like lawyers and accountants, but any professional licensed with the state (including therapists) may form an LLP. You can think of an LLP as the “professional version” of a general partnership.
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The LLP structure protects each partner against outcomes of the other partners’ professional negligence. For instance, if one partner in an LLP is sued by a client, the other partners are not liable.

Limited Liability Limited Partnership (LLLP)

The LLLP business structure is very similar to an LLP business structure. The main difference is that existing general partnerships may choose to register as LLPs, while existing limited partnerships may choose to register as LLLPs.

4. Register Your Business in North Carolina

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

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

The fastest and easiest way to register your business in North Carolina and pay associated fees is to log on the Secretary of State’s online filing service and follow the onscreen prompts. The Secretary of State provides a 10 minute video tutorial.

Here’s a breakdown for each of the business structures covered in section 3 above.

Form a sole proprietorship in North Carolina

Filing fees: No cost to form, fees apply to register an assumed name
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Aside from the optional step of registering an assumed name, there are no extra steps you need to take in order to form a sole proprietorship in North Carolina.

Form a general partnership in North Carolina

Filing fees: No cost to form, fees apply to register an assumed name
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Aside from registering an assumed name, there are no extra steps you need to take in order to form a general partnership in North Carolina. Consider drafting a partnership agreement in order to easily resolve any future disputes between partners.

Incorporate in North Carolina (business and professional corporations)

Filing fees: $125 to file Articles of Incorporation

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 your Articles of Incorporation and pay the fee using the North Carolina Secretary of State business portal.

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

Register a Limited Liability Company (LLC) in North Carolina

Filing fees: $125 to file Articles of Organization

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 your Articles of Organization and pay the fee using the North Carolina Secretary of State business portal.

Register a Professional Limited Liability Company (PLLC) in North Carolina

Filing fees: $50 to file an Amendment to the Articles of Organization, converting an LLC to a PLLC

1. File your Amendment to the Articles of Organization and pay the fee using the North Carolina Secretary of State business portal.

Register a Limited Partnership (LP) in North Carolina

Filing fees: $50 to file a Certificate of Limited Partnership

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 Limited Partnership and pay the fee using the North Carolina Secretary of State business portal.
4. Draft a partnership agreement. It will help you stay organized and settle any disputes between partners.

Register a Limited Liability Partnership (LLP) in North Carolina

Filing fees: $125 to file an Application for Registration of a Limited Liability Partnership

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 Limited Partnership and pay the fee using the North Carolina Secretary of State business portal.
4. Draft a partnership agreement. It will help you stay organized and settle any disputes between partners.

Register a Limited Liability Limited Partnership (LLLP) in North Carolina

Filing fees: $125 to file a Certificate of Limited Partnership with the option to file as an LLLP

Note: In order to register an LLLP in North Carolina, you must file as an LP, and select the option to register as an LLLP (Section 11 on the print application.)

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 Limited Partnership and pay the fee using the North Carolina Secretary of State business portal.
4. Draft a partnership agreement. It will help you stay organized and settle any disputes between partners.

5. Business Licenses & Permits in North Carolina

To operate in North Carolina, 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 North Carolina. And, outside of standard licensure for mental health practitioners, they also do not require permitting or licensing at the state level.

At the local level—meaning your municipality (town, city, etc.), you may be required to purchase a business license to operate. Contact your local permitting office for details.

6. Business Insurance in North Carolina

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

• General Liability Insurance
• Commercial Property Insurance
• Business Income Insurance
• Professional liability insurance
• North Carolina 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 North Carolina 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 North Carolina 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 North Carolina

Every business earning income in North Carolina is required to pay state taxes. If you owe over $1,000 in state taxes, you’re required to pay that amount in quarterly installments.