Start a Private Practice in California: Checklist

Launching a private therapy practice in California requires navigating licensing requirements, business formation, compliance rules, and operational setup. This complete checklist breaks down every step so you can move from idea to seeing your first client with confidence.

Graduate school prepared you to be an excellent clinician - but probably did not cover how to register a business entity, apply for an NPI number, or set up HIPAA-compliant systems. If you have ever felt paralyzed by the question "where do I even start?" you are not alone. Thousands of California therapists have launched successful private practices, and you can too.

39,000+

Licensed therapists in California

4-6 weeks

Average setup time

$800

LLC minimum annual tax

100%

HIPAA compliance required

This guide walks you through every requirement: California BBS licensing verification, choosing your business structure, state registration, getting your NPI, securing liability insurance, and setting up compliant technology systems. By the end, you will have a clear roadmap and the confidence to take action.

Step 1: Verify Your California BBS License

Before seeing your first private practice client in California, you need to confirm your license is active and in good standing. The California Board of Behavioral Sciences (BBS) oversees LMFTs, LCSWs, and LPCCs. This verification step takes just a few minutes but is essential.

License Types for Private Practice

In California, you can operate a private practice with one of these licenses:

Clinical Licenses

✓
LMFT - Licensed Marriage and Family Therapist. Can diagnose and treat mental health disorders within the scope of marriage and family therapy.
✓
LCSW - Licensed Clinical Social Worker. Can provide psychotherapy and diagnose mental health conditions.
✓
LPCC - Licensed Professional Clinical Counselor. Can diagnose and treat mental disorders. Requires additional training for couples and families.

License Verification Steps

1 Visit the BBS License Lookup at bbs.ca.gov
2 Search by your license number or name
3 Confirm status shows as "Active" or "Clear"
4 Note your expiration date and renewal requirements

If you are an associate (AMFT, ASW, or APCC), you cannot operate an independent private practice until you complete your supervised hours and pass licensing exams. However, you can work for a group practice under proper supervision while completing your requirements.

Step 2: Choose Your Business Structure

One of the first decisions you need to make is how your practice will be structured legally. California offers several options, each with different liability protections, tax implications, and administrative requirements.

Simpler Options

Sole Proprietorship

No formation required. Your personal SSN is your tax ID. Simplest option but no liability protection. Good for starting out while building a caseload.

Cost: Free to start

Single-Member LLC

Provides liability protection while maintaining pass-through taxation. California charges $800 minimum annual tax regardless of income.

Cost: $70 filing + $800/year tax

Professional Entity Options

Professional Corporation (PC)

Required if you want to practice under a corporate name. Provides liability protection and potential tax advantages for higher earners.

Cost: $100 filing + $800/year minimum tax

S-Corporation Election

A tax election for your LLC or PC that can reduce self-employment taxes once income exceeds $80,000-100,000 annually.

Cost: Additional payroll and accounting complexity

Recommendation for New Practice Owners

If you are just starting out and want to keep things simple, consider beginning as a sole proprietorship while you build your caseload. Once you are consistently earning income above $50,000 annually, consult with a CPA and attorney about whether forming a PC or LLC makes sense for your situation. Many therapists operate successfully as sole proprietors for years before transitioning to a formal entity.

How to Form Your Business Entity

If you decide to form an LLC or Professional Corporation, follow these steps:

Choose a business name. For PCs, it must include your license type - for example, "Jane Smith, LMFT, A Professional Corporation" or similar designation.
File with the California Secretary of State. Submit your formation documents online at bizfileOnline.sos.ca.gov. Filing fees range from $70-100 depending on entity type.
Obtain an EIN from the IRS. Apply free at irs.gov. You will need this for business banking, hiring employees, and tax filings.
Register with the California Franchise Tax Board. Required for LLCs and corporations. Remember the $800 minimum annual tax applies even if you earn nothing.
Open a business bank account. Keep business and personal finances separate from day one. This simplifies taxes and protects your liability shield.

Step 3: Get Your NPI and Professional Liability Insurance

Two essential credentials every private practice therapist needs are a National Provider Identifier (NPI) and professional liability insurance. Both are straightforward to obtain.

National Provider Identifier (NPI)

Your NPI is a unique 10-digit number that identifies you as a healthcare provider. Required for insurance billing and increasingly used for all provider identification.

• Apply free at nppes.cms.hhs.gov
• Application takes 15-20 minutes
• Number issued within 1-2 business days
• Same NPI follows you throughout your career

Professional Liability Insurance

Malpractice insurance protects you if a client files a complaint or lawsuit. Most policies cost $150-400 annually for individual therapists.

• Popular providers: HPSO, CPH Insurance, Preferra
• Standard coverage: $1M per incident / $3M aggregate
• Covers legal defense costs and settlements
• Many include free risk management resources

Step 4: Set Up HIPAA-Compliant Systems

As a healthcare provider, you are legally required to protect patient health information under HIPAA. This applies to your electronic health records, email, telehealth platform, phone communications, and any other system that touches client data.

HIPAA Compliance Is Not Optional

HIPAA violations can result in fines ranging from $100 to $50,000 per violation, with annual maximums up to $1.5 million. Beyond fines, breaches damage client trust and your professional reputation. Taking compliance seriously from day one protects both you and your clients.

Essential HIPAA Checklist

Here is what you need to set up for proper HIPAA compliance:

HIPAA Compliance Requirements

Technology Setup

HIPAA-compliant EHR/practice management software with signed BAA
Encrypted email service with signed BAA (Google Workspace, Microsoft 365)
HIPAA-compliant telehealth platform with signed BAA
Device encryption enabled on all computers and phones

Documentation Required

Notice of Privacy Practices document
Written privacy and security policies
Completed risk assessment (at least annually)
Signed Business Associate Agreements from all vendors

A Business Associate Agreement (BAA) is a contract between you and any vendor that handles protected health information on your behalf. Without a signed BAA, using that vendor for client data is a HIPAA violation. Always request and keep copies of BAAs from your EHR, email, telehealth, billing, and any other relevant service providers.

Step 5: Create Your Practice Operations

With licensing, business formation, and compliance handled, you can focus on the operational aspects of your practice. This includes clinical documentation, policies, and payment systems.

Clinical Documentation

✓ Informed consent for treatment
✓ Telehealth consent (if offering virtual sessions)
✓ Intake questionnaire and history forms
✓ Release of information forms
✓ Progress note templates
✓ Treatment plan formats

Practice Policies

✓ Fee schedule and session rates
✓ Cancellation and no-show policy
✓ Payment and billing procedures
✓ Sliding scale guidelines (if offering)
✓ Crisis and emergency protocols
✓ Social media and contact boundaries

Setting Your Rates

Determining your session fees can feel challenging, especially when starting out. California therapy rates vary significantly by location and specialty. In 2024, typical private pay rates range from $150-250 per session in most areas, with higher rates ($200-400+) common in San Francisco, Los Angeles, and other major metro areas.

Research what other therapists in your area and specialty charge. Your rates should cover your overhead costs, taxes, and provide sustainable income. Many new therapists start slightly below market rate to build a caseload, then raise rates for new clients as demand increases.

Step 6: Start Attracting Clients

You have done the preparation work. Now it is time to find clients. Here are the most effective marketing strategies for new private practices:

Psychology Today profile - The most common therapist directory. Costs approximately $30/month but generates significant referrals for most therapists.
Google Business Profile - Free listing that helps you appear in local searches. Include your specialties, photos of your office, and encourage reviews.
Professional website - Even a simple one-page site establishes credibility. Include your bio, specialties, approach, and contact information.
Referral network - Reach out to primary care physicians, psychiatrists, school counselors, and other professionals who might refer clients to you.
Insurance panels - If you choose to accept insurance, credentialing with major panels expands your potential client base significantly.

Marketing Tip: Start with Three Referral Sources

Rather than trying to market everywhere at once, identify three professionals in your area who see your ideal clients. Introduce yourself, explain your specialty, and ask if you can be a referral resource for them. Building genuine professional relationships generates consistent referrals over time.

Your Complete California Private Practice Checklist

Here is everything we have covered in one comprehensive checklist. Save this page, print it out, and check off each item as you complete it.

California Private Practice Launch Checklist

Phase 1: Licensing and Legal Foundation

Verify your BBS license is active and in good standing
Decide on business structure (Sole Proprietorship, LLC, or PC)
File business entity with California Secretary of State (if applicable)
Obtain EIN from the IRS
File Fictitious Business Name statement if using a DBA
Register with California Franchise Tax Board
Obtain city business license (requirements vary by city)

Phase 2: Provider Credentials and Protection

Apply for NPI through NPPES
Purchase professional liability insurance ($1M/$3M coverage)
Open dedicated business bank account
Set up business phone number

Phase 3: HIPAA Compliance Setup

Choose HIPAA-compliant EHR/practice management software
Set up encrypted email with signed BAA
Select HIPAA-compliant telehealth platform with signed BAA
Collect and file BAAs from all vendors
Create Notice of Privacy Practices
Document written privacy and security policies
Complete initial security risk assessment
Enable encryption on all devices

Phase 4: Practice Operations

Create informed consent documents
Develop intake questionnaires and forms
Set your fee schedule based on market research
Create cancellation and payment policies
Set up payment processing (credit cards, HSA/FSA)
Secure office space (if offering in-person sessions)

Phase 5: Marketing and Client Acquisition

Create Psychology Today profile
Set up Google Business Profile
Build a simple practice website
Begin insurance credentialing (if accepting insurance)
Reach out to 3+ potential referral sources

Frequently Asked Questions

Here are answers to the most common questions therapists ask when starting a private practice in California:

How long does it take to start a private practice in California?

Most therapists can complete all setup steps in 4-6 weeks if they work on it consistently. Some items like insurance credentialing can take 60-90 days, but you can see private pay clients while waiting for panel acceptance.

How much does it cost to start a therapy practice in California?

Minimal startup costs for a sole proprietor range from $500-1,500 (liability insurance, EHR software, directory listing). If forming an LLC or PC, add $800+ for the annual franchise tax plus filing fees. Office space, if needed, is typically the largest ongoing expense.

Should I accept insurance or only private pay clients?

Both models work. Insurance panels provide a steady referral stream but involve administrative burden and lower reimbursement rates. Private pay offers higher per-session income and less paperwork but requires stronger marketing. Many therapists start with a mix of both.

Can I practice telehealth across state lines?

Generally, you must be licensed in the state where your client is physically located during the session. Some states have temporary or permanent telehealth allowances, but California licensure only authorizes you to treat clients located in California.

Do I need a separate office or can I work from home?

Many California therapists operate 100% telehealth practices from home offices. If you see clients in person, you need appropriate clinical space. Check local zoning laws before seeing clients in a home office, and ensure any space meets confidentiality requirements.

Key Takeaways

1. Verify your license first. Confirm your BBS license is active before taking any other steps. This is your foundation.
2. Start simple with business structure. A sole proprietorship works fine while building your caseload. Upgrade to an LLC or PC when income justifies the $800 annual tax.
3. HIPAA compliance is non-negotiable. Get BAAs from every vendor that touches client data. Document your policies. Enable encryption.
4. Get liability insurance immediately. Professional liability coverage protects you and typically costs less than $400 per year.
5. Marketing does not have to be complicated. A Psychology Today profile, Google Business listing, and a few referral relationships can fill a caseload.

You Can Do This

Starting a private practice in California is absolutely achievable. Yes, there is paperwork. Yes, there are regulations. But none of this is impossible. It is simply a series of steps, and you can take them one at a time.

The therapists who succeed in private practice are not the ones who figured everything out before they started. They are the ones who started, learned as they went, made adjustments, and kept going.

So pick one item from this checklist. Complete it today. Then do the next one tomorrow. Before you know it, you will be seeing your first private practice client and building the practice you have envisioned.

You became a therapist because you wanted to help people. Private practice lets you do that on your own terms, in your own way, building something that is truly yours. That vision is worth the effort it takes to get there.

Ready to Simplify Your Private Practice?

TheraFocus helps California therapists manage their practices with HIPAA-compliant tools for scheduling, documentation, billing, and client communication. Start your free trial and see how much easier private practice can be.

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