Do Therapists Need a PLLC or LLC? State Rules, Costs, and Taxes
Short answer: no, you don't have to form any business to start a private practice, but if you do, your state usually decides which kind. Many states require licensed therapists to use a professional entity, such as a PLLC (professional limited liability company) or a professional corporation, rather than a regular LLC, and California doesn't allow licensed therapists to practice through an LLC at all. Forming one usually costs $100 to $300, and keeping it costs $0 to over $800 a year, depending on the state.
This guide covers what each option means, what it protects and what it doesn't, what it costs to form and keep in 10 large states, and when the S-corp tax election starts to make sense. Your entity is one early step in starting a private practice, and it's one you can change later.
Business education, not legal or tax advice. Confirm with your state's business filing office, your licensing board, and a CPA or attorney before you file.
The short version
- You can start as a sole proprietor. It's the default, it's free, and it's legal in every state. You just have no separation between you and the business.
- If you form an entity, most states point therapists to a PLLC. Some require it. A few, including California, require a professional corporation instead.
- A PLLC doesn't protect you from your own malpractice. Malpractice insurance does that. A PLLC protects your personal assets from business debts, like a lease.
- Forming costs about $100 to $300, and keeping it costs anywhere from $0 to over $800 a year, depending on your state. New York adds a newspaper publication requirement that can cost far more.
- An S-corp is a tax election, not an entity type. It usually only pays off once your profit is steady and fairly high.
In this guide
- Which entity, in every state
- Your options compared
- What a PLLC does (and doesn't) protect
- What a PLLC costs to form and keep in 10 large states
- How to find your state's rule
- When does an S-corp make sense for a therapist?
- What comes after you file
- Frequently asked questions
Which entity, in every state
Most states let licensed therapists form a PLLC. A few don't have one, and in a few the answer depends on your license. Here's how the states group, from Well Launched's state-by-state research (checked October 2026):
| What therapists usually form | States |
|---|---|
| A PLLC (professional LLC) | Most states, including Texas, Florida, New York, Illinois, Ohio, North Carolina, and Washington |
| A regular LLC (no separate PLLC) | Georgia, Indiana, Missouri, New Mexico, Oregon, South Carolina, Wisconsin, Wyoming |
| A professional corporation (PC), or stay a sole proprietor | California |
| Depends on your license: ask your board first | Alaska, Delaware, Hawaii, Louisiana, Maryland, Rhode Island |
Whatever your state, your licensing board's rules still apply to the entity and its name. In Pennsylvania, for example, psychologists' LLCs are treated as "restricted professional companies" with an extra yearly fee, while counselors, social workers, and MFTs aren't on that list. For your state's yearly filing fee, due date, and filing link, plus your board's advertising and records rules, see private practice rules by state.
Your options compared
| Sole proprietor | PLLC or LLC | Professional corporation (PC) | S-corp election | |
|---|---|---|---|---|
| What it is | You and the business are the same | A separate business, for licensed professionals | A corporation for licensed professionals | A tax choice an LLC, PLLC, or PC can make |
| Separates business debts from personal assets | No | Yes | Yes | Same as the entity underneath |
| Protects you from your own malpractice | No | No | No | No |
| Cost to form | $0 | State filing fee, usually $100 to $300 | State filing fee | Free IRS form, but adds payroll costs |
| Yearly upkeep | None | Annual report or tax, $0 to $800+ | Annual report and taxes | Payroll, a separate tax return, CPA fees |
| Taxes | On your personal return | Same as sole proprietor, by default | Corporate rules apply | You pay yourself a salary; can lower self-employment tax |
| Best for | Testing the waters, very early practices | Most solo therapists | States that require it, like California | Steady, higher profit |
What a PLLC does (and doesn't) protect
A PLLC can keep your personal savings separate from business debts and contracts, like an office lease or a dispute with a vendor. It does not protect you from claims about your own clinical work. That's what malpractice (professional liability) insurance is for, and you need it either way. Our guide to liability insurance for therapists covers what that costs.
A PLLC also helps in practical ways: a business bank account in the practice's name, a cleaner line between personal and business money, and a more established look to insurance panels and referral partners.
What a PLLC costs to form and keep in 10 large states
| State | What most therapists form | Cost to form (online) | What it costs to keep each year | Note |
|---|---|---|---|---|
| California | Professional corporation (PC). Licensed therapists can't practice through an LLC. | $100 | $800 minimum franchise tax, plus a $25 Statement of Information | A new corporation generally doesn't owe the $800 minimum in its first tax year; after that it's owed even in a year you earn nothing |
| Texas | PLLC | $300 (Form 206), plus a small card fee | $0 for most practices | No franchise tax under $2.65 million in revenue (2026 and 2027 reports), but you must file a Public Information Report by May 15 each year |
| New York | PLLC | $200, plus a Certificate of Authority from the State Education Department first | $9 biennial statement, plus a $25+ annual filing fee with your tax return | A new PLLC must publish a notice in two newspapers for six weeks within 120 days, plus a $50 filing; newspaper costs run from a few hundred dollars upstate to $1,000 to $2,000 or more in Manhattan (estimates) |
| Florida | PLLC | $125 (including the registered agent designation) | $138.75 annual report, due May 1 | A $400 late fee applies after May 1 |
| Illinois | PLLC | $150, plus a $50 registration with IDFPR | $75 annual report | — |
| Pennsylvania | LLC | $125 | $7 annual report, due September 30 | Psychologists' LLCs also owe $700 per licensed member each year as restricted professional companies |
| Ohio | PLLC or LLC | $99 | $0 (no annual report for LLCs) | Many Ohio cities tax business profit |
| Georgia | LLC (Georgia has no separate PLLC) | $100 to $110 | $50 annual registration | About $60 online with the service fee |
| North Carolina | PLLC | $125, plus your licensing board's certificate first | $200 annual report, due April 15 | About $203 online by card |
| Washington | PLLC | $180, plus an online processing fee | $70 annual report | Also has a business and occupation tax on gross receipts, with a small-business credit |
Figures gathered October and November 2026 from state filing and revenue websites (rechecked November 1, 2026). Fees change, so confirm with your state before filing. Your licensing board may add its own rules, such as requiring all owners to hold the same license or the license type to appear in the name.
If you're adding up everything it takes to open, the entity is usually one of the smaller costs. Our guide to how much it costs to start a private practice and the free startup cost calculator put it next to insurance, your EHR, and your website.
How to find your state's rule
- Search your Secretary of State's website for "professional limited liability company" or "professional entity." It will say whether your license must use a professional entity. The free checklist links your state's filing office for you.
- Check your licensing board's rules on business names and ownership. Some require your license type in the name, or require every owner to hold the same license.
- Ask whether your board must approve the entity first. In New York, for example, licensed professionals need a Certificate of Authority from the State Education Department before filing with the Department of State. North Carolina also requires a certificate from your licensing board before you file.
- Ask a CPA how the entity changes your taxes, especially in states with an entity-level tax, like California.
How Well Launched helps: Well Launched shows the entity your state and license usually require, what it costs to keep each year, and the official filing link, so you don't have to dig through state websites. It also puts your annual report or franchise tax deadline on your practice calendar, so it doesn't sneak up on you.
When does an S-corp make sense for a therapist?
An S-corp election lets you pay yourself a reasonable salary and take the rest of the profit as a distribution, which isn't subject to the 15.3% self-employment tax. The tradeoff is cost and paperwork: payroll, a separate business tax return, and usually higher CPA fees.
A common rule of thumb is that it starts to pay off once your profit is steady at around $50,000 to $80,000 a year or more, but it depends on your state and your numbers. California, for example, adds a 1.5% tax on S-corp net income, with an $800 minimum after the first year. Ask a CPA to run your numbers before you elect. To see what profit a full caseload might bring, see how much therapists make in private practice and the therapy fee calculator.
What comes after you file
- Get an EIN from the IRS. It's free and takes minutes online. The free checklist puts it in the right order with the rest.
- Open a business bank account in the entity's name.
- File an assumed name (DBA) if your practice name differs from the legal entity name.
- Update your NPI, insurance panels, and malpractice policy with the new business name and EIN.
- Put your annual report or franchise tax deadline on your calendar. Missing it can cost your entity its good standing.
Frequently asked questions
Do therapists need an LLC to start a private practice?
No. You can start as a sole proprietor in every state. Many therapists form a PLLC for the separation between business and personal finances, but it isn't required to see clients.
What is the difference between an LLC and a PLLC for therapists?
A PLLC is an LLC for licensed professionals. Many states require licensed therapists to use a PLLC, and owners usually must hold the license. Both separate business debts from personal assets, and neither protects you from your own malpractice.
How much does it cost to form a PLLC as a therapist?
Usually $100 to $300 to file, plus $0 to over $800 a year to keep it. Texas charges $300 to form, Florida $125, and North Carolina $125 plus a $200 annual report. New York adds a newspaper publication requirement that can cost $1,000 or more in New York City.
Can a therapist form an LLC in California?
No. California doesn't let licensed therapists practice through an LLC. Most form a professional corporation or stay a sole proprietor. A California PC owes an $800 minimum franchise tax each year after its first tax year.
Does a PLLC protect me from malpractice lawsuits?
No. A PLLC can protect your personal assets from business debts, but not from claims about your own clinical work. Malpractice insurance covers that. Our guide to liability insurance for therapists explains what it costs and what to look for.
Can I start as a sole proprietor and form a PLLC later?
Yes. Many therapists do. When you switch, get a new EIN for the entity if it needs one, open a business bank account, and update your NPI, insurance panels, and malpractice policy with the new name.
Should my PLLC elect S-corp status?
Usually not at first. An S-corp election tends to pay off once profit is steady and higher, often around $50,000 to $80,000 a year or more. A CPA can tell you where the break-even point is for you.
Sources
- California Franchise Tax Board: LLC and corporation taxes
- California Franchise Tax Board: S corporations (1.5% tax, $800 minimum)
- California Franchise Tax Board: 2025 Form 100S booklet (first-year minimum tax rule)
- California Secretary of State: bizfile
- Texas Secretary of State: Form 206 instructions (PLLC certificate of formation)
- Texas Comptroller: franchise tax
- New York Department of State: fee schedules
- New York Department of State: articles of organization for professional service LLCs
- Florida Division of Corporations (Sunbiz): LLC fees
- Illinois Secretary of State: limited liability companies
- Pennsylvania Department of State: business fees
- Pennsylvania Department of State: certificates of annual registration (restricted professional companies)
- Ohio Secretary of State: businesses
- Georgia Corporations Division
- North Carolina Secretary of State: LLC fees
- Washington Secretary of State: LLC and PLLC filing resources
- Washington Department of Revenue: business and occupation tax
- IRS: self-employment tax
- IRS: get an EIN
See your state's rule in two minutes
The free checklist shows the business setup steps for your state, in order, with official links. When you're ready for the whole plan, see the plans and founding pricesprices.
Related: How to start a private practice as a therapist · How much should I charge for therapy? · How therapists show up in ChatGPT and AI search · Practice name checker
Photo by Vitaly Gariev on Unsplash
Free tools: therapy fee calculator · startup cost calculator · rules by state · Psychology Today counter