Business Models for Group Practices

Infographic Text: Business Models for a Group Practice

A group private practice is essentially a group of mental health professionals who work together. Group practices can look quite different depending on their business model.

Hired professionals usually fall into one of two categories.

Contractors:

  • More control over when or how they do their jobs.
  • Typically paid per session.
  • Taxes typically filed through a 1099 form.
  • Responsible for their own retirement planning, health insurance, etc.

Employees:

  • Less independence regarding how therapy is provided.
  • Typically paid through a salary.
  • Taxes typically filed through a W-2 form.
  • Managers provide employee benefits, vacation days, and so on.

Group practices are often structured in one of four ways:

Sole Proprietorship:

  • One owner gets all the profit, and they manage the practice all by themself.
  • Owner is responsible for all the practice’s debts, liabilities, and employees.
  • Practice income is reported on a personal tax return. Employee benefits cannot be written off.

General Partnership:

  • Multiple owners share the profit equally and make business decisions as a group.
  • Owners share personal liability for the practice, partners, and employees.
  • Each owner’s share of the income is reported on their personal tax return.

Corporation:

  • Shareholders get profits and influence according to stock ownership.
  • If the practice is sued or goes into debt, only the company’s assets are used to pay. 
  • The company files its own income taxes based on its assets. 

Limited Liability Company (LLC):

  • An LLC can't sell stock. Instead it has members who own a percentage of the company.
  • Members have limited personal responsibility for the company's debts or legal issues.
  • Income is reported on personal income tax returns, similar to a partnership.

References: 

  1. Brewer, G. (n.d.). Business models for private counseling practices. Retrieved from https://bit.ly/2KhKBtN
  2. Brewer, G. (n.d.). Starting a group private practice; Contractors or employees? Retrieved from https://bit.ly/2W0scUs
  3. Choosing the best legal structure for your practice. (n.d.) American Psychological Association Services, Inc. Retrieved from https://bit.ly/2HPSTYh
  4. Who owns an LLC? Everything you need to know. (n.d.). Retrieved from https://bit.ly/2IfjGMC