Private Practice Business Types

Video Transcription

[MUSIC PLAYING] Well, here we are for more fun, so let's get rolling. OK. There are several different ways the counselors can be classified in business, including sole proprietor, independent contractor, limited liability company, partnership, nonprofit, or one of several types of corporations. There are different reasons why individuals choose different business structures, and no one structure is right for everyone. The primary reason a counselor chooses a business classification is for tax purposes, which is why you need to consult with a tax expert before choosing.

The information provided in this unit is very basic, and it will be necessary to consult with others, including an attorney, an accountant, and a business mentor before choosing a business structure. It's not uncommon to change the business type, but also, it can be expensive to change one's tax status with the IRS. Therefore, I highly recommend that you be confident and informed in your decision about tax structure from the start. So here's what we'll cover in this lesson. First, sole proprietor, next, independent contractor, Limited Liability Company, or LLC, partnership, nonprofit structure, corporation structure, and choosing an approach.

Sole proprietor classification is one of the most simple business entities a counselor can choose. A sole proprietor is defined as one person who owns a business and claims responsibility for all profits and losses. A sole proprietor in a counseling practice is a single person practicing alone. A sole proprietor is self-employed and reports their business income on their personal taxes.

Now this classification is what we think of most when we think of hanging out a shingle and practicing by one's self. Sole proprietors usually need to be independently licensed to sustain a full-time practice. The reason why is because, usually, they need to be able to accept all insurances as well as cash to have a self-sustaining income. Another option for sole proprietor owners who want to practice counseling is to practice counseling part time while collecting hours toward independent licensure or while building the practice's name and reputation.

Independent contractor classification is defined as a single person practicing under a verbal or written contract for another person. A counselor can either be an independent contractor or can hire independent contractors to work in his or her business. As an independent contractor, a counselor can be working for several business owners at once. This type of counselor is self-employed and is not considered an employee and reports their business income on their personal taxes.

A limited liability company is a business classification whereby the counselor files articles of organization. There is limited liability to the business entity with pass-through taxation to the business owner or owners. Limited liability means that the owners of the LLC can't be held personally liable for debts and claims against the company. Pass-through taxation means that the business is not taxed and, instead, the tax is passed through to either a sole individual or the people involved in the partnership.

In other words, the business doesn't pay its own taxes, but rather, the owners report profits and losses on their personal tax returns just like they would if they were in a sole proprietorship or a partnership. Articles of organization or sometimes also known as a certificate of organization and include information such as the business name, the nature of the business, and names of the members. These articles of organization are filed with the secretary of the in your state.

With an LLC business classification, the counselor can still be in business alone or with others. An LLC is a business classification and, as such, a counselor can form an LLC and have independent contractors or employees working for the LLC. Because of this, the counselor does not need to be fully licensed as an independent counselor in order to run the actual business, but he or she may have difficulty providing counseling until he or she is independently licensed. So the counselor can own and run the LLC and employ others as counselors.

So here's another option for LLC business owners who want to practice counseling. You can practice counseling part time while collecting hours toward independent licensure or while building the practice's name and reputation.

A partnership is a relationship between two or more individuals for the purpose of trade or business. There is an expectation that each person contributes to the business and shares in the profits and losses. You don't want to be the slacker in the business, nor do you want slackers who are your partners either. A partnership, as a business entity, does not pay taxes. But instead, the profits and losses are passed through to the individuals involved in the partnership.

Now, a partnership is a business classification. And because of this, a counselor can form a partnership with one or more individuals. And any one of these individuals can provide counseling or not. Or perhaps only a few partners provide counseling. Because of this, you don't need to be fully licensed as an independent counselor in order to run the actual business. But you may have difficulty providing direct counseling services until you are independently licensed.

If you decide to run a business without being fully licensed, you may need to hire an independent contractor or contractors or employees to provide counseling services to clients. Another option is to practice counseling part time while collecting hours toward independent licensure.

A nonprofit organization serves a public purpose and is afforded special tax-exempt status by the IRS. A nonprofit classification can be defined as one whereby the organization uses its profits to advance its mission and goals as opposed to distributing the income to the organization's shareholders. A counselor opening a nonprofit organization will need to incorporate the nonprofit, file for tax exempt status for the nonprofit, register the nonprofit with the state, and prepare annual reports and procedural requirements necessary to keep the nonprofit organization compliant with national and state regulations.

The nonprofit organization needs a few things in order first-- a board of directors for starters, as well as a business plan that articulates the mission and goals as well as funding. So here are options for your nonprofit. You may want to establish a relationship with state agencies and the local department of human service in order to apply for and secure state contracts. Grants and contracts are available at the local, state, and federal level, and they are the lifeblood of many nonprofits. So see what your state has available.

Nonprofit grants are also available for private organizations. Now, I just mentioned grants in two different arenas. So grant writing skills are essential for obtaining grants and contracts to fund the organization. Now the council can work for the nonprofit organization and is permitted to make an income. A counselor wanting to practice counseling may be able to practice under any grant awarded to the nonprofit or under any contract secured by the nonprofit. The following three websites are helpful places to learn about nonprofit culture.

OK. So you still with me? This is the last business type that we'll be covering in this lesson, and it is corporation. A corporation can be defined as a legal entity separate from the people who own, manage, or control the corporation. Since a corporation is separate from its owners, the owners are not responsible, personally, for the corporation's debts. There are different types of corporations, and you will need to work with an attorney or an accountant to determine the best corporate structure for your business if this is the route that you choose.

Being incorporated means that the counselor can still be in business by him or herself or with others. As an incorporated business, the counselor does not need to be fully licensed as an independent counselor in order to run the actual business. But it may be difficult to provide direct counseling until the counselor is independently licensed. Another option for those wanting to practice as a corporation is to practice counseling part time while collecting hours toward independent licensure.

So here we are at the end of our journey down private practice business road. That's an awfully long name for a road, but anyhow, you should first decide whether you want to work alone, in a partnership, or in a group as this will have an impact on your tax structure options. You also need to consult with an attorney or an accountant to help make the choice that is best for you.

Here's what we covered in this lesson-- first, sole proprietor, next, independent contractor, limited liability company, or LLC, partnership, nonprofit structure, corporation structure, choosing an approach.

[MUSIC PLAYING]

Video Transcription

[MUSIC PLAYING] Well, here we are for more fun, so let's get rolling. OK. There are several different ways the counselors can be classified in business, including sole proprietor, independent contractor, limited liability company, partnership, nonprofit, or one of several types of corporations. There are different reasons why individuals choose different business structures, and no one structure is right for everyone. The primary reason a counselor chooses a business classification is for tax purposes, which is why you need to consult with a tax expert before choosing.

The information provided in this unit is very basic, and it will be necessary to consult with others, including an attorney, an accountant, and a business mentor, before choosing a business structure. It's not uncommon to change the business type. But also, it can be expensive to change one's tax status with the IRS. Therefore, I highly recommend that you be confident and informed in your decision about tax structure from the start.

So here's what we'll cover in this lesson. First, sole proprietor. Next, independent contractor. Limited Liability Company, or LLC, partnership, nonprofit structure, corporation structure, and choosing an approach.

Sole proprietor classification is one of the most simple business entities a counselor can choose. A sole proprietor is defined as one person who owns a business and claims responsibility for all profits and losses. A sole proprietor in accounting practice is a single person practicing alone. A sole proprietor is self-employed and reports their business income on their personal taxes.

Now, this classification is what we think of most when we think of hanging out a shingle and practicing by one's self. Sole proprietors usually need to be independently licensed to sustain a full-time practice. The reason why is because usually they need to be able to accept all insurances as well as cash to have a self-sustaining income. Another option for sole proprietor owners who want to practice counseling is to practice counseling part-time while collecting hours toward independent licensure or while building the practice's name and reputation.

Independent contractor classification is defined as a single person practicing under a verbal or written contract for another person. A counselor can either be an independent contractor or can hire independent contractors to work in his or her business. As an independent contractor, a counselor can be working for several business owners at once. This type of counselor is self-employed and is not considered an employee and reports their business income on their personal taxes.

A limited liability company is a business classification whereby the counselor files articles of organization. There is limited liability to the business entity with pass-through taxation to the business owner or owners. Limited liability means that the owners of the LLC can't be held personally liable for debts and claims against the company. Pass-through taxation means that the business is not taxed. And instead, the tax is passed through to either a sole individual or the people involved in the partnership. In other words, the business doesn't pay its own taxes, but, rather, the owners report profits and losses on their personal tax returns, just like they would if they were in a sole proprietorship or a partnership.

Articles of organization are sometimes also known as a certificate of organization and include information such as the business name, the nature of the business, and names of the members. These articles of organization are filed with the secretary of the state in your state.

With an LLC business classification, the counselor can still be in business alone or with others. An LLC is a business classification. And as such, a counselor can form an LLC and have independent contractors or employees working for the LLC.

Because of this, the counselor does not need to be fully licensed as an independent counselor in order to run the actual business. But he or she may have difficulty providing counseling until he or she is independently licensed. So the counselor can own and run the LLC and employ others as counselors.

So here's another option for LLC business owners who want to practice counseling. You can practice counseling part-time while collecting hours toward independent licensure or while building the practice's name and reputation.

A partnership is a relationship between two or more individuals for the purpose of trade or business. There is an expectation that each person contributes to the business and shares in the profits and losses. You don't want to be the slacker in the business, nor do you want slackers who are your partners either. A partnership as a business entity does not pay taxes, but, instead, the profits and losses are passed through to the individuals involved in the partnership.

Now, a partnership is a business classification. And because of this, a counselor can form a partnership with one or more individuals. And any one of these individuals can provide counseling or not. Or perhaps only a few partners provide counseling.

Because of this, you don't need to be fully licensed as an independent counselor in order to run the actual business. But you may have difficulty providing direct counseling services until you are independently licensed. If you decide to run a business without being fully licensed, you may need to hire an independent contractor or contractors or employees to provide counseling services to clients. Another option is to practice counseling part-time while collecting hours toward independent licensure.

A nonprofit organization serves a public purpose and is afforded special tax-exempt status by the IRS. A nonprofit classification can be defined as one whereby the organization uses its profits to advance its mission and goals as opposed to distributing the income to the organization's shareholders. A counselor opening a nonprofit organization will need to incorporate the nonprofit, file for tax-exempt status for the nonprofit, register the nonprofit with the state, and prepare annual reports and procedural requirements necessary to keep the nonprofit organization compliant with national and state regulations.

The nonprofit organization needs a few things in order first. A board of directors for starters, as well as a business plan that articulates the mission and goals, as well as funding. So here are options for your nonprofit.

You may want to establish a relationship with state agencies and the local department of human service in order to apply for and secure state contracts. Grants and contracts are available at the local, state, and federal level, and they are the lifeblood of many nonprofits. So see what your state has available. Nonprofit grants are also available for private organizations.

Now, I just mentioned grants in two different arenas, so grant writing skills are essential for obtaining grants and contracts to fund the organization. Now, the counselor can work for the nonprofit organization and is permitted to make an income. A counselor wanting to practice counseling may be able to practice under any grant awarded to the nonprofit or under any contract secured by a nonprofit. The following three websites are helpful places to learn about nonprofit culture.

OK. So you still with me? This is the last business type that we'll be covering in this lesson, and it is corporation. A corporation can be defined as a legal entity separate from the people who own, manage, or control the corporation. Since a corporation is separate from its owners, the owners are not responsible personally for the corporation's debts. There are different types of corporations, and you will need to work with an attorney or an accountant to determine the best corporate structure for your business if this is the route that you choose.

Being incorporated means that the counselor can still be in business by him or herself or with others. As an incorporated business, the counselor does not need to be fully licensed as an independent counselor in order to run the actual business. But it may be difficult to provide direct counseling until the counselor is independently licensed. Another option for those wanting to practice as a corporation is to practice counseling part-time while collecting hours toward independent licensure.

So here we are at the end of our journey down private practice business road. That's an awfully long name for a road, but anyhow, you should first decide whether you want to work alone, in a partnership, or in a group, as this will have an impact on your tax structure options. You also need to consult with an attorney or an accountant to help make the choice that is best for you.

Here's what we covered in this lesson. First, sole proprietor. Next, independent contractor. Limited liability company, or LLC, partnership, nonprofit structure, corporation structure, choosing an approach.

[MUSIC PLAYING]