Consultation as a therapist in WA state

August 25, 2020 8:29 AM

I am trying to figure out the exact steps to provide consultation (not clinical supervision) to other MH therapists in WA state. Can you explain it to me like I'm 5? I don't know anything and am overwhelmed by searching. Things like, taxes, do I need to be a company, do I need to declare myself a freelancer somewhere, etc. Thank you!
posted by fairlynearlyready to Work & Money (4 answers total)

Best answer: Hopefully someone else with more specific knowledge will chime in, but it depends on the type of consulting you are doing. If you are just providing general advice or technical services but are not working directly with patients, then the question is just "How do I become an independent consultant in Washington?", which should simplify your question. If you would be working directly with patients I imagine that would hit into HIPAA/privacy issues that I do not know anything about. I am a software consultant in North Carolina, so I can answer some of the general questions, but there are probably state-specific issues I am not aware of.

Regarding taxes, there are two simple options: a Single Member (or pass-through) LLC, and a Sole Proprietorship (which is not actually a company as it it isn't registered anywhere). Tax-wise, these are exactly the same, where you use your own Social Security Number when you set up payment. For these simple setups the IRS considers the company to be the same thing as you personally. Unless you are paid less than $600 by a client in a calendar year, you will need to send each client a W-9 Form, which they will use to report what they paid you to the IRS. On your side, you will need to keep track of your business income and expenses, and then work with an accountant at the end of the year to file your taxes, which will be much more complicated and much higher than you expect because as a freelancer you are responsible for paying social security/etc yourself. But, you get to deduct most of your business expenses. So I would talk to a tax accountant early to set up a relationship, and they can discuss rather you need to pay quarterly estimated taxes.

So the question about if you need to be a company is more complicated, and the rest of this is about that. If you don't need to be a company, you just follow the tax advice above and use your personal name as the entity to be paid. The difference between having an LLC and just being a sole proprietorship/individual is that with an LLC you form a limited-liability "shell" company that theoretically protects your personal finances from money your business owes. As you'd be doing medical work you probably want an LLC and some liability insurance to avoid the chance of going bankrupt due to lawsuits. So, you should first form your LLC, which I did with LegalZoom for around $500 total but it differs per state. You'll also need a business tax id for the next step. You probably don't want to use LegalZoom for anything after that, they were charging me $100 to fill out a form I did in 5 minutes on North Carolina's website. They'll also want to be your Registered Agent, but that can just be your home address, you only need one of those if you don't actually live in the state where your business is located.

Once you have your LLC and tax ID, you need a business banking account. I just set up an appointment at a branch office of my personal bank and they walked me through that. They discussed things like liability insurance with me at this point. You want your business and personal income to be strictly separated, which also helps with your accounting at the end of the year. I signed up with Wave and use them for invoicing and basic accounting, but there are lots of options here. Generally, you send your client an invoice, they pay your business account via direct deposit or anything else, and then you move that money from the business account to your personal one. You pay expenses out of your business account with it's own credit/debit card. The last thing to worry about is health insurance, and this is very state-dependent. If you have access to other insurance via a primary job or partner use that, otherwise you can sign up for self-employed health insurance.

I definitely found it confusing when I started out as a consultant, but hopefully that will point you in the right direction.
posted by JZig at 12:59 PM on August 25, 2020 [1 favorite]

Re the health ins piece, if you're striking out on your own (i.e. not getting coverage as a dependent on your spouse's or other family member's coverage) your options are the ACA individual plans and the SHOP (basically ACA but for small businesses) site. SHOP is more complex because you're basically setting up employer-offered coverage and you have to figure out what percent the business will be paying vs. you as an individual and Open Enrollment Periods and all of that -- so you will probably want to consult an insurance broker. But it might be better from a tax perspective depending on Factors. Your spouse's income plays into this as well; if they make a decent amount of money you won't be able to get much subsidy through the ACA plans even if you're not paying yourself much or anything.
posted by tivalasvegas at 1:52 PM on August 25, 2020

Federally qualified health centers and many hospitals and social service organizations have free help with figuring out ACA stuff, there are links to "get local help" or similar on healthcare.gov.
posted by tivalasvegas at 1:53 PM on August 25, 2020

Best answer: The State of Washington has a website that will give you a pretty good overview of the answers to your question on Opening A Business

I would also pay an accountant for an hour of their time to walk you through some of the choices that you need to make and issues to pay attention to - particularly the need to pay estimated taxes. You may not need an accountant once you get going - I've used accounting packages like Quickbooks SE for accounting TurboTax for filing (as a sole proprietor, the easiest form, I just add a Schedule C to my regular 1040 to report the income and expenses of my business)

One thing you should think about is whether you need professional liability insurance. If your consulting has any impact on patient care then you really, really need it. For other things, it depends on your risk tolerance (and possibly state laws)
posted by metahawk at 9:33 PM on August 25, 2020