By Dan Miller, WCI Contributor

Many physicians dream of opening up their own medical practice—for some, part of the thrill of entering the medical profession was due to an entrepreneurial spirit. In fact, the American Medical Association states that 44% of all patient-care physicians were self-employed as of 2020. If you're a doctor looking at starting your own medical practice, here is a step-by-step guide on how to do it.

There may be challenges along the way, but the rewards can also be substantial.


Benefits of Starting Your Own Medical Practice

There are a couple of reasons you might want to start your own medical practice. Some doctors prefer the autonomy and freedom that comes from owning their own practice. Rather than having your hours, terms, and physician salary set by someone else, you can be your own boss. Others prefer the financial upside that can come with starting their own medical practice. There is also the possibility of selling it when you retire—either to another doctor, a larger group, a hospital system, or private equity. This can provide a boost to your nest egg at just the right time.


Types of Medical Practice to Consider Starting

Once you've decided to open up your own medical practice, there are a few different types of practices that can make sense, depending on your own specific situation.


Solo Practice

The simplest form of medical practice is a solo practice. As a practice of one, you control everything that happens with your practice. But with that power also comes the responsibility of setting all the standards, rules, and business practices—along with all of the startup costs. While many solo practitioners work with other physicians to serve as a backup, forming a solo practice may mean that you have limited or no vacation time.


Group Practice

In a group practice, several physicians band together to work under one practice. Forming a group practice allows multiple doctors to work together. While you may give up some control by being part of a group practice instead of being on your own, a group practice also comes with some benefits. You may have to contribute less of an upfront investment, and you have built-in backup if you need to take time off.



Another option to consider is starting a medical practice within an existing hospital network. When you start a practice that is affiliated with a hospital, you may give up some control over your schedule and employees, but you'll also have all of the marketing and other resources of the hospital. This can help to jumpstart your practice and give you access to an existing pool of potential customers.


Federally Qualified Health Center

A similar option to opening a hospital-owned practice is to open a medical practice affiliated with a federally qualified health center. That also allows you to have access to a wide pool of potential patients, but you may run into caps on working capital due to being dependent on allocation from the federal government.


Academic Health Center

Many cities and metro areas have health centers or hospitals that are affiliated with nearby universities. Depending on where you live, opening a practice affiliated with one of these academic health centers may be an attractive option. However, most “academic docs” are employees of the institution.


Create a Medical Practice Business Plan

One of the first things that you'll want to do on your journey to starting your own medical practice is to come up with your medical practice business plan. Having a physician business plan is one of the most important tasks that you'll want to complete. You'll probably need a business plan for your new medical practice if you're trying to raise capital from outside investors. But even without that, having a written business plan can help you as you start up your practice by identifying strengths, weaknesses, and areas of concern.


Fund Your Practice

While you'll certainly have ongoing expenses as part of your medical practice, you're likely to also have additional startup costs. How you fund your practice will depend quite a bit on the type of practice you have. With a solo practice, you will be responsible for raising capital or contributing all of the startup costs. With a group practice or one that is affiliated with an outside organization, others may help with the funding process.


How to Choose a Legal Structure for Your Medical Practice

There are several different legal structures for your medical practice. Choosing the right one will depend on your specific financial and personal situation. Here are a few different structures to consider:


Sole Proprietorship

A sole proprietorship probably works best for a solo practice where you are the only one involved. While this may be the simplest and cheapest type of legal structure, it also does not provide much legal protection. This may not be a great legal structure for all but the simplest types of medical practices.


General Partnership

A general partnership might be an option for a group practice where several different physicians are equally sharing the costs, obligations, and profit. Typically in a general partnership, all of the general partners share in the operational control of the partnership but are also personally obligated to the entire debt of the practice.


Limited Partnership

A limited partnership differs from a general partnership in that any limited partners do not typically take part in the day-to-day operation of the partnership. These limited partners also have limited liability to go along with their lack of control. A limited partnership can make sense if you are raising capital from outside investors who don't want to be involved in the everyday running of the practice.


C Corporation (Standard Corporation)

A standard corporation is a separate entity, usually with its own tax identification number and a requirement to file its own tax return. Setting up your practice as its own corporation can help to shield some of your own personal assets if you are sued. If your C Corp is sued, only the assets held by the corporation are at risk. Without a corporation, your own personal assets may be in play for a lawsuit. A typical medical practice set up as a C Corp pays out most or all of its profits as salaries to the physician owner(s) to avoid the double taxation problem (where the corporation pays taxes on earnings and then the owner pays taxes on dividends received).

starting medical practice


S Corporation

An S Corporation (S Corp) is another type of corporation that can be used for setting up a medical practice. Unlike a C Corp, where businesses are taxed at the corporation level and then members of the corporation are taxed on the non-salary income they receive from the business, each shareholder has their income split between salary and distributions. This can save Medicare tax since payroll taxes are not paid on distributions.


Limited Liability Company (LLC)

A Limited Liability Company (LLC) can choose how it will be taxed. It can be taxed as a sole proprietor, a partnership, an S Corp, or a C corp. An LLC will pass any profits down to the personal tax returns of the owners of the LLC. Depending on the state, the LLC structure can provide liability protection similar to a corporation. An LLC is generally easier and less costly to form than a corporation and looks “more official” than a sole proprietorship.


Limited Liability Partnership (LLP)

In a Limited Liability Partnership (LLP), the owners of the LLP are considered partners, as opposed to owners of an LLC, who are considered members. Like an LLC, an LLP is somewhat of a cross between a corporation and a partnership. Not all states allow LLPs, and the laws vary by state, so make sure to check with your state to see if an LLP makes sense for your practice.

Some states allow/require doctors and other professionals that form corporations and LLCs to form “professional” corporations and LLCs. Tax- and liability-wise, there is no difference between a professional and a regular corporation or LLC.


How to Choose the Right Business Entity for Your Medical Practice

Choosing the right business entity for your medical practice is an important decision but not an irrevocable one. Having the wrong business entity can cause you to pay significantly more in taxes or open you up to unneeded liability. Consider spending time and money upfront by talking with a healthcare attorney in your state to make sure that your business starts off on the right foot.

More information here:

8 Business Tax Errors That Could Really Cost You


Medical Practice Licensing

If you are looking at starting your own medical practice, there are a variety of different types of licensing that you'll need to set up. Failure to get all of the appropriate licenses may result in fines, penalties, or even having to shut down your practice.


State Licensing

One of your first steps in setting up your medical practice is getting your state licensing. Generally, all physicians who are planning to treat patients in your practice must be licensed by the state where your practice is located. Certain states may have additional licensing requirements, depending on how your practice is set up. Make sure to check with your state medical board to make sure that you comply with all licensing requirements.


National Provider Identifier (NPI)

All medical providers are required to have a National Provider Identifier (NPI). You can apply for your NPI on the website of the National Plan & Provider Enumeration System (NPPES). You will need an NPI to have the ability to bill Medicare, Medicaid, and most private insurance companies.


DEA Registration

To prescribe controlled medications, you'll also need to be registered with the US Drug Enforcement Agency (DEA), which you can do on its website.


Additional Regulations

Some states, cities, and municipalities may have other regulations and licensing requirements that you'll have to meet. These can vary widely by location, so make sure that you check with your state and local government to make sure you take care of any additional regulations before you open your medical practice. Like any business, you may need a business license and may need to collect and submit sales taxes.


Office Setup and Location

As you move forward with starting your own medical practice, one of the most important considerations you'll have is how your office is set up and where your practice will be located. As with most real estate, location is one of the most important considerations. You'll want to make sure it is convenient for as many potential clients as possible. If your practice is affiliated with a hospital or university, you'll likely want to be close to those institutions.

Once you have a general idea of where you want to locate your practice, you can start looking for office space. You'll want to think about how many square feet you'll need, what the prevailing lease rates are, and what your hours of operation should be. Depending on where you start your practice, you may need to get a certificate of occupancy for the space from the local building or zoning department. The space can be rented or purchased. Many physicians make more money from selling the practice real estate than the practice itself. There are also some unique tax opportunities available by having a separate company lease the space to the practice.

More information here:

Should You Lease or Own the Real Estate for Your Medical Practice?


Equipment And Technology

Unless you are taking over an existing medical practice or office space, you'll need to purchase and equip your new practice with all the necessary equipment and technology to run things. This may include:

  • Software to manage your practice
  • Billing and records management software
  • Communications, including phone lines and internet service
  • Any and all medical equipment needed for your area of practice
  • General office furniture and supplies


Insurance for Medical Practice

While taking different forms of private and public medical insurance is important to the success of a medical practice, you also need to have insurance FOR your medical practice. Personal malpractice insurance likely won't be enough to cover the various types of liability you may be exposed to. In addition, depending on how your practice is formed and if you have any employees, you may need to get worker's compensation insurance, health insurance, dental insurance, vision insurance, life insurance, disability insurance, and/or business interruption insurance. An overall umbrella insurance policy is also probably a good idea.


Human Resources and Staffing

There are many different types and sizes of medical practice that you might be thinking of, and each requires a different level of staffing. But even the smallest type of medical practice (a sole proprietorship where you are on your own) is going to require a certain level of staffing. After all, you'll need someone to answer the phones and manage customers while you are seeing patients. The larger your practice grows, the more staffing you will need, and finding, hiring, and keeping good staff is paramount to the success of your medical practice. You will need to develop and follow policies to ensure compliance with laws, best practices, and efficient staff turnover.


Staff Compliance Training

As you build out your staffing model, you'll also need to ensure that every member of your staff is taking part in required and mandated training. This may include OSHA training, HIPAA compliance training, and CLIA compliance, among others. If you are found in violation of compliance training, you may open up yourself and your practice to fines, penalties, or even civil or criminal prosecution.


How to Market Your Medical Practice

If you start a medical practice and nobody has ever heard of you, do you even have a medical practice? While you may have gone to medical school and not business school, that doesn't mean that you can avoid marketing and advertising. Putting your name out to potential customers and patients is key to building and growing your practice. If you don't plan to do the marketing yourself, make sure that you have staff onboard that can help get out the word.

If you are affiliated with a hospital or other physician network, that may provide some of your marketing, but you may want to consider additional forms of advertising to make sure that you have a healthy pipeline of new customers coming in. Social media is probably going to be key to getting the name of your practice out in the real world.

More information here:

How to Save Money When Building Your Dental or Medical Practice Website


Additional Vendors To Support Your Business

Your new medical practice is also going to need to set up relationships with other types of vendors to make sure that you have the supplies and services that you need for your practice to thrive. This might include setting up utilities and general maintenance (depending on the terms of your office lease), office supply replenishment, the processing and removal of medical waste, or payment processing. Having good staff in place can help to manage these vendor relationships.


Negotiating Contracts with Payors

One of the most important tasks for most practices is to ensure you will actually get paid. Most patients in the US do not pay their medical providers directly; they pay via a third-party payor like private insurance, Tricare, Medicare, or Medicaid. You will need to register with and/or contract each of these entities. If you choose to work with these payors, you will also need to deal with denials and requests for additional information, as well as pre-authorizations. Some doctors have decided not to bother and simply charge the patients directly. This makes for a more transparent pricing model, although it's one generally used by only the most medically literate and well-to-do patients.

More information here:

What is Direct Patient Care?

Maximize Profits with a Concierge Medical Practice Model


Common Challenges to Starting a Medical Practice

It's important to think of some of the challenges you may face when starting a medical practice BEFORE you first open your doors. This is one of the reasons that spending time creating a good business plan beforehand is such a good idea. Spending time thinking of these challenges and how you will handle, react to, or mitigate them can help minimize overall disruptions to your practice.

Some common challenges you may run into include managing accounts payable and accounts receivable, setting up the technology and other computer systems, marketing your practice, or managing your staff. Depending on how you choose to set up your practice or your own specific situation, you may run into work-life balance issues as well. Think through some of these challenges before you first start up a medical practice.

More information here:

Starting a Medical Practice Book Review

Medical Practice Start-up: 7 Steps to be Successful

First-Year Review of Our Medical Practice Startup

Starting a Medical Practice Podcast


The Bottom Line on Starting a Medical Practice

If you have always had an entrepreneurial mindset and love the idea of being your own boss, starting your own medical practice may fulfill a number of your life goals. There's no denying that owning your own medical practice may give you freedom—flexibility with your time and potentially increased income. But that's not to say that there aren't potential downsides as well. Make sure you have a good medical practice business plan in place and that you've thought through some of the potential downsides before starting up your medical practice.

Have you thought about starting a medical practice? If you did, would you do anything differently? What would you do the same? What else should potential practice owners know? Comment below!