Evan Dumas 

You’re listening to Group Practice Tech, a podcast by Person Centered Tech, where we help mental health group practice owners ethically and effectively leverage tech to improve their practices. I’m your co-host, Evan Dumas.

 

Liath Dalton 

And I’m Liath Dalton, and we are Person Centered Tech.

 

Liath Dalton 

This episode is brought to you by Therapy Notes. Therapy Notes is a robust online practice management and electronic health record system to support you in growing your thriving practice. Therapy Notes is a complete practice management system with all the functionality you need to manage client records, meet with clients remotely, create rich documentation, schedule appointments and bill insurance all right at your fingertips. To get two free months of Therapy Notes as a new Therapy Notes user go to therapynotes.com and use promo code PCT.

 

Evan Dumas

Welcome to Episode 620: Choosing the Right Business Entity for Your Practice: LLCs, PLLCs, PCs, and S-Corps Explained (with Attorney Dan Pepitone).

 

Liath Dalton 

Hello and welcome. I am so pleased to be joined by my friend and colleague, the wonderful Dan Pepitone of Peptone Law. Dan has been an attorney for 18 years, and for the last five, Dan’s practice has been specifically focused on working with behavioral health professionals. Dan’s law practice is based in New York State, and we all know how complicated the laws in New York can, can be. When we’re usually giving examples of complex legal situations that need to be considered or navigated really intentionally, oftentimes that’s going to include New York and California, right?

 

Liath Dalton 

So Dan has been a great resource to be able to refer Person Centered Tech clients with legal needs in New York State to. But we thought we would just have a conversation about some super exciting topics, right Dan?

 

Dan Pepitone 

I think so, yep.

 

Liath Dalton 

Foreshadowing here, we’re going to be talking a lot about the implications of the legal entity structure that you select for your practice. And I want to be clear too that this conversation isn’t just applicable for those of you who are preparing to launch a practice, because it also comes that there can be a point in time when you want to change or would be appropriate to revisit the entity structure that you have, right? So we’ll talk too about what some of those triggers can be.

 

Liath Dalton 

Before we dive in. Dan, what else do folks need to know about you?

 

Dan Pepitone 

Yeah, thank you so much for having me. I’m really excited to participate today. Yeah, I’m an attorney, as you said. I previously worked at a nonprofit law firm for 14 years before I went into private practice. Most of what I do for my behavioral health professional clients is setting up their practices, setting up their business entities, helping them with client documents, employment agreements, a bunch of other things that are more like foundational. My idea, like you kind of touched on, my approach to the law, I guess, would be preventative law, trying to help people avoid issues and create a strong foundation at the start, so they’re less likely to encounter problems as they go along.

 

Dan Pepitone 

And yeah, I think I’m excited to kind of dive into, to, to discussing in particular different business entities and approaches. I would just start by saying, too, that you know I’m sharing information. There’s not going to be very specific advice. This is always, always a tricky topic. And just in general, I have to be very lawyerly here to point out to people that they should absolutely consult counsel in their states, a lot of what we’re talking about, as much as I’m going to speak generally, is going to be, you know, determined by the laws of the states that you practice in. So, very important to get specific advice for your specific situation.

 

Liath Dalton 

Absolutely, always have to have that in place. And I want to say, too, that one of the things that I appreciate, um, in terms of how you approach the law, and how PCT approaches practice in general, and specifically HIPAA compliance and risk management, is very much through that preventative lens, or being proactive, where you can, instead of reactive, establishing a solid foundation at the outset. Because we know that practice owners didn’t pursue this field typically to be a business owner or to navigate all of these complexities and nuances. They got in it to help people and provide client care, and then grad school doesn’t equip them to navigate these pieces, and it can kind of end up feeling like they’re thrown into the deep end without a life preserver.

 

Dan Pepitone 

Definitely.

 

Liath Dalton 

So any, any ways that we can be that life preserver and and help help people get the right foundation in, and know that they also don’t have to have all of the answers.

 

Liath Dalton 

Yep.

 

Liath Dalton 

That, sort of one of the most valuable skills, I think, can be learning when to identify that yes, you don’t know something, and that is totally okay. It’s not your job to know it. It is then a matter of just identifying how to get the right guidance and resources and support to address that specific aspect of running your practice.

 

Dan Pepitone 

Yeah, I think that’s a really good point for people. The like amount of regulation in this work is so unbelievable. You’re really not taught at all in school, and the two of us are spending, you know, most of our time digging into these things, and we’re learning new things all the time. So, it’s a totally unreasonable expectation that you would have to, as a provider, know all of these rules that govern your practice, that’s where I think it is really helpful, in particular with Person Centered Tech, the resources and the documents, and the real understanding of what people’s responsibilities are.

 

Dan Pepitone 

Getting that early is just so essential to building that strong foundation for a solid practice that’s really going to be able to reduce their risk and exposure to liability as you move forward, Person Centered Tech to be clear with everyone of you and The Insurance Maze by Barbara Griswold are by far my first, like most two organizations that I refer my clients to just on a daily basis, because your resources and help are just so crucial to people. So, thank you so much for everything you’ve done for all of my clients.

 

Liath Dalton 

Well, it truly is a privilege and a pleasure, and the feeling is mutual as well, and I appreciate how over the years there has sort of been creation of a network where we each are working in our own silos, but increasingly in a connected and collaborative way.

 

Dan Pepitone 

Definitely.

 

Liath Dalton 

And I think that then translates into being able to give all of the folks that we work in support of the best sort of potential outcome, so.

 

Dan Pepitone 

I agree.

 

Liath Dalton 

Higher powers combined.

 

Dan Pepitone 

I love that.

 

Liath Dalton 

Yes. Well, let’s dive in, because this is a question that we end up hearing all the time, particularly in Office Hours and Group Practice Office Hours, when we’re working with someone who is preparing to launch a practice, whether it be a solo practice or a group practice. Sometimes we’ll have folks who are presently a solo practitioner looking to launch a group practice, but generally we get some flavor of the question of, “What business entity should I choose for my practice?” And I suspect that’s actually not necessarily the right first question. So, before you, Dan, start to make a recommendation on LLC, PLLC, PC, S-Corp, anything else, what do you want to know about the practice or their vision and like plans for what this practice is going to look like?

 

Dan Pepitone 

Yeah, I love that. I love that kind of changing the framing of it. I think it’s so important for people to consider their unique plans and how that fits into these different categories and options and. So yeah, for me, I think the first thing, the first few things are going to be like, what are, how big are you going to grow? How many people are going to be part of like management, of ownership, let’s say, actually. How many therapists do you plan to hire, how many other employees? so like how big are you growing? Where is this thing headed? What are your overall plans in terms of the clients that you’re going to help? Who are you reaching out to? Are you going to be renting office space? Is it going to be totally virtual? Is it going to be totally in the office, hybrid, whatever? And if you’re going to be hiring people, like I mentioned before, is going to be a huge component of this. And then what states you are planning to engage with and interact, offer your services in?

 

Liath Dalton 

Right. So what, what additional states between where the practice is physically located, or, if it’s a virtual practice, where the practice owner and primary clinician resides? What other states are they going to be delivering client care to via teletherapy?

 

Dan Pepitone 

Yeah, thank you. That’s exactly right. I think it’s extremely important that people understand that different states have different entity types. So if you just start with one of the states, even though you’re planning for multiple, you really need to have the understanding of what each state is going to accept.

 

Dan Pepitone 

A really good example is California. In California, you are supposed to practice a profession through a Professional Corporation, a PC. So, if you form a different entity in another state, you’re not going to be able to register that entity in California. You need to start a PC in California, so that might change your equation of where you know your entity starts, and then what you end up doing in the other states that you’re operating in.

 

Liath Dalton 

Oh, wow. Yeah, I mean, that, that makes, makes sense. And now, because we all encounter so many acronyms in this, in this line of work, in particular, but then the entities all have, have their own too, right?

 

Dan Pepitone 

Yep.

 

Liath Dalton 

Can you walk us through what those, each of those different terms actually mean, because sometimes I’ll hear folks use LLC, PLLC, PC, and S-Corp almost interchangeably.

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

And they’re not, obviously. So, how would you untangle those and explain what decisions?

 

Dan Pepitone 

Yeah, let’s break that down. I think that’s a helpful start. So, you know, the most basic form of people operating and engaging in a business activity is one where there is no registered business at all. You’re operating as an individual as a sole proprietor, or you’re operating with other people as partners. So, those are sole proprietorships and partnerships. There’s no real registration requirements. There may be certain things that you do, but there’s not like a formal filing, you know. We’re here, we’re starting this, that kind of thing. And in this type of, you know, way of approaching business, you remain personally liable, personally responsible for your the debts and obligations of your business, so it’s just you operating as an individual or with other friends through a partnership, and you remain liable for the activities of your business.

 

Dan Pepitone 

The next is a limited liability company, an LLC. And you know, a limited liability company protects your personal assets from the debts and obligations of a company of the business. So you know it’s one thing for people to just sign up and say they have an LLC, get it registered, but if you’re not actually acting where the business is separate from yourself, you separate business finances, in particular, from those of your personal life, then that’s how you really ensure that you have this protection of your personal assets, ensuring that you create this limited liability shield. This does not protect professionals, however, from malpractice claims. So you can’t have this business entity and shield yourself from this bad behavior, that’s like essentially this unprofessional conduct that’s rising to the level of malpractice. That’s where you have malpractice insurance that gives you this extra coverage.

 

Dan Pepitone 

So, your limited liability company is a really simple structure, and it’s considered to be very flexible. Where we’ll get into corporations a bit more, you know, corporations have existed for, I don’t know over 100 years, right, and all this law and regulation has been created around this form of business entity, which is basically designed so when there are problems within the corporation itself, it’s easy for people to, you know, determine what the law says. How an issue should be handled. Maybe there’s conflict between two of the owners, or there’s an issue with someone wanting to get out and sell a part of it. There’s this huge body of regulation, whereas with a limited liability company, it’s much more informal and flexible, where the parties involved, those owners can kind of create a lot of their own rules. Did you have a point? Or yeah.

 

Liath Dalton 

No, I’m just following, following along. And was going to ask if you, because I know there are different tax filing obligations for a multi-member versus single-member LLC, in terms of the federal filings, which forms are filed, and so I have told folks before, if they’re pursuing an LLC, and they truly are a solo practitioner, not to just add their domestic partner on as an additional member for, like, business continuity sake, or something with that, without thinking through those implications, because there is a difference there.

 

Dan Pepitone 

Yeah, that is a really good point. Let me just bring up some things that I kind of missed as I was going through this earlier, of this idea of like this difference between a limited liability company and a corporation. My kind of like very basic differentiation between the two would be that a corporation is, sort of, the idea behind it is that it’s for like a larger company or for people who have plans to grow it into something, let’s say, where there’s shareholders and there’s many different owners. In which you can do the professional version of it, in New York, we have professional corporations, I mentioned that earlier, referencing California. Not every state is going to have a professional corporation, but, like in New York, people are required to practice their profession through a professional entity. So, a regular corporation or a regular LLC won’t cut it. You have to have a professional corporation or a professional limited liability company, and that’s where it becomes very important for people to check the rules that their individual state.

 

Dan Pepitone 

Very unfortunately, I regularly hear from people in New York who have created a limited liability company that was not structured as a professional limited liability company, and very often they’re starting from scratch, and the LLC they created was, was, is kind of useless at this point. But if a corporation is designed for a growth, and there’s all this regulation that I indicated before to kind of help with that of how these structures work, and a limited liability company is much looser and able to kind of change things as you go and be a bit more flexible, and yes, there’s room for growth in it, but it’s not this idea of these like kind of like sales of parts components of the corporation to bring more money in and to grow even bigger. That’s usually not exactly the idea of these private practices LLCs that kind of have a more defined plan of how big they’re going to grow. That doesn’t mean that an LLC might not be the proper structure for someone who plans to grow much larger. Again, that’s where like different factors are going to come into play, based on where you live, you know, where you’re operating, and that kind of thing.

 

Dan Pepitone 

So we have sole proprietorships and partnerships, which are unregistered. There’s no, like, business registration for them, your business, your, your, the debts and obligations of the company are, are you’re still responsible for them as the individual owners. A limited liability company is designed to be more flexible, and there is a protection of your personal assets. That does not cover malpractice. And then a corporation is, has that same limited liability protection, but it is designed generally for growth for a much bigger company. There’s more like, complexities and formalities that come with it as well.

 

Dan Pepitone 

When we talk about the tax issue, I’m sorry, that was the longest intro to get to your question.

 

Liath Dalton 

No, not at all. Very on brand.

 

Dan Pepitone 

Yeah. Well so when we’re talking about these tax implications, too, when you’re just a sole proprietor in a partnership, you’re reporting your income from these business activities on your individual or jointly filed tax returns, right? When you have a corporation, you are very likely filing taxes for the corporation itself, separate from your individual tax return.

 

Dan Pepitone 

When you have an LLC, the standard tax classification of the LLC is as a disregarded entity, which means you just report your income on your individual or jointly filed return the way that you would if you had a sole proprietorship or a partnership. What people do, and this is where you kind of reference S-Corps earlier, an S corporation isn’t like an alternative to an LLC or a corporation in terms of the business entity type itself. What it is is a classification for tax purposes. So what some people do to lower their self-employment tax, which covers Medicare and Social Security, they will file as an S corporation. Now they’re treated not only as an owner, but also as an employee, which maybe like offsets how they, you know, pay their taxes, and maybe has a reduction in what the overall tax bill is. There are limitations that come to this. It can, you know, change someone’s responsibilities as well. So it is important for someone to really consider those possibilities and talks, talk to a tax professional about what the implications will be there.

 

Dan Pepitone 

But where a sole proprietorship and a partnership are an unregistered, they cover your unregistered business activities. An LLC and corporation are business structures, business entities, and an S-Corp is really just a filing status, a tax filing status.

 

Liath Dalton 

Aha. That is helpful explanation,

 

Dan Pepitone 

I hope so.

 

Liath Dalton 

differentiation between between each of them. So, would you kind of have two things that are coming up for me.

 

Dan Pepitone 

Yep,

 

Liath Dalton 

In terms of what to ask next. One, because a, in New York, you cannot have an LLC for behavioral health care delivery.

 

Dan Pepitone 

Yep.

 

Liath Dalton 

Then, or just a regular corporation, it needs to be a professional corporation or a PLLC. Can you talk through what the process for establishing those is, as well as, as why that particular requirement exists as well, like, what? What is the intent behind having that requirement?

 

Dan Pepitone 

Yeah, good question. So, you know, some states aren’t regulating in that way, so you can form an LLC, and you can engage in any business activity, including the delivery of your professional services. In New York and many other states, if you’re going to practice your profession, you have to do so under a professional entity like a PLLC or a PC. And the idea here is we want to be extra aware of people who are licensed to be, to ensure that they’re practicing responsibly and following the regulations of their business.

 

Dan Pepitone 

So in New York and in many other states the process is considerably more complicated than if you were just filing for a traditional corporation or a traditional limited liability company. I do have a guide on my website that goes through the process for New York. But essentially just to kind of give like a very quick overview in New York and other states as well. You first start by going to the Office of Professions, so it’s the state licensing authority to get authority from them to create this business entity. So they’re essentially signing off to say, you know, you’re properly licensed, you don’t have any disciplinary issues that are going to be a problem here. And then you take this certificate of authority that they give you to the Department of State, so you can file and actually form the business entity. And, you know, that can be a complicated process. You file articles of organization, that might be called something different in other states as well, certificates of incorporation, that type of thing. All different names in all different states, all different processes.

 

Liath Dalton 

Right.

 

Dan Pepitone 

Yeah, all different ways. In New York, you know, we still use the mail, and we just stopped using fax for certain things, so it’s very complicated in different states, and that’s something to just be aware of. Our process takes like about two and a half months. But you can be in another state where there is, you don’t have this requirement, and your LLC can be set up in like ten minutes. So it really is so dependent on the state that you’re in.

 

Dan Pepitone 

One thing that I want to say, we talked about, you know, determining what states you’re going to operate in, and one of the reasons we ask that question too is because there’s this idea that if you’re regularly engaging in business activities in a state, your business is supposed to be registered in that state. And if you don’t register the business, there could be penalties, and other issues could come up for you. So, a lot of times I get clients who are practicing in multiple states, and then we determine which is the appropriate state to start the initial entity, and then determine if we’re registering as a foreign entity, it’s called. So the foreign is that it’s just from another state, and whether that needs to be registered in, you know, what other other states you’re, you’re practicing in.

 

Liath Dalton 

Yeah, I’m seeing this coming up more and more as folks have all teletherapy practices, and as sort of licensure portability is opening up more and more, right? Like it started with PSYPACT, now the Counseling Compact is online, even though it’s just a few few states at the moment where you can actually get the practice privileges. But the Access MFTs is also setting, has set things up for licensure portability, and then the Social Work Licensure Compact is also in place. So there are a lot of people who are either presently not having such geographic restrictions on their practice, or are looking ahead to it. And so I want to caution folks that the, “Am I permitted to practice there in this, or deliver client care to this other US state?” in this case is only the first part of what needs to be considered and navigated, because there are these business entity and registration questions too.

 

Liath Dalton 

Can you give a little sort of TLDR version, almost of what triggers needing to register in another state? Because I think sometimes it’s easy to think, well, I’m not physically present there as the care provider, so why would I need to register there?

 

Dan Pepitone 

Yeah, I mean, these.. this is going to be the trickiest thing. I mean, this is always a part of the law where things are a bit vague and things are open to interpretation, so you know, in one state some of your limited business activities that state might not really care about, and they’re okay with you not being registered there, and in another state it could be a really big deal. So it is very difficult to give that that analysis, just kind of generally.

 

Dan Pepitone 

What I will say, is generally speaking, if you are engaged with a client on a regular and ongoing basis, which is kind of the nature of therapy, and that client is located in a state where you are not, where your business isn’t registered, you very likely would have to register there in the eyes of the law. Are you absolutely going to get in trouble? Is this like police force, you know, coming after all these businesses that aren’t registered in each state? Of course, not. Like you can imagine, most companies that are engaging in business across the country, they’re not really doing this, for the most part, I would imagine. I haven’t, you know, done a thorough investigation, but it’s pretty hard to imagine that that’s happening regularly.

 

Dan Pepitone 

But I do worry about it for professionals, because what other impact could it have if you weren’t properly registered there? Is there going to be issues with your license? Is there going to be issues with your malpractice insurance if there’s a claim against you in this other state? Is your malpractice insurance going to be like, you know, we’re not covering you because you didn’t properly register the entity? I think some of that might be very attenuated, attenuated. And we haven’t really seen it so much, but that doesn’t really mean it couldn’t ever happen in the future.

 

Dan Pepitone 

So, I do think it’s important that people take this seriously. I understand that, like, you know, interest in kind of expanding, and I can help more people, and you know, reach more people, and reach more states, and all of this, but it is much more complicated than that. I also just generally think, for a lot of small practices, most of my clients have very small practices. If it’s not just them as the only therapist, they only have, like, a handful of therapists working for them. And I generally think, like, keeping it small, you know, not having a lot of states that you’re interacting with seems to make sense to me, in terms of, yes, what I’m just talking about with your, like, registration of the business, but there’s also all these fees involved with that.

 

Liath Dalton 

Right.

 

Dan Pepitone 

There’s keeping up your licensure, there’s making sure that you understand the specific regulations of every state, so I think it gets complicated. Generally, I tell people to consider pumping the brakes a little bit on getting licensed everywhere, you know, jumping on board with the compact and that kind of thing.

 

Liath Dalton 

I am not surprised to hear that, but also glad to hear it, because I’m worried about the implications of things opening up so much, and there not being enough attention paid to the details and the consequences of how those details can particularly come to sort of manifest or or play out.

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

And sure we haven’t to date seen these examples of things going horribly awry. Yet, though.

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

So I am always applying the risk analysis lens, though, of okay, but say worst-case scenario happens. What would that mean for you individually? Is that a risk that you’re, you’re willing to take? Just because it’s not, doesn’t have high likelihood of occurring, if the impact is really high, if it were to occur, then I’m still like, it’s not.

 

Dan Pepitone 

Yeah. And I think it’s a different way of just thinking about what someone’s plans are and what is like the root, you know, of the decision. Why are we getting licensed in all these states? And you know I think there’s like a world that would be a lot easier if we didn’t have all these different state rules and it really was just like a country-wide license and regulation was just one, there was just one source. That is not the environment that we’re working in, so it just becomes so complicated, because you really have to follow and pay attention to every state that you’re dealing with.

 

Dan Pepitone 

And it’s not necessarily to discourage everyone from doing it, but I would really think about, like, why, and what is the goal here? I think for a lot of people it’s because they’re just starting out, and they want to get as many clients as possible very fast, so they can, like, you know, pay their bills. That absolutely makes sense to me. But the long-term effect of that, I think, can be really hard and very overwhelming in ways that people just, of course, don’t don’t know going into it, because where are you finding that information, right? That’s not part of the thinking as you’re going down this road, and so that’s tricky.

 

Liath Dalton 

100% So, going back to the different entity structures that we started out with at the beginning, can you, kind of, talk us through, in general terms, what sort of general practice context or particulars would make you say, “Ah, you know, actually staying as a sole proprietorship might make sense for you, versus this is a clear need for a PLLC or for PC?”

 

Dan Pepitone 

Corporation. Yeah, yeah, that’s a really good question. For me, as a lawyer in New York, my two biggest things to distinguish between whether someone can continue as a sole proprietor or consider getting a business entity would be whether they have plans or already in a commercial lease, if they’re going to rent office space. I really don’t want my people to rent office space in their individual name, particularly in New York, where a lot of complicated things can happen, and the law is very favorable for landlords. A lot of these commercial leases are very intense, thorough documents that are very landlord favorable. So, there’s exposure to risk there that concerns me, and I really don’t want someone to be personally responsible for all of those things, and the different difficult ways that that might go.

 

Dan Pepitone 

And then the next is if someone is planning on hiring people, if they’re going to grow their practice in that way, I think there again is going to be more exposure to risk, and there’s this absolute value of ensuring extra protection or taking these steps to protect your personal assets in case there is conflict or a lawsuit in particular. But yeah, I mean, I generally think that a lot of people who are just starting out are probably planning on doing this into retirement, and between now and then, a lot of different things could come up. A lot of different, you know, things that you weren’t really conceiving of at this starting point could come up, and it might be nice to have the business entity structure like already set up and out of the way. You’re already like going through the process of starting from scratch, so getting everything into the name of the business early on, and being ready for, you know, whatever might come your way, with the entity already in place, can be a really helpful thing. But of course people can make the decision to proceed as a sole proprietor, and you know, very likely get through that without a lot of issues, if they’re keeping things really simple. They have a remote practice, they’re doing, you know, telehealth, it’s just them, they’re not hiring people, and that kind of thing. Still worth the discussion and the evaluation, though.

 

Liath Dalton 

Right, it should be an informed decision, and fully, fully considered, not just a default.

 

Dan Pepitone 

Yep, exactly.

 

Liath Dalton 

So, is there really much to consider beyond the liability protection and kind of formalities, then of how your taxes get filed that actually play a role in choosing the right entity.

 

Dan Pepitone 

Yeah, I mean, I think how, how formalized this needs to be, and what you’re really trying to prepare for is what’s going to matter. If you are going in a direction where you’re going to bring other therapists on and be co-owners, there may be very good reason for you to consider a corporation or a professional corporation that is going to have this body of regulation already established, so it’s very, or I shouldn’t say very, it may be more clear how different issues get dealt with. So I think there’s considerations like that of just, I don’t know, where you’re headed. For the most part. Most of my clients are really entering into a plan to have a very simple practice, not to use that name too specifically. But just keeping things very basic for their practice, maybe that’s my new framing of that. And an LLC or a PLLC can make sense for them. They’re going to have this protection of the limited liability, like you, you were mentioning, and they have this kind of formal thing too. You know, it’s also there is something to it about, like, a professionalism as well. I don’t really like to harp on this too much, but I think you know, from a client perspective, sometimes it can look like this is more the real deal if there’s this entity attached to it, and you’re not just, like, you know, contacting whoever directly, it may feel a little less professional sometimes. Not that that should be, you know, the deciding factor, but I do think that there is a component of that as well.

 

Liath Dalton 

So I was going to say, if you are doing things as a sole proprietor, how do you then protect your practice name?

 

Dan Pepitone 

Yeah, then

 

Liath Dalton 

Because is there any process whereby a sole proprietor can do a DBA registration?

 

Dan Pepitone 

Yeah, and this is, I should have probably mentioned this as well, so it’s a doing a DBA is a, is considered a doing business as, or an assumed name in some states, New York too. Where the idea is, yes, you’re an individual, but you’re like marketing yourself, and maybe you’re entering contracts under a different name. There’s no real protection of that name by doing that, though, in most places. You’re not really preventing anyone else from using that same name. You know, Green Meadow Therapy, whatever it is, sure you’ve registered it, and it’s more so you know the state can verify that you’re not misleading people, you have, you know, registered this, and you are thoughtfully doing it, and you’re not confusing anyone with what you’re doing. We still understand that it’s you as an individual, and there’s no business entity here.

 

Dan Pepitone 

There’s things to think about, like getting trademark, registering the trademark, either with the federal government or with your state, I tend to think that for a lot of really small practices that’s probably not really worth it. It’s very unlikely you’re gonna, you know, go after someone and go through this huge process of proving that someone has infringed on your trademark, which is a very time consuming and costly process. For the most part, if someone is an individual in private practice, I think you might also think about how your branding and whether it’s really like you’re using that name or it’s more of like a slogan. The other consideration with using this assumed name is that you probably still need the state to approve it. In New York, the Office of Professions, the governing body of your profession, wants to know what that name is, and they want to say, you know, you know what words you can use and what words you can’t. Again, so you’re not misleading people or engaging in other like promissory behavior, and that kind of thing.

 

Dan Pepitone 

So that’s a consideration as well for people who are going the sole proprietor route. For the most part, I sort of push people a little more towards just using their individual name and signing contracts and marketing in that way, and maybe you have a slogan, and there’s something that you really identify with, some words or phrase or whatever it is, and maybe that’s more of like a slogan, it’s kind of part of your brand, but not like who is signing contracts, you’re still signing contracts as an individual.

 

Liath Dalton 

Right, that makes really good sense. So then at what point or points in a practice’s growth should they revisit the entity that they’ve they’ve chosen? It would sound like if they’re that’s something to really revisit if a solo practitioner is now expanding to a group practice model.

 

Dan Pepitone 

Yeah, yeah, I think that’s a really smart way of looking at it. If you’re bringing other people in to be co-owners in an LLC, an owners called a member, so co-owners, co-members, that’s something to think about. You know, your bylaws or your operating agreement, bylaws for a corporation, operating agreement for an LLC, is going to change dramatically. So it makes sense that you’re very thorough before you make any moves like that, having a co-owner, if you’re going to go in the direction of hiring more therapists. I do think that yeah, it’s appropriate for you to consider your entity. More, for me, like if you’re a sole proprietor, then you should have something else, like an LLC or a corporation, less like if you have an LLC, and now you’re hiring people, do you need to switch to a corporation? That’s probably not likely. For the most part, I think LLCs for a smaller practice are going to make sense. And a PLLC, if I haven’t already said it, is just a type of an LLC. So, when I refer to LLCs, I’m kind of doing the umbrella that incorporates a PLLC. Did that answer your question?

 

Liath Dalton 

Yes, absolutely.

 

Dan Pepitone 

Okay.

 

Liath Dalton 

It did. So, then I think another related question to this whole entity consideration is that I think oftentimes there’s a presumption that once the entity has been formed and the paperwork has been filed, if it’s one that requires filing, if it’s not just a sole proprietorship, that they’re done. So, what ongoing legal maintenance is actually important for preserving those entities, different entities?

 

Dan Pepitone 

Yeah, I love it. Really, really good point. I have a guide on my website to basic legal maintenance for New York businesses. A lot, I have all these guides on my website that can be, yes, a lot of them are focused on New York, but could be applied to people in other states, at least to get the basic idea of, you know, the requirements, even if maybe some of the language has changed and some of the requirements don’t apply, but it might lead you to other specific requirements for your state as well. So I do encourage people to check that out.

 

Dan Pepitone 

In New York, and in a lot of states, there may be an annual or biannual, like renewal of the registration of the business. This is a very important thing to consider, too, when you’re considering, you know, these choices of what states you’re engaging with and where you start your business. And I don’t know what the exact number is, but in California, your annual registration, I think, is like over $800. In Massachusetts, it’s 500. So these things can really add up, and people should consider it. One area where New York is great is we have a biannual registration, and it’s only $9, so $9 every two years. New York makes your life a little bit easier than a lot of other states.

 

Liath Dalton 

What?

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

That is so much cheaper than Oregon as well.

 

Dan Pepitone 

What’s Oregon, roughly? Hundreds?

 

Liath Dalton 

I think it’s 100 for an LLC, for the, annual.

 

Dan Pepitone 

Oh yeah.

 

Liath Dalton 

Annual,

 

Dan Pepitone 

It adds up.

 

Liath Dalton 

is 100. And then if you miss it, then filing in pain in time, which, like filing, is generally just making sure that all the member contact information and addresses and roles are listed correctly, but yeah the penalties add up.

 

Dan Pepitone 

Yeah, New York miraculously has no penalties, so plenty of people never, you know, file these biannual registrations. And yeah, then they just, you know, however many years later pay $9 for.

 

Liath Dalton 

And they’re like, oh, I’m active again. That’s

 

Dan Pepitone 

Exactly.

 

Liath Dalton 

That’s interesting.

 

Dan Pepitone 

That’s not too difficult. Yeah, so different states and different entity types are going to have different rules around kind of this, like recertification of the business with your state, and then that goes for all the states your business is registered in. That’s certainly an important thing. For people who are filing as an S-Corp, again, that’s just for tax purposes, it’s a tax classification, there is, like, confirming the entity eligibility on an annual basis.

 

Dan Pepitone 

What else? You know, a big thing is for corporations. You’re supposed to have annual meetings of your shareholders, your owners, of your directors, so you know it’s important to have these meetings, even if you are the only director of your business, and you take notes. This is part of your compliance. Yes, it’s this kind of like sometimes nonsensical sort of formality, but it is an important one. So people should consider it. If you’re an LLC or a PLLC, and you’re filing as an S-Corp, you also have to have these annual meetings and show this documentation that proves that you’re doing it for the sake of it.

 

Dan Pepitone 

I could have said this earlier too, but when you file as an S-Corp because you’re treated as an employee, you also have withholdings from your pay, another important thing. These formalities, these things that you just have to do to remain compliant, which really can matter in the long run. Let’s say, if there ever was a question, if someone sued the business, if they sue your limited liability company, and you didn’t follow through with all of these obligations that you have, then someone could say that your LLC was really only in name, so then you should be personally responsible for these debts and obligations of your business. You should review your business insurances, consider what other insurances you should have, so it’s good to kind of, you know, even if you, you don’t really feel like it’s necessary to have these annual meetings so formally, it is just a good opportunity for you to run through everything you have, are your registrations up to date, are you following, you know, current updates? Look at Person Centered Tech’s website to see, you know, what new things have come up, stay on top of those trainings, and that kind of thing, as well. But, yeah.

 

Liath Dalton 

Well, I appreciate the insight and guidance on, on this really, you know, impactful consideration, and that there is no, you know, one size fits all, that you just have sort of a neat little, like, if you are this, then this is the only way to go entity wise.

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

And also really appreciate your highlighting and emphasizing the foreign entity registration component of things in our,

 

Dan Pepitone 

Yep.

 

Liath Dalton 

like the modern practice reality, of a lot of cross-jurisdictional teletherapy practice occurring.

 

Dan Pepitone 

Yep.

 

Liath Dalton 

And and so now would love to ask a kind of a concluding question I have been going to ask you for like your, your top three wishes. But I feel like we’ve made a meal of the entities, and so I want folks to actually hear it. So, how about just one thing. If you could wave a magic wand and change one behavior that you see across behavioral health practices, not a law, but a, but a habit.

 

Liath Dalton 

Yeah,

 

Liath Dalton 

what would it, what would it be?

 

Dan Pepitone 

Yeah, this is such a great question. I think I get a lot of people who are very anxious about all the regulations, and it’s so overwhelming, and, like, we’ve referenced, that it’s just impossible for any one person to stay on top of all of these things. So, my biggest thing for everybody is one, don’t keep your head in the sand if your way of, you know, dealing with your overwhelmedness is just to kind of hide, that’s not the way. And then on the other side of the spectrum to be really worked up and to really live in this like state of fear of all the risk and what are you doing wrong and everything, like that’s not healthy or good either. For the most part, a lot of these things, you know, can be remedied, and there are simple fixes for a lot of things. Your exposure to risk is very unlikely to be as great as you’re imagining in your head. So, my kind of idea is this, like, middle ground of staying on top of things, looking out for updates, like from Person Centered Tech, I get those email, you know, updates and learning about the new trainings and everything. I think that’s a great way to kind of just stay aware of what’s going on without, you know, really overdoing it, and that kind of thing. So use that too for incorporating it in your practice, incorporating it in your own policies of how you operate. I think is an important way to go.

 

Liath Dalton 

I couldn’t agree more. I think you know we never, though the area that you work in, in supporting practices, and the area that we work in, oftentimes the first time someone reaches out, it’s because something has gone awry, right?

 

Dan Pepitone 

Yeah.

 

Liath Dalton 

And, and yet, there is no HIPAA police. There’s, there’s no.

 

Dan Pepitone 

Yeah no.

 

Liath Dalton 

So that I think being motivated to do right by your business and your clients and utilize support that is is helpful in managing that, but not feeling like you’re constantly under pressure, that they had other shoes about to drop,

 

Dan Pepitone 

Yep, yeah.

 

Liath Dalton 

that’s not a recipe for success, and, like you said, nor, nor is putting your head in the sand, which can, can be compelling to do, when there is so much demanding of attention. So I love the way you, you framed that and hold that as a, as an ardent hope for our listeners as well.

 

Dan Pepitone 

Yeah, I think people will feel a lot better if they go through the process of, you know, building the foundation properly of their practice, going through client documents, understanding what they mean, tuning them to how your practice operates, not just using these, like I think Frankensteined was a term you maybe used at some point in the past, documents. And you’re really, people are afraid to really like sometimes look and dig in, and why is it there, and what does it mean. And those are the things that you feel better when you really understand those, so however you get to that place where you feel like you understand, you know, the things that are a part of your practice, you’re just going to feel better about it all around and shore things up. You’re going to reduce your risk of problems happening because you face it head on in a thoughtful way.

 

Liath Dalton 

Absolutely, one of the other things that we say often in regards to this is that CYA is self care.

 

Dan Pepitone 

Totally. I’m so there.

 

Liath Dalton 

Right?

 

Dan Pepitone 

It’s preventative, it so makes sense. You feel so much better, and then when, like, little things happen, you even if you’re like, you know, caught up in it, it’s been, however long since you looked at this document, you look back and your answer is there because you already did the right thing moving into it. So, yeah, I love it.

 

Liath Dalton 

Well, Dan I,

 

Dan Pepitone 

CYA is self-care.

 

Liath Dalton 

I am so grateful that that you exist, and are are part of this supportive resource network, essentially available to to clinicians, and so to all of our listeners, if you are a New York practitioner or have any New York practice related legal questions and considerations, do check out Dan. I will make sure that the link to his website and to the various guides that he mentioned are linked to in the show notes for the episode, so check it out. And

 

Dan Pepitone 

Thank you.

 

Liath Dalton 

always so happy to have good legal counsel to be able to refer folks to as well, so here, you hold an auspicious place in in in that list.

 

Dan Pepitone 

Thank you very much. Really appreciate it.

 

Liath Dalton 

Well, we will definitely have to have you back on another time to delve into other topics, but thank you so much for taking the time to talk through these things with us. It’s been a pleasure.

 

Dan Pepitone 

Thank you so much for having me.

 

Liath Dalton 

This has been Group Practice Tech. You can find us at personcenteredtech.com. For more podcast episodes, you can go to personcenteredtech.com/podcast or click podcast on the menu bar.