If You’re Ready to Expand – Here’s Your Detailed 28-Step Checklist Before You Hire Associates

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You’ve been in practice for a while now.

Things are going well. You're thinking it may be time to expand your practice.

Since you’re getting close to capacity, and sometimes even have to put clients on a waitlist, you decide it’s time to scale up your practice by adding associates. However, you’re not sure what all the steps are to do this in a safe and compliant manner.

Your Checklist for Hiring Associates

Get ready.

Take a deep breath. This isn't something you've done before, and it will take concerted, well-thought-out, and effective action. It's a long list of actions, but if you're committed to expanding your practice, I know you can do it.

Here it is...

1. Employees or Independent Contractors?

Consult with an employment attorney to make the correct call between hiring associates as independent contractors and as W2 employees. All the attorneys I spoke with are pretty clear that if the associates will be carrying out duties that are central to your business (e.g., therapists in a therapy practice), they almost certainly should be hired as employees. Using independent contractors when you should hire them as employees can cost you big-time. The one caveat is that if they prefer to be independent contractors, they have their own LLC, and they provide essentially the same services at other practices as independent contractors, it may be ok for you too. For what follows, I’ll assume you’re going the W2-employee route.

2. Payroll

Since you’ll have employees, you’ll need to set up payroll. Unless your spouse can run a compliant payroll for you, it’s probably most cost-effective to go with an online solution. Almost as cost-effective, and probably more comfortable is to see if your accountant can provide this service at an acceptable cost.

3. Business Entity Type

While you’re speaking with your accountant, ask what type of business entity would be best for your situation. Since you have employees, a sole proprietorship may be able to have W2 employees, but the liability you’d be taking on should give you pause. Check with a business attorney and your accountant, but the solution we chose was a sole-member LLC. We then asked the IRS to treat this LLC as an S corp, which has certain tax advantages.

4. Business or DBA Name

If you’re setting up a new entity, you’ll want to name it in a way that makes sense for your new setup. If you already had an LLC, consider if the benefits of changing the name (e.g., if it’s something like Jane Smith Psychotherapy) outweigh the hassles. You can always set up a new DBA (doing-business-as) name.

5. The Right Space

Now that you know what your business will look like legally and financially, decide if your current space is large enough, in the right location, and of the right ambiance for what you’re building up. If it is, great. If not, find a reasonably priced suite. This can be exactly the size you need, or if your new landlord will allow you to sublease a portion, you can lease a larger space and find others to pay you rent for the rooms you won’t be using. Since you’re the one ultimately responsible to the landlord, feel free to charge a larger portion of your lease payments than the square footage ratio of the subleased space. For example, if the suite has 6 offices and you’re using 3, you may set the sublessees’ rent at 20%-25% of your full lease per office. Alternatively, you could decide to purchase a space. In this case, you don’t need a landlord’s permission, and can lease out any space you’re not using.

6. Your Support Team

You’ve already spoken with the first 5 of these, now it's time to assemble the rest of the gang.

  • Accountant
  • Payroll processor (if different from your accountant)
  • Employment attorney
  • Business attorney (preferably from the same firm as the other attorney)
  • Realtor to help you find space and negotiate the price (whether lease or purchase)
  • Benefits management company
  • Malpractice attorney (preferably from the same firm as your employment and business attorneys)
  • Business insurance agent
  • Small-business banker (decide if you prefer a credit union, local or regional bank, or large bank)
  • Financial planner or Financial Strategist
  • Small-business coach (if you have a Financial Strategist, this won’t be needed)
  • Human resources consultant
  • Digital marketing and/or social media person
  • Virtual assistant (VA)

7. Structure Your Pay Scales

Consult with your Financial Strategist or small-business coach, and decide how you want to structure your employees’ wages. For your associates, this could be one of several ways (check with the employment attorney to make sure your setup complies with all relevant laws, including payment frequency – in Maryland for example you must pay at least twice-monthly):

  • Flat salary (simplest and usually works best if you can fill your associate’s calendar fairly well)
  • Dual hourly rate (usually a set amount for a therapy session and a much lower set amount for other hours, e.g., staff meetings, supervision, networking on your behalf, blogging, etc.)
  • Hourly rate plus commission (low set hourly rate for all hours plus a larger extra number of dollars for each clinical session)
  • Hourly rate for non-clinical hours plus a percentage of fees collected for sessions (this usually works best for insurance, where you may get paid many months after the session)

8. Employee-Specific Session Rates

Determine what rates you plan to charge for each associate’s sessions. This may be the same for all of them, or may depend on their credentials and/or experience. It could also vary based on the services provided. Here too, a Financial Strategist or small-business coach can help. Note that if you plan to accept insurance, the panel will let you know what you can charge for each clinician’s sessions.

9. Employee-Specific Pay

Decide on the specific pay level(s) for each person you plan to hire. This might be the same for all associates, or you may set different levels based on credentials and/or experience and/or service. Work with your Financial Strategist or small-business coach to make sure your associates’ sessions are profitable for your practice.

10. Offer Letters

Have your employment attorney draft offer letters for these people, providing her with the name, address, and pay structure you plan to apply to each.

11. Employee Signatures on all Docs

Send each prospect the offer letter, as well as all the forms your attorney, payroll processor, and accountant suggest (this will include I9, W4, new hire form, state-specific hiring forms, etc.).

12. Employee Posters

You can find online providers who will send you all the employment posters you're required to post in your office for employees. These will need to be compliant with all relevant federal and state statutes. They'll also need to be kept up to date. To that end, the provider will email you regarding any changes and will send you any new and/or replacement posters. If your space is too small, you may be able to get by with a large folder that's easily accessible for all employees.

13. Worker's Comp

Once your prospects sign the offer letter and return it along with all the other forms, they’re your employees. Contact your business insurance agent to set up worker’s comp coverage for them. Ask her what other coverages you may need beyond this, malpractice, and general liability.

14. HR Compliance Review

Ask your HR consultant to review all the documentation you get from your employees for compliance.

15. Accept Insurance or No?

Do you currently accept insurance? Whether yes or no, consider which associates, if any, you want to panel with what insurance plan(s) and start that process if needed.

16. Malpractice Insurance

Contact your malpractice insurance carrier to adjust your coverage to include your employees.

17. General Liability Coverage

Make sure your general liability (likely a rider on your malpractice policy) also covers your employees.

18. Electronic Health Records (EHR)

Contact your EHR provider to add your employees plus access for your VA.

19. Employee Benefits (e.g., Group Health Plan)

Contact your benefits management company to figure out what benefits you want to offer your employees. This could include a group health plan (depending on the number of employees, you will likely not be required to pay anything toward employees’ premiums; however, at a small cost you can set things up so they pay their premiums with before-tax money).

20. Employer Retirement Plan

Check with your accountant and/or benefits management company to decide if you want to set up an employer retirement plan, and if so, what type. The simplest is the aptly named SIMPLE IRA. This is relatively inexpensive to set up and run, and you’ll only need to match employee contributions up to 3% of their compensation. Note that whatever plan you set up, you can only change to a different type at the start of a new tax year.

21. Snail-Mail

Set up mail bins for each employee, preferably in a lockable cabinet to prevent guests from rifling through your mail.

22. Physical Access

Provide employees with copies of any keys they need.

23. Open-up and Close-up Procedures

Draft instructions for what the first person to leave needs to do when they arrive, and what the last person to leave for the day needs to do to lock up. Train your employees on these procedures.

24. Money, Money, Money

If your employees will be collecting client payments, make sure they have an easy way to do so. This can include a safe for checks and cash, and swipe machines for credit card payments.

25. Employee Handbook

Whether through your employment attorney or payroll company, you need to put together an employee handbook. This doesn’t have to be done before you start employing anyone, but sooner is better than later.

26. Marketing

Figure out your main marketing channel for filling your associates’ calendars. If your associates are paneled with an insurance network, this may be enough. If not, some options include Google ads, Facebook ads, social media activity, in-person networking, etc. You want to find something that works well, doesn’t cost too much relative to the resulting revenue it brings in, and doesn’t take too much of your own time (some employee time is ok).

27. Update Intake Forms

Ask your attorney to review your existing intake and disclosure forms, and update them as needed given your new practice structure. Do yourself a favor and don't ask to use anybody else's forms.

28. Your Own Compensation

Talk with your accountant to determine the best way for you to get paid by your practice. Since you already have payroll set up, and probably have all the business accounting needed in place, adding yourself as an employee will likely only add a minimal cost. However, depending on your profits and what salary you and your accountant deem defensible to the IRS, you can take profit distributions above your salary that will be subjected to income taxes but not payroll taxes.

The Bottom Line

Hiring employees isn’t something you do on a whim.

It’s a long process with many critical and non-trivial steps. The right support team will help you avoid expensive missteps.

It also requires a significant investment of your time and money. Make sure you know in advance what’s needed, so you have all the needed resources available and don’t get stuck halfway through the process.

Financial strategy is all about setting financial goals, crafting a plan to reach them, and doing what's needed to start implementing that plan in both your business and personal life. This includes working through such complex processes as expanding from a solo practice to a group. If you'd like to learn what financial strategy can help you accomplish, email me and we'll coordinate a free, no-strings-attached phone call to explore that possibility.


This article is intended for informational purposes only, and should not be considered financial or legal advice. You should consult a relevant professional before making any major decisions.

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