How To Start A Mental Health Practice In Delaware

1. Local Zoning Laws and Regulations in Delaware

It is crucial to check the local zoning regulations before choosing a location for your therapy practice, even if it’s your own home, as Delaware comprises 67 counties and 411 municipalities.If your desired business location is not typically allowed in a specific area, such as a home business in a residential zone, you may apply for a zoning variance, which is essentially an exception to zoning laws.

To determine whether you need to apply for a variance, the types of zoning recognized in your town or city, and the kind of business activities allowed, you can contact your local municipality for further guidance. Here is the regulation explanation and case examples about Delaware property and zoning ordinances.

2. Business Name Search in Delaware

If you run a therapy practice as a sole proprietorship or general partnership and plan to
conduct business beyond your own or your partners’, you are mandated by law to register
a fictitious business name in Delaware.
Here will be the detail steps

1. Check Delaware’s fictitious name records to ensure that the name you want to register is available. You can also check fictitious business name page looking for naming guidelines and other information.
2. Advertise your fictitious name at least once in a newspaper published in the county where your practice operates. You don’t need to provide proof that you’ve published the name, but when you register it, you will personally certify that the name has been advertised.
3. Sign in to the fictitious name registration page and follow the prompts on screen.
4. Pay the $25 fee.

3. Business Structure in Delaware

The type of business structure you choose for your practice affects how your income is taxed and who may own shares in the practice. Each state has different business structures available for registration.

1. Sole Proprietorship: This is the simplest and most common form of business structure. As a sole proprietor, you have complete control over your therapy practice and are personally responsible for all business liabilities and debts. You report your business income and expenses on your personal tax return.
2. Partnership: If you plan to practice therapy with one or more partners, you can form a partnership. In a general partnership, all partners share equal responsibility for the business’s liabilities and debts. It is important to establish a formal partnership agreement that outlines the roles, responsibilities, profit-sharing, and decision-making processes.
3. Limited Liability Company (LLC): An LLC provides a balance between simplicity and liability protection. It separates your personal assets from the business’s liabilities, offering limited personal liability protection. An LLC can have one or more members, and the members report the business income and losses on their personal tax returns. Forming an LLC requires filing the necessary formation documents with the Delaware Division of Corporations.
4. Professional Limited Liability Company (PLLC): For licensed professionals, such as therapists, Delaware offers the option of forming a PLLC. A PLLC provides the same liability protection as an LLC but is specifically designed for professional practices. It typically requires additional filings and compliance with professional regulations.
5. Corporation: If you are planning to establish a larger therapy practice or seek outside investors, you may consider forming a corporation. A corporation is a separate legal entity from its owners, providing strong liability protection. There are different types of corporations, including C corporations and S corporations, each with its own tax implications and governance requirements. Forming a corporation involves filing the necessary documents with the Delaware Division of Corporations.

4. Register Your Business in Delaware

People should do two things:

1. File the business registration with the Delaware State
2. Paying the filing fee

Sole Proprietorship
Filing Fees: No cost to form, fee apply to register an assumed name.
There are no extra steps you need.

General Partnership
Filing Fees: In Delaware, the fee for registering a General Partnership is $200. This fee is required when filing a Certificate of Partnership with the Delaware Division of Corporations. The Certificate of Partnership provides the necessary documentation to establish the existence of a general partnership in the state.

You only need to register an assumed name. Consider creating a partnership agreement to easily settle any future disputes. If you plan to form an LLP later, you can choose to register your general partnership with the Department of State.

Incorporate (Profit Corporation or Professional Corporation)
Standard Formation Fee: $204

Additional Services and Expedited Fees: If you require additional services or choose to expedite the processing of your incorporation documents, there may be additional fees. For example, if you opt for expedited processing, there are different tiers available, such as 24-hour expedited service for an additional fee of $1,000, or same-day expedited service for an additional fee of $1,500.

In addition to the filing fees, you may also have other costs associated with incorporating a Profit Corporation or a Professional Corporation, such as legal fees for drafting the necessary documents, obtaining an Employer Identification Number (EIN) from the IRS, and potential fees for specific licensing or permits based on the nature of your therapy practice.

Limited Liability Company (LLC)
Standard Formation Fee: $90

1. Choose an LLC name
2. Appoint a registered agent
3. File the Certificate of Formation
4. Create an LLC Operating Agreement
5. Consult with an attorney to draft a comprehensive Operating Agreement tailored to your specific needs.
6. Obtain an EIN

Professional Limited Liability Company (PLLC)
Standard Formation Fee: $90

1. Choose an PLLC name
2. Appoint a registered agent
3. File the Certificate of Formation
4. Create an PLLC Operating Agreement
5. Consult with an attorney to draft a comprehensive Operating Agreement tailored to your specific needs.
6. Obtain an EIN

Limited Partnership (LP)
Standard Formation Fee: $90

1. Choose an LLC name
2. Appoint a registered agent
3. File the Certificate of Formation
4. Create an LLC Operating Agreement
5. Consult with an attorney to draft a comprehensive Operating Agreement tailored to your specific needs.
6. Obtain an EIN

Limited Liability Partnership (LLP)
Here are the general steps to register a foreign LLP in Delaware:

1. Verify Eligibility: Confirm that your LLP is eligible for registration as a foreign LLP in Delaware. Typically, this means that your LLP is already registered and in good standing in its home state or country.
2. Name Availability: Check the availability of your LLP’s name in Delaware. You can do this by searching the Delaware Division of Corporations’ name database to ensure your desired name is not already in use.
3. Appoint a Registered Agent: Designate a registered agent in Delaware who will be responsible for receiving legal and official documents on behalf of the LLP in the state. The registered agent must have a physical address in Delaware.
4. Gather Required Documents: Prepare the necessary documents for the foreign LLP registration, which typically include:
5. Application for Registration: This form, sometimes called the “Foreign LLP Registration Statement,” is provided by the Delaware Division of Corporations. It requires information about the LLP, such as its name, principal place of business, registered agent details, and the names and addresses of partners.
6. Certificate of Good Standing: Obtain a Certificate of Good Standing or a similar document from the LLP’s home state or country. This document proves that the LLP is registered and in good standing in its jurisdiction of formation.
7. Partnership Agreement: Provide a copy of the LLP’s Partnership Agreement, which outlines the rights, responsibilities, profit-sharing, decision-making processes, and other important aspects of the LLP’s operations.
8. File the Application: Submit the completed Application for Registration and the required supporting documents to the Delaware Division of Corporations. Include the appropriate filing fee, which can vary over time, so it’s important to check the most up-to-date fee information on the division’s website or by contacting them directly.
9. Fulfill Ongoing Requirements: Once registered, your LLP must comply with any ongoing requirements imposed by the state of Delaware, such as filing annual reports and paying applicable fees or taxes.

Limited Liability Limited Partnership (LLLP)
If you are specifically interested in forming a Limited Liability Limited Partnership (LLLP) in Delaware, it’s important to note that Delaware does not have a specific formation process or fee structure for LLLPs. LLLPs are recognized and regulated at the state level, and the availability and requirements for LLLP formation vary from state to state.

If you are considering forming a partnership with limited liability protection, you may want to explore forming a Limited Liability Company (LLC) or a Limited Partnership (LP) in Delaware instead. These entities offer limited liability protection to their members or partners, respectively.

To form an LLC or LP in Delaware, you can follow the steps I previously outlined for each entity type. However, for an LLLP specifically, it would be best to consult with a business attorney or a professional incorporation service familiar with Delaware laws and regulations. They can provide personalized guidance based on your specific circumstances and the nature of your practice, as well as advise you on the appropriate business structure that aligns with your goals.

5. Business Licenses & Permits in Delaware

While specific federal licenses or permits may not be required for a therapy practice, it is important to ensure compliance with applicable federal laws and regulations. For example, if you handle protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA), you will need to comply with HIPAA regulations and may need to register with the U.S. Department of Health and Human Services.

You can visit the Delaware One Stop Business Registration and Licensing System website or contact the Delaware Division of Revenue and other relevant agencies to determine the specific licenses and permits you need.

6. Business Insurance in Delaware

In Delaware, there are several types of business insurance that you may consider for your therapy practice. While the specific insurance needs can vary depending on the nature of your practice, here are some common types of business insurance that you may want to explore:

1. Professional Liability Insurance:: Also known as malpractice insurance or errors and omissions (E&O) insurance, professional liability insurance is essential for healthcare professionals, including therapists. It provides coverage for claims arising from alleged negligence, errors, or omissions in the professional services you provide.
2. General Liability Insurance: General liability insurance protects your therapy practice from third-party claims of bodily injury, property damage, or personal injury. It can cover medical expenses, legal costs, and other damages resulting from accidents or incidents that occur at your business premises or as a result of your business operations.
3. Cyber Liability Insurance: As a therapy practice, you may handle sensitive patient information electronically, making you vulnerable to data breaches or cyber-attacks. Cyber liability insurance can help protect your business against the costs associated with data breaches, including notification expenses, credit monitoring, and potential legal liabilities.
4. Property Insurance: Property insurance provides coverage for your business property, including your office space, equipment, furniture, and supplies. It can protect you against losses caused by fire, theft, vandalism, or other covered perils.
5. Business Interruption Insurance: Business interruption insurance covers the loss of income and additional expenses if your therapy practice is temporarily unable to operate due to covered events, such as a fire or natural disaster. It can help you recover lost income and continue meeting your financial obligations during the downtime.

7. Business Taxes in Delaware

In Delaware, both domestic and foreign corporations that conduct business or generate income in the state are generally subject to taxation. The Delaware Division of Revenue is responsible for administering and collecting corporate taxes in the state.

Here are some key points regarding corporate taxes in Delaware:

• Corporate Income Tax: Delaware imposes a corporate income tax on the taxable income of corporations. The current corporate income tax rate in Delaware is a flat rate of 8.7% of taxable income. Corporations are required to file an annual corporate income tax return (Form 1100) with the Delaware Division of Revenue.
• Franchise Tax: In addition to the corporate income tax, Delaware corporations are subject to an annual franchise tax. The franchise tax is based on a corporation’s authorized shares or the assumed par value capital method, depending on the corporation’s classification. The specific calculation method and rates can vary based on the corporation’s authorized shares and total assets.
• Authorized Shares Method: The franchise tax for corporations using the authorized shares method is calculated based on the number of authorized shares, with a minimum tax due.
• Assumed Par Value Capital Method: Corporations using the assumed par value capital method have their franchise tax calculated based on their assumed par value capital, which is a calculation based on the corporation’s total gross assets in Delaware.
• Annual Reports: Delaware corporations are also required to file an annual report with the Delaware Secretary of State. The annual report includes information such as the corporation’s name, principal place of business, officers, directors, and registered agent details. There is a fee associated with filing the annual report.

To pay corporate taxes in Delaware:

1. Corporate Income Tax: Corporations must file an annual corporate income tax return (Form 1100) with the Delaware Division of Revenue. The return should include the necessary calculations and information regarding the corporation’s income, deductions, and tax liability. Payment of the tax due should be included with the return.
2. Franchise Tax: Delaware corporations are required to calculate and pay their franchise tax annually. The specific calculation method and payment process will depend on the corporation’s classification (authorized shares or assumed par value capital method). The franchise tax payment is typically due by March 1st of each year.