How to Start a Group Therapy Practice: The Complete Guide

Starting a group therapy practice requires every step of a solo launch — business entity, credentialing, HIPAA compliance, documentation — plus a new layer: the legal and operational structures that govern how you work with other clinicians. This guide covers the setup tasks in the order they need to happen, from entity formation through billing configuration.

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Step 1 — Choose the Right Business Entity

Solo private practices can operate as sole proprietors with minimal paperwork. Group practices almost never should. Once you add a second clinician — whether as an employee or a contractor — you need a formal legal structure that separates business liability from personal assets and can hold a Tax ID number for payroll and billing purposes.

The most common structures for group therapy practices:

• Multi-member LLC: Available in most states, allows flexible profit distributions and minimal state formalities. Not available to mental health professionals in all states — California prohibits LCSWs and LMFTs from forming LLCs; Illinois requires licensed clinical social workers to use PLLCs.
• PLLC (Professional Limited Liability Company): Required in many states for licensed professionals forming multi-member practices. All members typically must hold the same license type in the state of formation. Many states require the words “PLLC” in the business name.
• Professional Corporation (PC): Required in some states for therapy practices. Slightly more regulatory overhead than an LLC but functionally similar for most group practice purposes.

State requirements vary significantly by license type. Check your state licensing board’s website — not just Secretary of State guidance — before filing, because licensing board rules can override general business entity law. Consult an attorney licensed in your state before forming the entity.

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Step 2 — Get Your EIN and Open a Business Bank Account

An Employer Identification Number is the federal tax identifier your group practice needs to hire staff, open a business bank account, process payroll, and file business taxes. It is also the Tax Identification Number (TIN) you will use on insurance claims — separate from any individual clinician’s Social Security Number.

Apply at IRS.gov/EIN — the process is free and the number is issued immediately online. Form the entity with your state first; the EIN application will ask for the entity’s legal name and state of formation.

Once you have an EIN, open a dedicated business bank account in the entity’s name. Commingling personal and business funds collapses the liability protection the entity structure provides and creates significant tax complications once multiple clinicians are billing under the same TIN.

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Step 3 — Obtain NPI Type 1 and Type 2 Numbers

Group practices need two kinds of National Provider Identifiers:

• Type 1 (Individual): Every clinician in the practice must hold their own Type 1 NPI. Clinicians who don’t yet have one apply at the NPPES online portal — the process takes a few business days and is free.
• Type 2 (Organizational): The group entity itself needs a separate NPI. This organizational NPI is what you use when submitting claims under the group’s TIN. Apply at the same NPPES portal by selecting “Organization.” You’ll need the group’s legal name, EIN, mailing address, taxonomy code, and an authorized official.

When entering information in NPPES, make sure the group’s Type 2 NPI, TIN, and service location address are consistent across every credentialing application and payer submission — mismatches are one of the most common reasons group practice claims get rejected or paid to the wrong entity.

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Step 4 — Credential the Group and Each Clinician With Payers

Credentialing a group practice is two parallel processes that must run simultaneously:

Individual provider credentialing: Each clinician must complete their own CAQH ProView profile, upload supporting documents, and authorize health plans to access their data. CAQH re-attestation is required every 120 days to keep profiles active. A clinician whose CAQH profile lapses during the credentialing window can stall the entire panel application.

Group/facility credentialing (payer enrollment): Payers also credential the group entity itself — verifying its Type 2 NPI, TIN, malpractice liability insurance, and articles of organization. This is a separate application from individual credentialing and is handled directly with each payer, not through CAQH.

Both processes run in parallel. Individual applications typically take 90–180 days. Group enrollment timelines vary by payer. Start credentialing applications before your first clinician begins seeing clients — not after. For a detailed CAQH walkthrough, see Insurance Credentialing for Therapists: A Step-by-Step CAQH Walkthrough.

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Step 5 — Decide Between W-2 Employees and 1099 Independent Contractors

How you classify the clinicians in your practice has significant legal and tax consequences. The IRS evaluates three categories to determine whether a worker is an employee or a contractor: behavioral control, financial control, and the relationship of the parties.

Questions that point toward employee status:

• Do you set the clinician’s schedule, required hours, or client load?
• Do you provide the EHR login, office space, or equipment?
• Do you direct how sessions are conducted or require specific documentation formats?

Questions that point toward contractor status:

• Does the clinician set their own fees and see clients outside your practice?
• Do they carry their own malpractice insurance and file their own taxes quarterly?
• Can they work for other practices simultaneously?

Misclassifying employees as independent contractors exposes the practice to back payroll taxes, IRS penalties, and state labor violations. The controlling factor is the actual working relationship, not the label in the contract. If you control where, when, and how a clinician works, both the IRS and most state labor agencies will classify them as an employee regardless of what any agreement says.

Practical implications:

• W-2 employees require payroll processing, tax withholding, and employer tax contributions. You have more direct control over the role.
• 1099 contractors are responsible for their own taxes, self-employment contributions, and malpractice insurance. The practice cannot require exclusivity or direct clinical methods.

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Step 6 — Build Your Core Document Set for a Group Practice

A group practice requires all the documents a solo practice needs — intake forms, informed consent, HIPAA Notice of Privacy Practices, practice policies, progress notes — plus documents that govern clinician relationships. The minimum additions for a group practice:

Document	Purpose
Independent Contractor Agreement	Scope of services, pay structure, IP ownership, non-solicitation terms
W-2 Employment Agreement	Role definition, compensation, benefits, and termination terms
Clinical Supervision Agreement	Supervisory format, frequency, hours, and license numbers (required by most state boards)
Group Practice Policies	Fee-split structure, caseload expectations, billing procedures
HIPAA Workforce Training Acknowledgment	Documents that each staff member received HIPAA training on a specific date

For the full client-facing document set every practice needs before the first session, see The Documents Every New Therapy Practice Needs.

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Step 7 — Set Up HIPAA Compliance for a Multi-Provider Practice

A group practice’s HIPAA obligations expand with every additional clinician and vendor. Every service that touches protected health information — your EHR, billing software, telehealth platform, clearinghouse — requires a signed Business Associate Agreement (BAA) with the practice entity before any PHI is transmitted.

Additional compliance requirements for group practices:

Workforce training: Every person in the practice — clinical and administrative — must receive HIPAA training. Document who was trained, on what date, and using what materials. This documentation is required under the Security Rule and is typically the first thing requested in an audit.

Notice of Privacy Practices: Each client receives the group practice’s NPP at or before their first appointment. As of February 16, 2026, NPPs must include substance use disorder (SUD) record protection language under HHS rules.

Access controls: Clinicians should access only the records of clients they are actively treating. Configure role-based permissions in your EHR before any clinician logs in — most EHR platforms have user permission settings that limit record access by clinician.

For a broader overview of HIPAA obligations across allied health practices, see HIPAA Basics for a New Allied-Health Practice.

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Step 8 — Establish a Clinical Supervision Framework

If any clinician in your practice is working under a pre-licensure designation — associate, intern, or resident — the supervising clinician must meet your state board’s requirements for approved supervisors. Most state boards require supervisors to have been licensed for at least two years and to hold an active, unrestricted license in good standing.

A written clinical supervision agreement is required in most states and should document: the supervisor’s and supervisee’s license numbers, the supervision format (individual, group, or triadic), the expected frequency and duration, and the scope of the supervisory relationship. Some state licensing boards publish a standard supervision agreement form — check your state board’s licensee resources page before drafting your own. Requirements for maximum group supervision sizes and supervision ratios vary by state.

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Step 9 — Configure Billing Under the Group NPI

When a clinician in your practice sees a client and bills an insurer, the claim should be submitted under the group’s Type 2 NPI and TIN — not under the individual clinician’s Type 1 NPI in isolation. Mixing these up is a common group practice billing error that delays payment and can trigger payer audits.

Your EHR must be configured to associate each clinician’s individual NPI and taxonomy code with the group’s organizational NPI and TIN before any claims are submitted. Most EHR platforms handle this through a “providers under this organization” configuration screen — complete this setup for every clinician before their first billing cycle.

For a complete overview of fee schedule and billing workflow structures across a private practice, see How to Start a Private Therapy Practice.

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Frequently Asked Questions

How many clinicians does it take to be a group practice?

Two. As soon as you add a second clinician — whether as a W-2 employee or a 1099 contractor — you are operating a group practice and need the entity, NPI Type 2, credentialing, and document structures this guide describes.

Can a group practice have both employees and contractors?

Yes. Many group practices carry a mix — some clinicians on W-2 (often more senior staff or those in supervisory roles) and others as 1099 contractors. The IRS classification test applies to each worker individually based on the actual working relationship, not the contract label.

Does every clinician need their own CAQH profile?

Yes. CAQH profiles are for individuals, not for organizations. The group’s Type 2 NPI and TIN are handled through direct payer enrollment. Each clinician maintains their own CAQH profile and must re-attest every 120 days to keep it active.

What if a clinician leaves the group practice?

Update the group’s NPPES record to remove the departing clinician’s association with the organizational NPI. Notify each payer to update the clinician’s billing status under the group TIN. Review your contractor or employment agreement for provisions on outstanding claims, active client transitions, and records access following departure.