For many Board Certified Behavior Analysts (BCBAs), the leap from clinician to business owner comes with a steep learning curve. Clinical expertise may prepare them to serve clients effectively, but the mechanics of managing finances, payroll, and tax obligations are often unfamiliar territory. On a recent webinar titled “Accounting 101 for New ABA Practice Owners,” hosted by Alpaca Health and Abcon Advisors, seasoned experts broke down the essentials for clinicians looking to launch and grow sustainable Applied Behavior Analysis (ABA) practices.

From Clinician to CEO: Owning Your Practice

“The future of ABA should belong to clinicians, not big-box companies,” said Michael, founder of Alpaca Health, as he welcomed participants from across the country. Speaking from New York, he highlighted the mission of Alpaca Health: to empower BCBAs to start, run, and grow their own practices with robust administrative support and AI-enabled tools.

Michael’s journey from education entrepreneur to health tech founder was personal. “My grandfather ran a small corner shop in China, and my dad runs an IT consulting firm,” he shared. “I’ve spent my life around small businesses, and I believe ABA clinicians deserve that same independence.”

Setting Up the Right Business Structure

One of the most pressing concerns for aspiring practice owners is selecting the right legal and tax entity.

Ajish Abraham, CPA and founder of Abcon Advisors, urged caution against operating as a sole proprietorship. “If you’re running a business as a sole proprietor, your personal assets—including your home—are potentially at risk if there’s ever a lawsuit,” he warned. Instead, he recommended forming a Limited Liability Company (LLC) for legal protection.

However, Ajish clarified that an LLC is only a legal designation. For tax purposes, practice owners must decide whether to remain a “disregarded entity” or elect to be taxed as an S Corporation (S corp) using IRS Form 2553. “The S corp election allows you to pay yourself a reasonable salary as an employee while taking additional income as distributions, which are not subject to self-employment taxes,” Shabram explained.

For many clinicians starting part-time practices, remaining an LLC initially may suffice. “Until you’re earning $30,000 to $40,000 in profit, the tax savings from an S corp often don’t outweigh the extra administrative costs,” Shabram noted. “But if you’re replacing your full-time income with your practice, that’s when an S corp usually makes sense.”

Understanding Taxes and Payroll

Tax compliance is another area where new business owners stumble. Unlike W-2 employees whose taxes are withheld automatically, sole proprietors and S corp owners must make quarterly estimated tax payments to avoid penalties.

“The IRS expects you to pay taxes as you earn income, not just at year-end,” Ajish said. For S corp owners, this also means setting up payroll accounts with state agencies for withholding, unemployment insurance, and other employer obligations.

Complicating matters further, ABA practices often operate across state lines. “If you’re delivering services or hiring staff in multiple states, you may need to register for employment taxes in each of those states,” he cautioned.

Revenue and Expenses in an ABA Practice

Michael contextualized accounting principles within the ABA industry. “In most in-home ABA practices, staff payroll will be your largest expense—often 40 to 50 percent of your revenue,” he said.

Revenue streams typically include:

• Insurance reimbursements

• Patient responsibility payments (co-pays, deductibles)

• Private pay services (like IEP advocacy or consulting)

On the expense side, aside from payroll, costs may include clinical supplies, assessments, office space (for clinic-based practices), and administrative software.

Michael emphasized the importance of tracking payer mix and understanding how much revenue comes from Medicaid versus commercial insurers. “That insight can guide your compliance and quality assurance priorities,” he said.

Bookkeeping: Laying the Financial Foundation

Ajish highlighted the necessity of keeping personal and business finances separate. “Co-mingling funds is a recipe for disaster. It makes bookkeeping a nightmare and can jeopardize your legal protections,” he warned.

He recommended cloud-based accounting software like QuickBooks, Xero, or Wave to record transactions and generate financial reports. While QuickBooks remains the industry standard, he acknowledged that free tools can work for very small operations.

Cash vs. Accrual Accounting

Most small businesses use cash accounting, recording revenue and expenses when money changes hands. However, Shabram advocated for accrual accounting, which recognizes income when it’s earned and expenses when they’re incurred.

“Accrual accounting gives a truer picture of your financial health,” he said. “If you’re waiting on insurance reimbursements but have already delivered the service, you need to know your actual liabilities.”

Switching between cash and accrual methods later requires IRS approval and can be complex, so Ajish Abraham advised choosing wisely from the outset.

The Cash Flow Crunch

Perhaps the biggest financial hurdle for ABA practice owners is cash flow. Insurance reimbursements can take weeks or months to arrive, but staff expect biweekly paychecks.

“I’ve seen practices limit their BCBAs’ hours because they can’t front the payroll while waiting on insurance,” Michael said. “That’s a huge barrier to growth and quality service delivery.”

To mitigate this, Alpaca Health offers a unique solution: advance payouts to practices every two weeks, covering 70-80% of expected insurance reimbursements. “We guarantee you’ll have enough cash on hand to make payroll,” Michael said. “You can start your practice with minimal reserves and focus on clients instead of cash flow.”

Audience Questions Highlight Real-World Challenges

During the Q&A, clinicians asked about:

• The cost of starting an LLC (typically under $500 in most states)

• Tax considerations for multi-state operations

• Strategies for managing supervision hours that aren’t billable concurrently with technician services

Ajish fielded a complex question about two practice owners living in different states but delivering services in a third. “You’ll likely need tax accounts in all three states,” he said, underscoring the value of professional guidance.

A Collaborative Path Forward

For Michael and Ajish, empowering clinicians isn’t just about financial literacy—it’s about reclaiming the field of ABA from large corporate players.

“Your time and clinical judgment are valuable,” Michael told the audience. “We want you to own your finances, your schedules, and your practices.”

The duo will return in May for a follow-up webinar on tax deductions and managing taxes as a new business owner. In the meantime, Alpaca Health continues to support practices nationwide with back-office services, AI-driven documentation tools, and financial management solutions.

As Michael concluded, “Starting a practice is hard, but it’s not rocket science. The hard part was getting your master’s degree. The rest is just good systems and the right support.”

Key Takeaways for New ABA Practice Owners

• Form an LLC early to protect personal assets.

• Consider S corp election once profits exceed $30,000-$40,000 annually.

• Separate business and personal finances to simplify bookkeeping.

• Adopt accrual accounting for a more accurate financial picture.

• Plan for cash flow challenges or consider services like Alpaca Health to stabilize payroll.

• Consult with a CPA familiar with multi-state tax and payroll compliance.

Ready to start your own ABA practice?

Book a free demo with Alpaca Health to see how we can help you launch and grow with confidence.