The Advantages and Disadvantages of a Private Practice
When a professional engages in a profession as an independent provider rather than as an employee of an organization, it is termed private practice. Individuals in private practice provide services and products of their own to clients. These individuals are responsible for their own success and are held accountable only for the legitimacy of their license. There are advantages and disadvantages to establishing a private practice in law, medicine and other fields.
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Autonomy
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Setting up a private practice affords the individual greater independence and autonomy in comparison to being a salaried employee. Autonomy allows the individual the freedom to decide when to work, the number of hours to work, flexibility of work schedules, the type of clients and the liberty to work as one wants, which are all part of the attraction of setting up a private practice. Autonomy in private practice allows the individual to have control over the type of clients she does business with, the quality of service provided and the business processes.
Economic Self-Determination
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Private practice allows individuals to decide how much they want to be paid and how many hours they want to work to earn that revenue. The individual has the freedom to determine the hourly fees chargeable, number of hours to work, amount of revenue to be generated, profit margin and budget for business development and marketing. Earning potential is unlimited in private practice because the individual sets the boundaries on the amount of revenue to be generated.
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Upfront Payment Demands
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Private practice is a form of sole proprietorship, and the individual or owner has unlimited liability for all the liabilities and obligations of the business. The owner of the business is solely responsible for any debts run up by the business or loans taken for the business. For the individual, unlimited liability means that, if the business is fined or sued, personal assets can be seized to pay off business debts if the business assets are insufficient to settle the claim.
Inability to Raise Funding Through Equity
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Private practice or sole proprietorship is limited only to borrowing capital. Unlike a corporation, a private practice cannot issue shares of company ownership for cash. A single owner becomes subject to Securities Exchange Regulation if an attempt is made to issue shares in the business venture. It will immediately cease to operate as a private practice and become a corporation, subject to penalties and fines imposed by the federal and state government.
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