The Complete New Midwifery Practice Startup Checklist

Starting a midwifery practice is a big step, and getting the business side right from day one can save you thousands in taxes and penalties. This checklist walks you through the essential tax and compliance tasks you need to complete before and during your first year of operation. Follow it in order, and you will have a solid foundation for your new practice.

1. Choose Your Business Entity

Your choice of entity affects your taxes, liability, and paperwork. For most new midwifery practices, the two most common options are:

• Sole Proprietorship: Easiest to set up, but you are personally liable for business debts and lawsuits. Taxes are reported on Schedule C of your personal return.
• Limited Liability Company (LLC): Provides liability protection and allows you to choose how you are taxed (as a sole proprietor, partnership, or S corporation). Formation costs range from $50 to $500 depending on your state.
• S Corporation: Can save on self-employment taxes if your net income exceeds about $40,000, but requires more payroll administration. Formation and ongoing compliance costs are higher.

Action step: Consult a CPA or business attorney to decide which entity fits your situation. If you are unsure, an LLC taxed as a sole proprietorship is a common starting point.

2. Register for an EIN

An Employer Identification Number (EIN) is your federal tax ID. You need it to open a business bank account, hire employees, and file certain taxes. You can apply for free on the IRS website, and it takes about 10 minutes. If you are a sole proprietor with no employees, you can use your Social Security number, but an EIN is still recommended to keep your personal and business finances separate.

3. Obtain State and Local Licenses

Midwifery practice requirements vary by state. At a minimum, you need:

• A state midwifery license or certification (check your state board of nursing or health).
• A business license or permit from your city or county (fees range from $25 to $200 annually).
• A sales tax permit if you sell products like supplements or prenatal vitamins (most states require this, and it is often free).

Action step: Visit your state’s business portal (often at .gov) to identify all required licenses. Keep copies of all permits in a designated file.

4. Set Up a Business Bank Account and Bookkeeping System

Separating your personal and business finances is non-negotiable. Open a dedicated business checking account and a savings account for tax reserves. Many banks offer free business checking if you maintain a minimum balance (often $1,000 to $2,500).

For bookkeeping, use software like QuickBooks, Xero, or Wave (free option). You will need to track:

• Income from client visits, births, and any product sales.
• Expenses: rent, supplies, insurance, marketing, continuing education, and mileage.
• Mileage: if you travel to clients’ homes or birth centers, keep a log. The IRS mileage rate for 2026 is projected at 67 cents per mile (check IRS.gov for the final rate).

Action step: Set up your chart of accounts and start recording every transaction from day one. Consider hiring a part-time bookkeeper if you are not comfortable with numbers.

5. Understand Your Tax Obligations

As a business owner, you have several tax responsibilities:

• Income tax: You pay tax on your net profit, whether you take it as personal income or leave it in the business.
• Self-employment tax: This covers Social Security and Medicare. For 2026, the rate is 15.3% on the first $176,100 of net earnings, and 2.9% on earnings above that.
• Estimated quarterly taxes: If you expect to owe more than $1,000 in federal taxes, you must pay estimated taxes quarterly. Deadlines are typically April 15, June 15, September 15, and January 15 of the following year. Penalties for late payment can be significant.

Action step: Use IRS Form 1040-ES to calculate your estimated payments. A good rule of thumb is to set aside 25% to 30% of your net income for taxes.

6. Get Professional Liability Insurance

While not a tax item, insurance is a deductible business expense and protects your practice. For midwives, professional liability (malpractice) insurance is essential. Costs vary widely by state and coverage limits, but expect to pay between $3,000 and $8,000 per year for a new practice. You may also need general liability insurance (around $300 to $600 per year) and possibly business owner’s policy (BOP) if you have a physical office.

Action step: Get quotes from at least three insurance providers that specialize in healthcare. Make sure your policy covers all services you provide, including home births if applicable.

7. Plan for Retirement and Health Insurance

As a self-employed person, you can deduct contributions to a retirement plan. Options include:

• SEP IRA: Allows contributions up to 25% of your net earnings, capped at $69,000 for 2026.
• Solo 401(k): Allows higher contributions if you have no employees, up to $69,000 plus catch-up if over 50.

Health insurance premiums for you and your family are also deductible, and you can deduct them even if you do not itemize. Check the health insurance marketplace for plans that fit your budget.

Action step: Open a SEP IRA or Solo 401(k) before the tax filing deadline to reduce your taxable income. Even a small contribution helps.

8. Track Deductible Business Expenses

Common deductible expenses for a midwifery practice include:

• Office rent and utilities
• Medical supplies and equipment (e.g., fetal dopplers, birth kits)
• Continuing education courses and conferences
• Professional association dues (e.g., ACNM)
• Marketing and website costs
• Mileage for client visits (at the IRS rate)
• Liability insurance premiums
• Software subscriptions for scheduling and EHR

Keep receipts and log expenses in your bookkeeping system. If you work from home, you may qualify for the home office deduction, but it must be used regularly and exclusively for business.

9. File Your Taxes on Time

Your first year will have two key deadlines:

• Quarterly estimated payments: Due on the dates above.
• Annual tax return: Due April 15, 2027 for the 2026 tax year (or the next business day if it falls on a weekend). If you need more time, file Form 4868 for an automatic 6-month extension, but you still must pay any taxes owed by the original deadline to avoid penalties.

Action step: Mark all deadlines on your calendar and set reminders. Consider using a tax professional to prepare your first return, as it can be complex.

10. Stay Compliant Year-Round

Tax compliance is not a one-time event. Throughout the year:

• Reconcile your bank accounts monthly.
• Review your profit and loss statement quarterly.
• Update your estimated tax payments if your income changes.
• Keep records for at least 7 years.

Action step: Schedule a quarterly review with your accountant or bookkeeper to catch issues early.

FAQ

Q: Do I need to charge sales tax on my services? A: Most states do not tax professional medical services, but if you sell products like vitamins or herbal remedies, you likely need to collect sales tax. Check your state’s rules and register for a permit if required.

Q: Can I deduct the cost of my midwifery certification exam? A: Yes, exam fees and study materials are deductible as continuing education expenses, provided they maintain or improve skills required in your current business.

Q: What if I don’t make a profit in my first year? A: That is common. You can still deduct business expenses, but the IRS may scrutinize a business that shows a loss for multiple years. Keep good records and be prepared to show you are actively trying to make a profit.

Q: Should I hire a tax professional? A: For most new practice owners, yes. A CPA who works with healthcare providers can save you money and help you avoid costly mistakes. Expect to pay $300 to $800 for a basic business tax return.

Related guides

• The Annual New Midwifery Practice Review Checklist
• 7 Mistakes New Midwifery Practices Make in Their First Year
• 7 Questions to Ask Before Buying a New Midwifery Practice

The bottom line

Starting a midwifery practice involves many moving parts, but tackling taxes and compliance systematically will give you peace of mind. Follow this checklist, set aside money for taxes, and consult professionals when needed. Your focus should be on providing excellent care, and a solid business foundation ensures you can do that for years to come.