The answer to this question is, “Much more than you think you should.” A total of 40% of profits is a good round number, including both income tax and self-employment tax (Social Security/Medicare). 

As you set up the financial worksheets to go with your chiropractic business plan, you’ll see that you’ll need to start including quarterly estimated tax payments in your cash flow projections.  Even if you aren’t ‘making money’ (i.e., if your cash flow is still negative), you may end the year with a profit.  And you must have enough cash to pay the tax on that profit.  And don’t forget, as I stated above, you must also have enough money to pay self-employment tax. 

If your tax rate is 28% and self-employment tax is almost 16% (both figured on your profit), that’s 44%.  Yikes!  Start saving now, and get a good CPA to help you minimize taxes.

To learn more about startup financial strategies, read Planning for Practice Success.