How to start a daycare: a step-by-step guide for centers and home daycares

1. Choose a daycare center or a home daycare

States license daycare centers and home daycares under different rules, with different limits on how many children you can care for. Decide which one you're starting before anything else. This guide follows the center path and notes where a home daycare is different.

• Daycare center: groups of children, often in classrooms by age, usually in a commercial building. A director runs it with a team of staff. Centers are run by individual owners, chains, nonprofits, churches, public schools and government agencies.
• Home daycare: licensing rules often call it a family child care home. You care for a small group of children in the home where you live. States limit how many children you can care for, and how many of them can be infants and toddlers. Many states count your own children, often those under school age, toward that limit.
• When a home needs a license varies a lot. Some states require one once you care for more than one unrelated child. Others don't until you care for six or more, and some offer registration or certification for some home daycares instead.
• Some states have more than one level of home license. Florida, for example, licenses family child care homes and large family child care homes, each with its own limits on total children and on babies and toddlers (Florida's rules).
• Learn what families near you need. Your local Child Care Resource and Referral agency (CCR&R) can help you see which ages and hours are hard for families to find, and our program finder shows licensed centers near you in the states that publish official program data.
• Then choose the ages you'll serve (infants, toddlers, preschoolers or school-age children), full- or part-time care and your hours. If you'll serve only school-age children, see how to start an after-school program or how to start a summer camp.

2. Learn your state's daycare license requirements

Each state licenses daycares through its own agency, under its own rules, and your city or county may add more. Most states require an application, background checks, fire and licensing inspections and some training before they issue a license. Some also ask for proof of insurance. Start with our state-by-state library, which links each state's licensing agency and rules. Then contact that agency before you sign a lease or buy equipment.

Some states require an orientation before you can apply. California won't accept a center's license application until you've completed its orientation (California's licensing steps). In Tennessee, you attend an orientation and intake session and apply online, then complete a site walk-through, fire and environmental inspections and a zoning clearance letter, all before you receive a provisional (temporary first) license (Tennessee's licensing steps).

Some states exempt certain programs from licensing, such as programs run by public schools and some faith-based or part-day programs. Exempt programs may still have to meet health and safety rules, such as background checks, fire safety and sanitation. Don't assume you're exempt. Ask your licensing office, in writing if you can. Questions to ask:

• Which license type fits our plans, and how many children can it cover?
• Is there an orientation or pre-licensing training, and when is the next one?
• Which inspections and clearances do we need (licensing, fire, health and zoning), and who schedules each one?
• What are the rules for ratios, group sizes, space per child and staff qualifications?
• What does it cost to apply, and how long does approval usually take?
• What do we need to do to accept families who use childcare assistance (government help that pays part of a family's childcare bill, also called subsidies or vouchers; see step 9)?
• Is there someone who can help us through the process? Your local CCR&R may help too: Child Care Aware of America calls it an important partner before, during and after licensing.

3. Choose a business structure

A daycare can run as a business or as a nonprofit. The choice changes how you pay taxes, raise money and make decisions, so talk with an accountant or lawyer before you file anything.

• Run it as a business: a sole proprietorship, partnership, limited liability company (LLC) or corporation. An LLC or a corporation can protect your personal assets from the business's debts.
• Run it under an existing nonprofit. A church or community organization that already has nonprofit status can run the daycare as one of its programs. Ask your licensing office whether that changes which rules apply.
• Form your own nonprofit. Federal tax law counts childcare as an educational purpose for 501(c)(3) status (the IRS status that makes a nonprofit tax-exempt and lets donors deduct gifts) when substantially all of the care helps parents work and the care is open to the general public.
• Register the business as your state requires, and get an employer identification number (EIN) from the IRS. It's free. Parents need your taxpayer identification number, or your tax-exempt status, to claim their childcare costs (see childcare tax receipts).
• Home daycare: IRS Publication 587 explains when you can deduct part of your home's costs, even for space your family also uses. One condition is that you've applied for, received or are exempt from your state's license. Ask a tax professional how it applies to you.

4. Find a space that can pass inspection

Don't sign a lease until you know the space can be licensed for a daycare. Check zoning first. If zoning doesn't allow a daycare at the address, you can't open there without an exception, even if you meet every state rule. Then ask the building department and the fire marshal what the space needs, and ask your licensing office what it will check when it visits.

Your state sets how much indoor and outdoor space each child needs. Child Care Aware of America suggests at least 35 square feet of usable space per child. Example: a room with 600 square feet of usable space holds 17 children at 35 square feet each (600 divided by 35 is 17.1, rounded down). Your state's number, its group size limits and your ratios may set a lower cap. Before you sign, check:

• Zoning, and any special use or occupancy permits the city requires
• Fire safety: exits, alarms, extinguishers and what the fire inspector will look for
• Sinks for handwashing, toilets, diapering areas and a kitchen that meet state and local health rules
• A fenced outdoor play area, or a safe way to reach one
• A safe drop-off area and parking for families and staff
• Cribs for any room with babies. Since December 28, 2012, cribs in daycare centers and home daycares must meet federal crib standards from the Consumer Product Safety Commission (CPSC). CPSC presumes cribs made on or after June 28, 2011 comply.
• Home daycare: check zoning, your lease and any homeowners association (HOA) rules. Some states, such as California, protect licensed home daycares from local zoning and HOA bans. In others, an HOA rule against running a business can stop you. Ask your licensing office which applies, and if you rent, whether you must tell your landlord first.

5. Plan your rooms and ratios

Your state sets ratios (how many children one adult may supervise), and some states also set group sizes (the most children allowed in one group or room, however many adults are present). Both change with age. They decide how many staff each room needs, so they shape your whole budget. Florida, for example, requires 1 adult for every 4 babies under 1, 1 for every 6 one-year-olds, 1 for every 11 two-year-olds, 1 for every 15 three-year-olds and 1 for every 20 four-year-olds (Florida Statutes 402.305).

Example, using those ratios: an infant room with 8 babies needs 2 adults with them. A room with 15 three-year-olds needs 1. Each adult covers 4 babies but 15 three-year-olds, so an infant spot takes almost 4 times as much staff time.

Our ratio table and staff ratio calculator cover 3-year-olds, 4-year-olds and school-age children, state by state. For infants and toddlers, check your state's rules.

• Plan staff for the whole day you're open, not just your busiest hours, with cover for breaks, lunches and sick days.
• Check what your state allows at nap time, during swimming and on trips. Some states set different ratios for those times.
• Ask how your state handles groups with children of different ages before you plan a mixed-age room.
• Check which staff count toward the ratio, for example whether volunteers or staff under 18 count.

6. Hire qualified staff and run background checks

Each state sets minimum ages, education and training for daycare staff, and the rules differ by role: director, lead teacher, assistant and home provider. Read the director rules first. If you don't meet them yourself, plan to hire someone who does. Florida, for example, requires childcare center staff to complete an approved 40-hour introductory course.

Federal rules require comprehensive background checks for staff of every licensed, regulated or registered childcare provider, and of every provider that can take childcare assistance. That includes adults 18 and older who live in a home daycare. A check includes an FBI fingerprint check, a search of the National Sex Offender Registry and searches of the criminal, sex offender and child abuse and neglect registries in the state where the person lives and any state they've lived in during the past 5 years. Checks happen before someone starts and at least once every 5 years. Federal rules let a new hire start after some checks come back, but only while supervised by someone who has passed a full check. Your state may be stricter. See background checks by state.

Programs that take childcare assistance must train staff on a federal list of health and safety topics: pediatric first aid and CPR, safe sleep, preventing shaken baby syndrome and abuse, recognizing and reporting child abuse and neglect, giving medication, food allergies, preventing infectious diseases, building safety, emergency planning, hazardous materials and transporting children. Many states require the same training for every licensed program. Staff must finish it within 3 months of starting, and some topics must be done before they care for children on their own.

• Write a job description for each role that matches your state's qualifications.
• Run background checks through your state's process before anyone starts.
• Plan for staff health requirements. Depending on the state, they can include a physical, a tuberculosis test, drug screening and vaccinations.
• Teach every staff member how to report suspected abuse or neglect. Most states name childcare workers as mandated reporters (people the law requires to report suspected abuse or neglect), and some states require everyone to report (see mandated reporter laws by state).
• Put your rules for staff in writing. Our staff handbook template is a place to start.
• Line up substitutes who have already passed background checks, so a sick day doesn't break your ratios.

7. Get insured

Your state may require some coverage, such as liability or fire insurance, before it issues a license. Talk early to an insurance broker who works with childcare programs, and ask what each policy covers and leaves out. Coverage to ask about:

• General liability, including medical costs for children hurt in your care and the cost of a lawsuit
• Professional liability
• Abuse and molestation coverage (ask whether your policy includes it)
• Property coverage for your building, furniture and equipment, plus business income coverage if you have to close for a while
• Workers' compensation for staff (check your state's rules)
• Auto coverage if you'll transport children
• Directors and officers coverage if you have a nonprofit board
• Home daycare: tell your homeowner's or renter's insurer that you'll run a daycare and how many children you'll care for. Homeowner's policies may refuse or limit coverage for business use, so you may need a separate business policy.

8. Build a budget and set tuition

Add up every cost before you set prices. Start with payroll, since your ratios decide how many staff each room needs. Then compare your numbers with what other daycares near you charge. Your CCR&R may have local rates.

Example, with made-up numbers: a toddler room for 12 children under a 1:6 ratio (1 adult for every 6 children) needs 2 teachers with the children, plus cover for breaks and the hours you're open beyond one shift. Say staffing that room costs $9,600 a month, and its share of rent, food, supplies, insurance and admin is $4,200. That's $13,800 a month, or $1,150 per child with all 12 spots full. With 10 children enrolled, it's $1,380 per child. Set prices for the enrollment you expect, not a full room.

Costs to count, and the payment rules to write down before you enroll anyone:

• Start-up costs: licensing and inspection fees, changes to meet building codes, furniture, cribs, toys and playground equipment. Keep enough cash to cover rent and payroll for the months it can take to fill your rooms. Ask your CCR&R and the U.S. Small Business Administration about start-up loans and grants.
• Ongoing costs: rent, utilities, insurance, cleaning, supplies and software
• Staff costs: wages, payroll taxes, workers' compensation, training, background checks and substitutes
• Per-child costs: food and classroom supplies, plus diapers and wipes if you supply them
• Rates: a rate for each age group and schedule, billed weekly or monthly. Example: a weekly rate of $300 is $15,600 a year, or $1,300 a month if you bill 12 equal payments. At $1,300 a month, the toddler room above breaks even only with 11 or more children ($13,800 ÷ $1,300 = 10.6). Build in your own pay and a cushion for empty spots.
• Registration fee and deposit: what each one covers and when it's refundable. Decide whether the deposit holds a spot or goes toward tuition. If families can spread a large fee over a few payments, the payment plan calculator builds the schedule.
• Closures and absences: whether families pay for holidays, sick days and vacations
• Late payments and late pickup: when tuition is due, what happens when it's late and the fee for late pickup. Have families sign your late pickup policy agreement at enrollment.
• Discounts and card fees: sibling rates (try the sibling discount calculator) and whether your daycare or families pay card fees (see credit card fees: absorb or pass on?)
• Receipts: give one for every payment, with your name, address and taxpayer identification number. Parents may need them for a dependent care FSA (flexible spending account) or the child and dependent care credit (see childcare tax receipts, or make one with the childcare receipt generator).

9. Add childcare assistance and the food program

Two federal programs, both run through your state, can bring in money beyond what families pay.

• Childcare assistance: the federal Child Care and Development Fund gives states money to help families with low incomes pay for childcare so they can work or go to school. It's also called subsidies, vouchers or certificates. Each state sets its own eligibility rules, and families may pay part of the cost as a copayment. Ask your state's childcare assistance office how to become an approved provider, what paperwork you'll need and how and when you're paid.
• Programs that take childcare assistance must meet federal health and safety requirements, including the background checks, training and inspections in this guide.
• Food program: the USDA Child and Adult Care Food Program (CACFP) reimburses licensed or approved daycares for meals and snacks that meet its nutrition standards. A daycare can be approved to claim up to two meals and one snack, or two snacks and one meal, per child per day. In most states, the state education agency runs it.
• Who qualifies for CACFP: public and nonprofit centers can take part. A for-profit center qualifies only if at least 25% of the children in care are eligible for free or reduced-price meals, or federal Title XX money (the Social Services Block Grant, which some states use for childcare assistance) pays for at least 25% of enrolled children (or of licensed capacity, if lower). Home daycares join through a sponsoring organization.
• Quality ratings: many states rate programs above the licensing minimum, often with stars. In some states every licensed program takes part. In others it's voluntary, or required only for programs that get government funding. Ask how it works in yours.
• Grants and scholarships: ask your CCR&R and local government whether any start-up or expansion grants are open, and see raising scholarship money for families who don't qualify for assistance.

10. Prepare your enrollment forms and policies

Your state sets which records you must keep for each child and which policies you must give families. Have them ready before you enroll anyone, and collect everything before a child's first day. Our registration form checklist and free templates are a place to start.

• Enrollment form with parent details, emergency contacts and the days and hours the child will attend (registration form)
• Health records your state requires, such as immunization records and a physical
• Medical and allergy information, plus an allergy list for each room (medical and allergy form, allergy alert roster)
• Parents' written permission before staff give any medication, and a log of every dose (medication administration log)
• Authorized pickup list (authorized pickup form) and a photo and media release
• A parent handbook: hours, closures, tuition, illness policy, meals, naps, discipline and how to reach you (parent handbook)
• Your refund and cancellation policy
• A safe sleep policy: babies under 12 months sleep on their backs, on a firm, flat surface, with no blankets, pillows, toys or other soft items in the crib
• An emergency action plan for fire, severe weather, a lockdown, a missing child and a medical emergency, practiced with staff
• An incident and accident report for every injury, and a call to the family the same day

11. Fill your spots

Start enrolling before you open, so you aren't paying staff for empty rooms. You can open some rooms first and add more as they fill.

• A program page with ages, hours, tuition, location, what a day looks like and how to enroll
• Tours, so parents can see the rooms and meet the teachers
• Your CCR&R, which refers families to regulated programs. Make sure it knows you're open.
• Your state's online childcare search. Once you're licensed, check that your listing is right.
• A waitlist for each age group, with a clear rule for who gets the next spot
• Flyers at pediatricians' offices, libraries, churches and community centers (ask about each one's rules first), and posts in local parent groups
• Information in Spanish, or another language families near you speak

12. Pass your inspections and open

For licensed programs that can take childcare assistance, federal rules require at least one inspection for health, safety and fire standards before licensing, then an unannounced inspection at least once a year. States must also post inspection results online, so parents can read yours.

• Schedule your inspections early, and fix anything they find before children start.
• Train staff before the first day on your policies, emergency plan, safe sleep, allergies, medication and pickup rules (staff training checklist).
• Check that every child's file is complete before their first day.
• Practice drop-off and pickup, including what staff do when an adult isn't on the pickup list. Keep a record of every sign-in and sign-out (daily sign-in and sign-out sheet).
• Keep attendance records every day. Your state, childcare assistance and the food program may all ask for them (weekly attendance sheet).
• Plan shorter first days for babies and toddlers who are new to care, and tell parents what to expect.
• Check in with every family after the first two weeks, and ask what to change.

How BackPR helps

BackPR runs registration, payments, forms and check-in for your daycare in one place. Families register and pay online, in English or Spanish, and complete enrollment forms, waivers and health forms as part of sign-up. You can bill recurring weekly or monthly tuition with autopay, or take a deposit and set up a payment plan. Staff check children in and out from their phones against each family's authorized pickup list, and parents get receipts and year-end dependent care statements. BackPR is free for registered nonprofits: no subscription and no BackPR fees (see if you qualify with the nonprofit eligibility checker). Card payments run on Stripe at Stripe's standard rates. Other programs get pricing by quote. More on BackPR for childcare.