How to start a daycare: the complete step-by-step guide

Last updated 2026-07-09

Can I open a daycare in my home?

Yes, and millions of providers do. A home daycare, sometimes called a family child care home, is one of the most reachable small businesses in the country. You already own the main asset: a place to live. What you add is a license (in nearly every state), a home that passes inspection, real business insurance, and a budget you have actually run the numbers on.

"Reachable" is not the same as "easy." Licensing runs anywhere from six weeks to six months depending on your state and how fast you clear background checks, training, and inspections. Some states have two tiers of home license: a family child care home (usually up to 6 children) and a group family child care home (up to 12 or 14). Which one you can apply for depends on your square footage, your zoning, whether you have an assistant, and sometimes just how long you have held a license.

Here is the one move that saves you the most money. Call your state child care licensing office before you spend a dollar on anything else. They will tell you the exact application, background check, and training hours that apply to your address. Every state writes its own rules, and no national guide (this one included) replaces reading your state's regulations.

What is the difference between a home daycare and a daycare center?

A home daycare runs out of the provider's residence. A daycare center runs in a dedicated commercial or institutional space. That single difference changes licensing, cost, staffing, and ratios in ways that touch every decision you make.

Feature	Home daycare	Daycare center
Typical startup cost	$10,000 to $50,000 [1]	$150,000 to $500,000+ [1]
Capacity (typical)	6 to 14 children	20 to 150+ children
Staff required at opening	Often just the provider	Director plus multiple teachers
Licensing authority	State + sometimes county/city	State + local zoning/fire/health
Ratio (infant, common)	1:4 to 1:6	1:3 to 1:4
Overhead	Low (mortgage/rent already exists)	High (dedicated lease, utilities, equipment)

Home programs carry less risk and cost less to open, but they cap your income at the number of children your state allows. Centers scale much further and demand much more capital, staff, and management. For most people asking how to start a home daycare, opening at home and growing into a center later is the path you are most likely to survive financially.

Want a center from day one? Then you need a full business plan, a commercial lease, an architect who knows child care building codes, and probably an SBA loan or an investor. That is not impossible. It is a different project than opening a home program.

What are the steps to start a home daycare?

Here is the sequence that works. Skip a step or run them out of order and you either waste money or redo the work.

Step 1: Read your state's rules. Find your state's licensing office through Child Care Aware of America's state directory ^[2]. Download the actual regulations, not a summary. Read the sections on home daycare capacity, required training hours, background checks, and physical space.

Step 2: Check local zoning. Before you apply, call your city or county planning office and confirm a family child care business is allowed at your address. Some residential zones ban it. Some want a conditional use permit. The licensing agency will not sort this out for you.

Step 3: Submit your application and start your background checks. Every state requires a background check for the provider and usually for every adult in the household. Federal law under the Child Care and Development Fund (CCDF) requires states to run fingerprint-based state and FBI criminal history checks for all licensed providers ^[3]. This step drags the longest, so start it first.

Step 4: Finish your pre-licensing training. Most states require 10 to 40 hours of training before they issue a license. Common topics: child development, CPR and first aid, safe sleep, mandated reporter duties, and emergency planning. Some states add a health and safety course built for child care.

Step 5: Prep your home for inspection. Your licensing specialist visits before the license issues. Expect them to check working smoke and carbon monoxide detectors in the required spots, a fenced outdoor play area, covered outlets, locked storage for medications and cleaning products, a stocked first aid kit, a safe sleep setup for infants (firm mattress, no soft bedding), and enough square footage per child (often 35 square feet of indoor space per child, though states vary).

Step 6: Set up your business and get a tax ID. Register your business with your state (sole proprietor, LLC, or another entity) and get an EIN from the IRS ^[4]. You need it for taxes and for accepting subsidy payments.

Step 7: Buy real insurance. Do not open on your homeowner's policy alone. You need home daycare insurance built for the business, which usually bundles general liability, professional liability, and abuse and molestation coverage. Homeowner's policies almost always exclude business activity. A typical home daycare policy runs $500 to $1,500 a year depending on capacity and location.

Step 8: Write your policies and contracts. Draft a parent handbook covering hours, fees, sick child policy, discipline policy, field trips, and payment terms. Get an enrollment contract signed before a child's first day. This protects you and sets expectations up front.

Step 9: Get on the subsidy payment system. Apply to accept CCDF subsidies in your state. A large share of children in licensed care use some form of subsidy, so accepting it widens the pool of families who can afford you. Your local Child Care Resource and Referral (CCR&R) agency gets you started ^[2].

Step 10: Open and document everything. Keep daily attendance records, medication logs, incident reports, and fire drill records. Your licensor checks these at every renewal. Good documentation is the line between providers who breeze through renewals and providers who land on a corrective action plan.

How much does it cost to start a home daycare?

Everyone asks this, and almost nobody answers it straight. Here it is.

Child Care Aware of America puts home daycare startup at roughly $10,000 to $50,000, with the spread driven by state training rules, renovation needs, equipment, and marketing ^[1]. The National Association for Family Child Care (NAFCC) puts the floor closer to $5,000 for providers who already own most of the equipment and only need licensing fees and training.

Here is a realistic breakdown for a small home daycare opening with 6 children.

Cost item	Typical range
Licensing fees	$25 to $350 [varies by state]
Background checks (provider + household adults)	$50 to $200 per person
Pre-licensing training (if paid)	$100 to $600
CPR/first aid certification	$50 to $150
Liability insurance (year 1)	$500 to $1,500
Outdoor play equipment (if needed)	$500 to $5,000
Indoor equipment, toys, cots, supplies	$1,000 to $5,000
First aid kit and safety supplies	$100 to $300
Business registration and EIN	$0 to $200
Legal review of contracts	$200 to $600
Marketing (website, flyers, listing fees)	$100 to $500

A lean home program comes together for $3,000 to $15,000. Budget three months of operating expenses on top of that, because you will not fill every slot on day one.

Now the revenue side. The national median rate for a family child care home infant slot was $237 per week in the most recent Child Care Aware data ^[1]. Six infants at that rate is about $73,700 a year in gross fees before expenses. Toddler and preschool slots pay less, usually $170 to $220 per week depending on your region.

See our full breakdown of daycare cost for how rates move by state and age group.

One thing that genuinely puts money back in your pocket: the IRS lets home daycare providers deduct the business-use share of home expenses (mortgage interest, utilities, repairs) using the time-space calculation tied to Form 8829 ^[4]. Most providers claim too little of it. A tax preparer who specializes in family child care earns their fee back many times over.

What licenses and permits do you need to open a daycare?

At a minimum, you need a child care license from your state. That is the baseline everywhere. The rest depends on where you are and what you serve.

For a home daycare, the extra permits you might need include:

• A local business license from your city or county
• A zoning permit or conditional use permit if your municipality requires it
• A food service license if you prepare and serve meals beyond snacks (states draw this line differently)
• A fire inspection clearance (some states fold this into the licensing visit, others send a separate fire marshal)

For a daycare center, add:

• A certificate of occupancy for the building
• A separate fire inspection
• A health department permit
• Building permits for any construction or renovation
• A director credential in states that require one

The National Database of Child Care Licensing Regulations, run by the Office of Child Care, is the federal source for your state's specific requirements ^[5]. Child Care Aware of America also keeps state-by-state profiles ^[2].

Federal CCDF rules set the floor for what states require of licensed providers, and states routinely build above it. The CCDF final rule requires states to conduct annual inspections of licensed providers and to make the results public ^[3]. Check whether your state posts inspection reports online, because parents will find them.

What are the child-to-staff ratios for a home daycare?

Home daycare ratios work differently than center ratios. In a family child care home, you are usually the only adult unless you hire an assistant, so your ratio is really your total capacity.

Most states cap a home daycare at 6 children total, often with a sub-limit on infants or toddlers. A common rule is no more than 2 infants under 18 months among your 6. Some states allow 8, or even 12, with an approved assistant.

Centers face the strictest limits on infants. The American Academy of Pediatrics recommends a maximum of 1:3 for infants under 12 months and 1:4 for toddlers 12 to 35 months ^[6]. NAEYC accreditation standards track closely with those numbers. State licensing rules often allow larger ratios, so read your state's actual standard.

NAFCC accreditation caps a family child care home at 6 children total with one provider, or up to 10 with a qualified assistant, and always counts the provider's own children under age 6 in the total ^[7].

Why sweat ratios during startup? Your capacity is your revenue ceiling. Cap of 6 children, local rate of $900 a month each, and your gross ceiling is $5,400 a month. Know that number before you sign a lease or quit your day job.

What training do you need before opening a home daycare?

Every state requires some training before licensure. The hours and content swing widely. Wisconsin requires 25 hours of pre-licensing training. Texas requires about 24 hours through an approved course. California requires 15 hours of health and safety training plus a pediatric CPR and first aid card. A few states set no hour count but mandate specific topics.

Expect to cover these regardless of your state:

• Pediatric first aid and CPR (hands-on, in-person, usually renewed every 2 years)
• Safe sleep for infants (built on AAP safe sleep guidance)
• Mandated reporter training (the law will require you to report suspected abuse or neglect)
• Spotting signs of illness and knowing when to send a child home
• Emergency preparedness and evacuation planning
• Nutrition basics if you serve meals through CACFP

The Child and Adult Care Food Program (CACFP), run by USDA, reimburses eligible home daycare providers for meals and snacks served to enrolled children ^[8]. Enrolling costs nothing and can add $3,000 to $6,000 a year in reimbursements for a full six-child program. You meet USDA's meal pattern rules and keep meal records, but the money is real and the paperwork is manageable.

Once your license issues, most states require ongoing annual training, commonly 12 to 24 hours a year, to keep it.

What insurance do you need to open a daycare?

New providers cut corners here more than anywhere else, and it is the worst possible place to do it.

Your homeowner's or renter's policy does not cover your daycare. Nearly every standard homeowner's policy spells out an exclusion for "business pursuits" run from the home. If a child is hurt in your care and all you carry is a homeowner's policy, the money comes out of your own pocket.

Carry at least three coverages:

• General liability insurance (bodily injury and property damage claims)
• Professional liability, or errors and omissions coverage (claims that your supervision or care was negligent)
• Abuse and molestation coverage (a separate endorsement many providers skip, and the one that matters most when a claim turns catastrophic)

Some states require proof of liability insurance to get licensed. Even where the state does not, any serious lender, landlord, or parent will ask.

See our detailed guide on daycare liability insurance for what policies actually pay out and average premiums by capacity. Our broader home daycare insurance guide walks through every coverage type you should carry.

Centers add commercial property insurance, workers' compensation (required with employees in virtually every state), commercial auto if you transport children, and an umbrella policy. A center with 30 children and 5 employees should budget $5,000 to $15,000 a year in total premiums.

How do you get children enrolled in a new home daycare?

Licensing officials do not teach this part. Getting licensed and getting full are two different problems, and the second one pays your bills.

The fastest path to enrollment for a new home daycare looks like this.

Get listed where parents search. Register on Care.com, Sittercity, and your local CCR&R provider database. CCR&R listings are free and are often the first place subsidized families check ^[2].

Accept subsidies from day one. Families using CCDF subsidies often wait months for a licensed spot. Get on the subsidy list before you open and you may have a waiting list before your first morning.

Tell everyone you know. Word of mouth from neighbors, pediatrician offices, and community groups fills home daycares faster than any paid ad. Leave flyers at pediatric offices, libraries, and local parent groups.

Set competitive rates. Look at what other licensed home daycares near you charge. Pricing far below market drains your income without filling slots any faster, because parents read cheap as low quality. Price within 10 to 15 percent of your local market.

Post on local Facebook groups and Nextdoor. These work well for home-based programs because you are literally in the neighborhood.

Realistic timeline: 30 to 90 days from license issue to full enrollment. Budget for the gap.

What does the licensing inspection look for?

Your pre-licensing inspection is a walk-through of your home against a checklist that mirrors your state's regulations. Inspectors are not hunting for reasons to fail you. They want you to pass. They also cannot look past a violation.

Here is what inspectors commonly check.

• Smoke detectors: working, in required locations (every level, inside and outside sleeping areas)
• Carbon monoxide detectors: required in most states
• Fire extinguisher: charged, reachable, not expired
• First aid kit: stocked with the contents your state's regulations list
• Outdoor play area: fenced, free of hazards, no standing water, age-appropriate equipment
• Indoor space: usually 35 square feet of usable floor space per child (varies by state)
• Safe sleep for infants: firm crib or play yard, no soft bedding, bumpers, or positioners in the sleep space
• Medication storage: locked, labeled, with written parent authorization on file
• Cleaning products: locked or out of reach
• Swimming pools or water features: fenced per your state's rules
• Emergency contact information posted and visible
• Evacuation plan posted

The Office of Child Care publishes a summary of what federal CCDF rules require states to inspect ^[5]. Your state adds items on top of that. Request your state's inspection checklist before the visit and self-inspect against it at least once.

ChildCareComp's compliance toolkit includes printable inspection prep checklists organized by state. It can save you from failing a first inspection over something small, like a missing outlet cover.

How do you write a business plan for a daycare?

You need a business plan even for a home daycare, even if no bank ever sees it. Writing it forces you to check whether the numbers work before you quit your job.

A workable daycare business plan covers these pieces.

Market analysis: How many children under 6 live within 3 miles? What do local daycares charge? Is anyone nearby running a waitlist? The Census Bureau's American Community Survey has child population data down to the zip code ^[9].

Capacity and revenue model: Six children at $800 a month each is $57,600 a year gross. Model 75 percent occupancy for year one, or $43,200. Does that cover your costs and pay you?

Startup costs: Use the breakdown above. Be honest. Underestimating startup cost is the most common reason new daycares close in year one.

Operating budget: Monthly costs including your own pay (put a number on your time, even on paper), insurance, food, supplies, training, and any mortgage or rent allocated to the space you use.

Break-even analysis: At what enrollment do you cover monthly costs? How long, realistically, until you get there?

Subsidy strategy: Will you accept CCDF? Head Start partnerships? Each has its own payment timeline and paperwork.

For a center seeking a loan, SBA 7(a) and 504 programs both fund child care businesses. The SBA's Small Business Development Centers offer free business plan help ^[10]. Use them.

What tax rules apply to a home daycare?

Home daycare has unusually good tax treatment once you know the rules.

The IRS treats family child care as a Schedule C business. The deductions that matter most:

• Time-space percentage (Form 8829): Calculate what percentage of your home's square footage serves the daycare AND what percentage of time it is in use. That combined figure applies to mortgage interest, utilities, rent, repairs, and depreciation. Most providers land at 25 to 40 percent of these home expenses ^[4].
• Food expenses: Fully deductible for food served to enrolled children. If you take CACFP, your reimbursements reduce your deductible food cost, so track it carefully.
• Equipment and supplies: Deductible in full or under Section 179 expensing.
• Training and professional development: Deductible.
• Insurance: Deductible.

IRS Publication 587 covers the home office deduction rules behind the time-space calculation ^[4]. Tom Copeland's "Family Child Care Tax Workbook" (published annually by Redleaf Press) is the practical reference most providers keep on the shelf. He is a real person who has worked this area for decades, and the book is worth buying.

One warning. Home daycare returns draw scrutiny for under-reported income. Providers who fudge income can face the kind of fraud liability seen in high-profile subsidy billing cases. Read what can go wrong in minnesota daycare fraud. Do not cut corners here.

How do you stay compliant after you open?

Opening is the start, not the finish. Most licenses renew annually or every two years. Renewal means another inspection, updated background checks for any new household adults or staff, and proof of completed continuing education hours.

Things that get a license suspended or revoked:

• Going over your licensed capacity (even by one child for one day)
• Failing to hold required staff-to-child ratios
• A substantiated abuse or neglect finding against any adult in the home
• A serious injury to a child with no incident report on file
• Missing your continuing education hours
• Medication errors with no documentation
• Failing to report a mandated reporter event

Federal CCDF rules require states to keep "an adequate supply of trained and qualified providers" and to conduct "annual, unannounced inspections" of licensed providers ^[3]. Unannounced means exactly that. Your program has to be compliant every single day, more than the day before your scheduled renewal.

Build daily habits that keep you clean: take attendance at drop-off and pick-up with times, log every medication given, run a monthly fire drill and document it, and review your policies with families once a year.

A clean, sanitary space is both a licensing requirement and a selling point. Our guide to daycare cleaning covers routines and products that keep you inspection-ready without eating your whole day.

Join a professional association. NAFCC for home providers, NAEYC for centers, plus your state child care association. These groups track rule changes, push for funding, and connect you to other providers. That network is how you hear about a regulation change before it catches you flat-footed.

ChildCareComp's compliance toolkit tracks your renewal dates, training hours, and inspection prep in one place. That gets useful once you have been open long enough that the details start to blur.

Frequently asked questions

Can I open a daycare in my home without a license?

In almost every state, no. Caring for more than a set number of unrelated children (typically 2 to 4, depending on the state) without a license is illegal and can bring fines, forced closure, and in some cases criminal charges. A handful of states exempt very small groups from licensing, but the thresholds are low. Check your state's child care licensing office for the exact exemption rules where you live.

How long does it take to get a home daycare license?

Plan for 2 to 6 months from application to license. The biggest variable is background check processing, which is outside your control and can take 4 to 12 weeks in some states. Training requirements, application review queues, and inspection scheduling add more. Start your background checks and training as early as possible to shorten the overall timeline.

How many children can I watch in a home daycare?

Most states allow 6 children per licensed home daycare provider. Some allow up to 8 with a qualified assistant present, and some group family child care licenses reach 12 or 14. Your own children under a certain age (often 6) typically count toward your capacity. The exact rule lives in your state's licensing regulations.

How much money can you make running a home daycare?

Gross revenue at full capacity (6 children) with a national median infant rate of $237 per week comes to about $73,700 a year. After food, insurance, supplies, training, and the home expense allocation, net income usually runs $25,000 to $45,000 for a solo provider at full enrollment. Actual numbers swing a lot by region, ages served, and subsidy mix.

Do I need to be a certified teacher to start a home daycare?

No. Most states do not require a teaching credential to run a home daycare. They do require pre-licensing training hours and sometimes a Child Development Associate (CDA) credential for certain license levels. A CDA is achievable in about 12 to 18 months while you already operate. Centers often require directors and lead teachers to hold an associate's or bachelor's degree in early childhood education.

Does my homeowner's insurance cover my home daycare?

No. Standard homeowner's policies exclude business activity. If a child is hurt in your care and you file under your homeowner's policy, expect a denial. You need a separate home daycare liability policy that includes abuse and molestation coverage. Some insurers offer a daycare rider on a homeowner's policy, but standalone commercial coverage is usually more complete and not much more expensive.

What is the Child and Adult Care Food Program and should I apply?

CACFP is a USDA program that reimburses licensed home daycares and centers for meals and snacks served to enrolled children who meet income eligibility. For a full six-child home daycare, annual reimbursements typically run $3,000 to $6,000 with no cost to enroll. You meet USDA meal pattern standards and keep meal records. It is worth it for nearly every home daycare program.

Can I start a daycare without any money?

Realistically, no. Even the leanest home daycare startup requires licensing fees, background checks, CPR certification, liability insurance, and basic supplies. That total is rarely under $2,000 even in the best case. State and federal grants exist for providers, often through Child Care and Development Fund quality improvement money. Contact your local CCR&R to ask about startup grants in your area.

Do I need to register as a business to run a home daycare?

Yes, in most practical senses. You need an EIN from the IRS to file Schedule C taxes, accept subsidy payments, and open a business bank account. Whether you register as an LLC or run as a sole proprietor depends on your state's rules and your appetite for personal liability. An LLC adds some liability separation; the filing cost is typically $50 to $200.

What background checks are required to open a home daycare?

Federal CCDF rules require fingerprint-based state and FBI criminal history checks for all licensed providers. Most states also require a child abuse and neglect registry check. Checks apply to more than the provider alone; usually every adult living in the home. Results affect eligibility: certain convictions permanently bar licensing, while others may allow a variance process.

Can I run a home daycare part time?

Yes. A part-time schedule, such as mornings only or three days a week, is allowed under most state licenses as long as you meet every other requirement. Your license does not set hours of operation in most states; it sets capacity. Part-time programs serve parents who need before-school care or split schedules. See our guide on part time daycare for how to structure rates and contracts.

How do I find out what my specific state requires to open a home daycare?

Go straight to your state's child care licensing agency. Child Care Aware of America keeps a state-by-state directory of licensing agencies at childcareaware.org. The Office of Child Care's National Database of Child Care Licensing Regulations is another federal resource with links to each state's regulatory text. Read your state's actual regulations, not a summary, to know exactly what you need.

What records do I need to keep once my daycare is open?

At minimum: daily attendance records with arrival and departure times, signed enrollment contracts, health and immunization records for each child, emergency contact and authorization forms, medication administration logs, incident and injury reports, fire drill records (most states require monthly drills), and training completion certificates. Most states require you to keep records for 2 to 5 years after a child leaves.

How do I start a home daycare if I have my own young children?

Your own children under a certain age, usually 6, typically count toward your licensed capacity. So if your state allows 6 and you have 2 of your own under 6, you can enroll 4 more. Know this before you apply, because it moves your income potential directly. Some providers wait until their youngest is old enough to stop counting toward capacity before opening.

Sources

1. Child Care Aware of America, 'Demanding Change: Repairing Our Child Care System' annual report: Startup costs for home daycare range from $10,000 to $50,000; national median weekly rate for family child care home infant slot was $237 per week
2. Child Care Aware of America, state resource directory: CCR&R agencies are a primary resource for finding state licensing offices and getting on subsidy payment systems
3. U.S. Department of Health and Human Services, Office of Child Care, Child Care and Development Fund Final Rule (45 CFR Parts 98 and 99): CCDF requires fingerprint-based state and FBI criminal history checks for all licensed providers and annual unannounced inspections of licensed child care providers
4. IRS, Publication 587 Business Use of Your Home: Home daycare providers may deduct the time-space percentage of home expenses including mortgage interest, utilities, and repairs using Form 8829; home daycare is a recognized Schedule C business
5. U.S. Office of Child Care, National Database of Child Care Licensing Regulations: Federal resource listing state-specific child care licensing requirements and what CCDF rules require states to inspect
6. American Academy of Pediatrics, Caring for Our Children: National Health and Safety Performance Standards (3rd ed.): AAP recommends maximum 1:3 ratio for infants under 12 months and 1:4 for toddlers 12 to 35 months in center care
7. National Association for Family Child Care, NAFCC Accreditation Standards: NAFCC standards cap a family child care home at 6 children with one provider or up to 10 with a qualified assistant, counting the provider's own children under 6
8. USDA Food and Nutrition Service, Child and Adult Care Food Program (CACFP): CACFP reimburses eligible home daycare providers for meals and snacks served to enrolled children who meet income eligibility requirements
9. U.S. Census Bureau, American Community Survey: ACS provides child population data by zip code useful for market analysis in daycare business planning
10. U.S. Small Business Administration, Small Business Development Centers: SBDCs offer free business plan help and SBA 7(a) and 504 programs fund child care businesses
11. U.S. Department of Health and Human Services, Office of Child Care, CCDF Policy overview: CCDF sets minimum requirements for state child care licensing and subsidy programs including provider background checks and inspection frequency