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Supply and demand pressures on daycare facilities have pushed prices up over the last generation. With more parents working multiple jobs and the rise of the single-parent households, the need for affordable and safe childcare is sure to increase. If you have experience in helping meet the needs of children, consider starting your own childcare facility. There are several steps to starting a non-profit daycare that avoid the shackles of trying to generate larger profits. Be aware, however, that as altruistic as this is, it is not without its challenges.
Laying the Groundwork
Even though operating a non-profit daycare is a noble pursuit, you should organize the company in a way that fits your lifestyle and provides a steady stream of clients. Consider the merits of opening a facility with the help of a parent organization such as a charity or non-profit company. Organizations such as churches, youth programs such as the YMCA and other charities may partner with a daycare to serve their community and their own employees. Working with a parent organization will also assist you in deciding where you will house the daycare and how many employees you will need to meet the demand. Some organizations arrange a localized daycare facility, often on their campus, while others arrange care in the home of their staff.
Non-profit daycare and other charitable organizations are typically formed using the IRS tax code Section 501(c)(3) and using IRS Form 1023. A 501(c)(3) company must not be in operation primarily for the financial benefit of its board members or other stakeholders, but rather for the good of a community or organization. Consult your tax attorney or accountant for complete details regarding the initial start up paperwork and the yearly financial reporting associated with this type of business. You may be required to apply for an Employer Identification Number and a sales tax license to hire employees and purchase goods and services. Seek the assistance of the U.S. Small Business Administration, or a similar entity, for help drafting a business plan that outlines how you will market the company, expand the facility and spend revenues in a legal and prudent way.
Preparing to Open
Consult with your local merchant license office for the specific requirements to become a licensed daycare facility. It is common for states to require a minimum staff-to-client ratio, specific safety apparatuses, and a maximum number of clients to be granted a license. These are problems to address before you open to prevent substantial fines and other liabilities. Licensing requirements will also assist you in choosing a facility to house your daycare. Once you have selected your location and applied for all of the necessary permits from your local city government, you are ready to furnish your facility with everything needed for operation. Once it is furnished, contact your local government to arrange all necessary inspections and licenses as dictated by your local charter.
Create a compensation plan that clearly delineates how payroll dollars will be spent so that you will not have your tax exempt status questioned. Compensate leadership using comparable market wages and no more. Document your method of determining these wages. Carefully insure yourself and your staff for personal and business liability. Seek certification in childcare as well as first aid and CPR to build credibility as you seek to expand. Hire staff, but recruit volunteers when possible to build community involvement and name recognition.
- Office of Personnel Management: Child Care Resources Handbook
- Palo Alto Medical Foundation: Choosing Child Care
- U.S. Small Business Administration: Starting a Child Care Business
- U.S. Internal Revenue Service: Exemption Requirements - Section 501(c)(3) Organizations
- U.S. Internal Revenue Service: Frequently Asked Questions: Form 1023
- U.S. Department of Agriculture: Starting a Child Care Center
- U.S. Bureau of Labor Statistics: Childcare Workers
- Councilofnonprofits.org: Managing Staff: More Topics, Tips, and Tools