Step by Step Guide to Starting a Daycare Center

happy baby boy image by Galina Barskaya from

Starting a daycare business is no small undertaking. There are thousands of things you must consider, like what type of legal entity the business should be structured as, where the daycare center should be located and how you can comply with the myriad of legal regulations in your locality. You may need to arrange inspections, hire employees, buy supplies, advertise the business, manage the books, pay yourself and do it all for a price that's competitive and affordable.

Decide whether you want the daycare business to be a limited liability company, S-corporation or C-corporation. The first two choices both cause the income from the center to flow to your personal tax return, while the final choice, C-corporation, means you'll be taxed at the corporate rate of 15 percent. An LLC requires the least amount of paperwork among the three and protects your personal assets in case of a lawsuit.

File the appropriate papers with your Secretary of State once you've decided. The forms are on your Secretary of State website.

Start a bank account specifically for the daycare business. This will help you track expenses. You will need your Secretary of State's confirmation of the establishment of your LLC or corporation to open the bank account.

Set up a bookkeeping system such as Quickbooks so you can track money you spend and money coming in. This will help you manage your week-to-week or day-to-day cash flow.

Decide whether you want to run this center in your home or elsewhere. Advantages to running it in your home include not needing to pay rent on another place and not needing to commute. A significant disadvantage to running it at home may be feeling like you can never "get away."

Inspect the place at which you decide to locate the daycare center and ensure that it complies with local and state laws, which will likely include but not be limited to having a history of safe (that is, non-lead) paint, adequate smoke alarms, fire escape routes and possibly carbon monoxide detection.

Arrange for any inspections that your local or state laws require. This will vary state by state. See the "Resources" section.

Write a list of policies and procedures for your center, which cover child check-in and check-out. Answer realistic "what ifs" such as whether or not to release the child to a different person that brought the child in, and if you do allow that, how you will verify that the person is authorized by the child's parents to pick the child up. Spell out how to handle health emergencies such as choking or allergic reactions, how to handle behavioral emergencies such as one child hitting another, what your fire evacuation plan is, what to do in case of a tornado or flood and other such potential issues.

Interview and hire staff. Look for certifications such as Infant and Child CPR and First Aid or First Responder. Look for a history of previous work with young children, perhaps as a preschool teacher. Run a criminal background check on all employees by contacting your state Bureau of Investigations.

Compile a list of documents for parents to sign, including an acknowledgment that the parents fully understand and accept the policies and procedures you have outlined.

Decide what price you want to charge. Consider the cost of renting the space (if applicable), hiring and paying employees, supplies you will use such as crayons and toys, food for the children, insurance, taxes and compensating yourself. Compare your desired price to other daycare businesses in the area.

Advertise the business to local parents through word-of-mouth, online advertising, newspaper, flyers, community groups, maternity stores and other venues that are appropriate for your location.


  • Always research and comply with local, state and federal laws.

    Always ensure the people you hire are suitable to work with children.

    Consider enlisting an attorney to review your policies, procedures and documents.

    Ensure your daycare location complies with all legal and ethical safety standards.

    Starting any business carries risk, including risk of principal loss.



About the Author

Kennedi Rose is an Atlanta-based journalist who began her career in 2005 as a newspaper reporter covering the education beat. She has written for a wide variety of commercial, trade and online magazines covering food, drink and the retail sector. She holds a Bachelor of Arts in sociology.

Photo Credits

  • happy baby boy image by Galina Barskaya from