Starting a Child Care Business in Texas

Starting a daycare or child-care business in Texas involves a particular set of legal considerations that are specific both to the type of business and to the State of Texas. These include choosing the proper business entity, obtaining licenses and permits, dealing with health and safety, getting adequate insurance, and dealing with employees.

As we review some of these considerations, keep in mind that the terms "day care" and "child care" are largely interchangeable in Texas; many of the state's laws, publications and websites refer to "child care" rather than "day care."

Choosing the Business Entity

While you could operate your day care business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a limited liability company or corporation. A day care center may not be the most dangerous business, but you will be taking care of the most precious thing in the lives of your clients: their children. You will be responsible for the health and safety of those children, many of whom may be toddlers, for hours every day. There is always a possibility that a child could be injured while on the premises of your day care business—in which case you would want the business, not you personally, to be responsible for any liability.

Licenses and Registrations (Permits)

In the State of Texas, licensing of child care businesses is handled through Child Care Licensing (CCL), which operates as part of the Texas Department of Family and Protective Services (DFPS). Generally speaking, you need to get some form of permit from the CCL (either a license or registration) in order to start a child care business. (The key exception to this general rule is for so-called "Listed Family Homes" – situations where care providers are compensated and provide care in their homes for at least four hours per day, at least three days per week, for 1-3 unrelated children.) Operating without the required permit can result in significant penalties, including fines of up to $100 per day.

Texas child care regulations define several different types of child care situations, including "Licensed Child Care Homes," "Registered Child Care Homes," "Listed Child Care Homes," and "Child Care Centers;" the general rules for each of these situations are as follows:

• In a Licensed Child Care Home, the licensed primary caregiver provides care in his or her own residence for children from birth through age 13; the total number of children cared for may vary based on ages of the children, but in any case must not exceed 12 children
• In a Registered Child Care Home, the registered primary caregiver provides care in his or her own residence for a maximum of six children from birth through age 13; the caregiver may also provide after-school care for up to six additional elementary school children, but the total number of children in care at any time may not exceed 12 children
• In a Listed Child Care Home, as mentioned above, care is provided in the home for no more than 3 unrelated children
• A Child-care Center is a facility licensed to care for seven or more children for less than 24 hours per day, at a location other than the home of the person who holds the license

DFPS has published the minimum regulatory standards for both child care homes and child care centers on its website.

Applications for licenses or registrations for child care centers and child care homes ask for information such as:

• the legal form of your child care business (e.g., sole proprietorship, limited partnership, corporation) with related details
• any past requests for, and denials of requests for, a permit
• number of children to be cared for
• services offered (for example, meals, night care, water activities)
• plan of operation
• fingerprint checks
• documentation of liability insurance, and
• request for criminal history check

For Listed Family Homes, there is a listing fee of $20; for Registered Child Care Homes, there is a registration fee of $35; for licensed operations, the fee varies depending on the number of children for which you will be licensed. Other fees, such as for background checks, may also apply.

Apart from preparing, submitting, and obtaining approval for your application, people who are new to working in child care or day care facilities must also complete 24 hours of initial training within 90 days of starting work, as well as an additional 24 hours of annual training in various areas.

Apart from state licensing, you should keep in mind that there may be local zoning laws that would prohibit running a child care business in a particular location. This is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if a child care center is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.

Health and Safety

The government is very concerned about the health and safety of infants and small children, and Texas child care regulations are extensive. With some variation depending on whether you are operating out of your home or an independent child care center, and how many children will be under care, key areas of state regulation include:

• permit-holder responsibilities (such as developing operational and personnel policies for the child care center)
• notifying CCL regarding changes in operation and notifying parents in cases of emergency
• items that must be posted on-site
• recordkeeping for children under care
• immunizations and other child medical matters
• responsibilities of care center directors
• minimum education and experience for care center directors and for other personnel
• requirements for training in First Aid and CPR, and in transportation safety
• number of children that caregivers may supervise (varies with age and other factors)
• planned activity requirements
• basic care requirements for infants, for toddlers, for pre-kindergarten children, and for older children
• disciplining children
• naptime
• snacks and mealtimes
• sanitation
• diapering
• persons to whom children under care may be released
• size and location of indoor care facilities and outdoor play areas
• furniture
• swimming and wading pools
• fire safety (including, among other matters, number of exits, smoke detectors, and fire extinguishers)
• transportation
• background checks
• abuse, neglect, and exploitation of children
• inspections and investigations

As the last item on the list indicates, the state has the authority to inspect your operation to ensure compliance with the regulations, as well as to investigate when lack of compliance, or abuse or neglect, is suspected. Similarly, you should expect that a fire marshal or other fire prevention official will make an inspection to ensure all fire safety regulations are being complied with, and an annual sanitation inspection; there may also be other regulatory inspections.

Keep in mind that, as part of the inspection process, the DFPS weights each of the hundreds of regulations in terms of how much of a risk each presents to children; the range is high, medium-high, medium, medium-low, and low.

Tax Deduction

If you run your day care business out of your home, you may be able to deduct expenses for the business. To qualify, you must (a) provide day care to children, and (b) be licensed by the state or exempt from the state's licensing requirement. Details about how to figure the deduction can be found on IRS Publication 587, available at Internal Revenue Service.

Insurance

There are particular risks associated with operating a child care center, primarily those related to the health and safety of infants and small children. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.

Try to work with an insurance agent who has previous experience writing policies for child care providers. Consider coverage for sexual abuse or molestation, for corporal punishment, and for employees who are child care providers. In general, make sure you have an excellent general liability policy.

Employees

Most day care centers have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:

• create a useful job application that does not include illegal questions
• check references or make other preemployment inquiries -- again without violating privacy laws or otherwise seeking illegal information, and
• ask interview questions that are both useful and legally permissible.

Keep in mind that there are some employment laws that are specifically relevant to day care workers, such as state training requirements and rules relating to criminal records and fingerprinting.

A good resource for general employment issues is The Employer's Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.