Starting a Child Care Business in California

Make sure you understand the basic legal issues involved before you open a child care business in California.

By , Attorney
Updated by Amanda Hayes, Attorney · University of North Carolina School of Law

Starting a child care business in California involves a particular set of legal considerations that are specific both to the type of business and to the State of California. As we review some of these considerations, keep in mind that the terms "daycare" and "child care" are largely interchangeable in California; many of the state's laws, publications, and websites refer to "child care" rather than "daycare."

Choosing a California 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 child care center or facility might not be the most dangerous business, but you'll be taking care of the most precious thing in the lives of your clients: their children. You'll be responsible for the health and safety of those children, many of whom could be toddlers, for hours every day. There's always a possibility that a child could be injured while on the premises of your child care business—in which case you would want the business, not you personally, to be responsible for any liability.

Learn more about choosing a business structure.

Applying for Business Licenses and Permits

In California, the Department of Social Services (CDSS) oversees and licenses child care businesses through its Child Care Licensing Program. You need a license if you'll be caring for children from more than one family that's not related to you. Operating without the required license can result in significant penalties.

Two Types of Child Care Licenses

The Child Care Licensing Program licenses two types of child care facilities:

  • child care centers (CCCs), and
  • family child care homes (FCCHs).

Typically, CCCs are located in an independent facility while FCCHs are operated out of a person's home. The distinction between the two types of licenses is important: The license and renewal fees are higher, and the regulations are more extensive, for CCCs.

Licensee Qualifications

When applying for a child care license, you must show that you've checked all the boxes to qualify for the license. Because a CCC involves hiring staff, you'll need to make sure your staff has met the education and training requirements before they can begin work. If you plan to run an FCCH, you, as the licensee, will need to meet the required qualifications as well.

To receive a license, An FCCH licensee must:

  • be at least 18 years old
  • live in the home that will be the FCCH
  • obtain criminal records clearance
  • have a TB test, and
  • complete 16 hours of pediatric health and safety training.

CCC staff have stricter education and training requirements.

Applying for a Child Care License in California

Before you apply for either type of child care license, you'll need to attend an orientation. You can register for an online orientation with the CDSS. If you want to apply for an FCCH license, you can attend an in-person orientation. Your local CDSS Regional Office should have a schedule of upcoming orientations that you can register for. You can also attend a live virtual orientation for an FCCH license. You must pay a non-refundable fee for the orientation.

After you complete the orientation, you'll need to complete the license application. The application asks for a variety of information, including:

  • the ages of the children you'll be taking care of (for example, infants, toddlers, pre-schoolers, school-age)
  • how many kids you plan to care for in each age range
  • whether you own the property where the care will be provided
  • whether your business will be for-profit or nonprofit, and
  • acknowledgments regarding knowledge of, and compliance with, health and safety, criminal record, and other regulations.

The forms required for each license vary. The CCC application is much more extensive and requires 15 separate forms in addition to supporting documents.

See the CDSS's FCCH application instructions for guidance on how to apply for an FCCH license, including an application checklist. Review the CCC application booklet for information about the forms and supportive documents that are required for the CCC application.

You also will have to pay a license application fee. This fee will depend on your license type and the number of children you'll be caring for. You must also pay a renewal fee each year. The fees change every year. You can find the current fee schedule on the licensing fees section of the CDSS website.

Consider Local Zoning Laws for Your California Business

Apart from state licensing, you should keep in mind that there might be local zoning laws that would prohibit running a child care business in a particular location.

Commercial space. Most commercial locations will be appropriately zoned for your business plans, thought it's best to do your due diligence and check how the area is zoned. You should also make sure that your commercial lease allows for your kind of business. You should also pick a location that's suitable for a day care center. For example, you might not want to choose a spot right next to a smoke shop.

Home-based business. You'll likely run into more obstacles if you choose to run your day care out of your home. If you live in a clearly residentialas opposed to commercialarea, business activities might be restricted. Apart from zoning ordinances, you'll need to look at your deed, HOA rules, or lease to make sure these documents don't prohibit business activities. (See our article on licenses and permits for home-based businesses for more guidance.)

Even if running a CCC or FCCH is permissible under the local zoning ordinance, you might 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.

Complying With California Health and Safety Laws

The government is very concerned about the health and safety of infants and small children, and California's child care regulations are extensive.

With some variation depending on whether you're operating out of your home or an independent child care center, key areas of state regulation include:

  • criminal record clearances, including checks related to child abuse
  • fire safety clearances
  • training requirements for center personnel
  • reporting requirements when children need medical treatment or there are other unusual incidents
  • ratio of staff to children
  • requirement that the individual named licensee be present at the center
  • safety of toys and play areas
  • prohibition on smoking cigarettes
  • disaster evacuation planning
  • financial records requirements
  • specific teacher-to-children ratios for toddlers
  • transportation of children
  • food service requirements
  • napping
  • minimum required outdoor space
  • building fixtures and equipment
  • distinctions between infant care, toddler care, and school-age care, and
  • state inspection authority.

As the last item on the list indicates, the state has the authority to inspect your operation. These inspections can be unannounced and can include interviews of children and staff. They can also include inspecting any part of the CCC, or those parts of a home in which child care services are provided. Similarly, you should expect that a fire marshal or other fire prevention official will inspect the space to ensure there are adequate routes of escape in case of fire.

Before obtaining their license, FCCH applicants must have their homes inspected by the DSS. The inspection will determine whether:

  • all adults living in the home have received a criminal record clearance or exemption
  • your home is neat and clean
  • toys are clean, safe, and age-appropriate
  • fireplaces and heaters are screened
  • a fire extinguisher is close by and accessible
  • you have a working smoke alarm
  • you have a working telephone
  • all poisons are locked
  • hazardous materials are put away and out of reach
  • firearms aren't loaded and are secured away
  • the outdoor play areas are safe (such as play equipment being anchored)
  • the outdoor play area is fenced or supervised
  • there are no pools, hot tubs, or bodies of water, or they're covered or fenced, and
  • a copy of your property records (like a deed or lease) are available at the home.

You can find copies of the laws and regulations that apply to child care facilities on the CDSS website. These laws include Title 22 regulations that directly apply to FCCHs and CCCs. You can also find California's Health and Safety Code as well as the Evaluator Manual. The Evaluator Manual is a great resource that demonstrates how the CDSS carries out its rules and policies.

Qualifying for Business Tax Deductions

If you run your daycare business out of your home, you might be able to deduct expenses for the business. To qualify, you must:

  • provide daycare to children, and
  • be licensed by the state or exempt from the state's licensing requirement.

The two main expenses you can deduct from your taxes are the space in your home that you use to provide the child care services and the meals you provide to the kids.

Business use of your home. The IRS allows you to deduct a particular amount from your business expenses based on how you use your home for your child care business. There are two methods to figure out how much to deduct. Most people use the standard, simplified deduction ($5 for every square feet of your home you use). But you can also use the more complicated method that involves accounting for the percentage of square feet you use for your business versus the total square feet of your home and whether your use of the space is exclusive.

Meals. You can also deduct the costs you pay for the meals you provide the kids under your care. You can deduct the actual costs or use the standard meal and snack rates provided by the IRS.

Details about how to figure the deduction can be found in IRS Publication 587 on the IRS website.

Obtaining Insurance for Your Child Care Business

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 child-related risks 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.

For more information, see our article on what types of insurance your small business needs.

Hiring Employees for Your Child Care Business

Most daycare centers have employees and, in many cases, there can be relatively frequent turnover. You should review basic employment law issues such as illegal discrimination, workers' compensation, and how to handle the hiring process. Concerning hiring in particular, learn how to:

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

Keep in mind that some employment laws are specifically relevant to daycare workers, such as state training requirements and rules relating to criminal records. California requires the licensee of a home-based child care operation, and at least one on-duty staff member at a child care center, to be trained in pediatric CPR, first aid, and other health-related areas.

A good resource for general employment issues is The Employer's Legal Handbook, by Aaron Hotfelder (Nolo). Also, many key employment laws are administered through the U.S. Department of Labor and California's Labor and Workforce Development Agency, and you can find information and resources on their websites.

More Information About Starting a California Day Care Business

Starting a business is a mighty, but manageable, task. Along the way, you're bound to have questions. You can find much of the information you need on the CDSS website (as referenced throughout this article). You can also contact your county office for your questions.

If you need help with your commercial lease (for a CCC) or the license application process or you have questions about business structure, employment issues, insurance, or health and safety laws, consider speaking with a California business attorney. They can help you throughout the process from start to finish or answer questions as needed.

To learn about other California business opportunities, see our section on starting a business in California.

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