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."
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.
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.
The Child Care Licensing Program licenses two types of child care facilities:
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.
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:
CCC staff have stricter education and training requirements.
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 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.
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 residential—as opposed to commercial—area, 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.
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:
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:
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.
If you run your daycare business out of your home, you might be able to deduct expenses for the business. To qualify, you must:
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.
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.
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:
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.
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.