How to Start a Daycare: Licensing, Costs and Tuition (2026)

Quick answer: To start a daycare, choose between a family child care home and a center, contact your state licensing agency, complete background checks, training and inspections, set up a safe space and insurance, set tuition from local rates and your costs, write a parent contract, and invoice families in advance weekly or monthly.

Child care is in steady demand in most areas, and a home daycare can be started with modest capital. It is also one of the most regulated small businesses you can run. This guide on how to start a daycare covers licensing, costs, tuition, policies and billing, with links to the official sources you need to check for your state.

What Is a Daycare Business?

A daycare provides supervised care for children, usually infants through school age, while parents work. The main types are:

Type	Where	Typical size	Key differences
Family child care home	Provider's home	Small group (state sets limits)	Lower startup cost, provider often works alone
Group or large family child care home	Provider's home	Larger group with an assistant	More staff and space rules
Child care center	Commercial building	Dozens of children or more	Zoning, building and fire approvals, director qualifications, staff
License-exempt care	Varies	Very small or relatives only	Exemptions defined by each state

Names and limits vary by state. Some states use "registered" and "certified" family homes, others use "small" and "large". Your state's definitions decide your capacity, ratios and requirements.

How Does Daycare Licensing Work?

Licensing is handled by each state, not the federal government. The federal National Database of Child Care Licensing Regulations links to every state's licensing rules and agency contacts, so start there. Typical requirements include:

• An orientation or pre-licensing class run by the state
• Background checks and fingerprinting for the provider, staff and often every adult living in the home
• Minimum age and education (often 18 with a high school diploma or equivalent for home providers; more for center directors)
• Pediatric CPR and first aid certification and health and safety training
• Home or facility inspection: fire safety, smoke and CO detectors, exits, safe sleep for infants, fencing, hazardous materials storage
• Staff-to-child ratios and group size limits by age
• Records: enrollment forms, immunizations, attendance, emergency plans

Centers also need zoning approval, building and fire inspections and often a health department food permit. Expect licensing to take weeks to months, so start the application before you spend heavily on furniture and marketing.

How Much Does It Cost to Start a Daycare?

These are illustrative ranges; your state's requirements and your space drive the real number.

Cost	Home daycare	Small center
Licensing fees, background checks, training	A few hundred dollars	Higher, plus inspections
Safety upgrades (gates, locks, detectors, fencing)	$500 to $3,000	Included in build-out
Furniture, cribs, cots, toys, learning materials	$1,500 to $5,000	$20,000 and up
Lease and build-out	None	Often the largest cost
Insurance	Child care liability policy	Liability, property, workers' comp
Software and admin	Low	Child care management software
Working capital (first months of payroll and food)	Low	Several months of payroll

A startup costs list and a simple business plan help you see when enrollment will cover expenses, which matters for centers that carry rent and payroll from day one.

How to Start a Daycare Step by Step

1. Research demand and rates. Call local providers, check waitlists and your state's market rate survey for subsidy programs.
2. Choose your type and capacity based on your space and state rules.
3. Contact the licensing agency and attend orientation.
4. Register the business and get a free EIN (see how to get an EIN). Parents will need a tax ID from you for their tax credit, and an EIN keeps your SSN private.
5. Prepare the space and pass inspections.
6. Get insurance. Homeowner policies usually exclude daycare; you need a child care liability policy.
7. Write policies: parent handbook, enrollment contract, illness, payment and withdrawal policies.
8. Apply for programs such as the USDA Child and Adult Care Food Program and your state's child care subsidy program if you want to accept subsidized families.
9. Market and enroll: local parent groups, referrals, a simple website, and tours.
10. Set up billing before the first child starts.

If you plan to hire an assistant, read hiring your first employee and how to do payroll yourself before you make an offer.

How Much Should a Daycare Charge?

Tuition is set mostly by local market rates, the child's age (infants cost more because ratios are lower) and full-time vs part-time schedules. Look at what licensed providers within a few miles charge, then check that your rate covers costs.

Worked example: home daycare budget

A provider is licensed for 8 children and plans to stay open 50 weeks a year.

• Tuition: 2 infants at $300/week, 6 older children at $240/week = $2,040 per week
• Annual gross tuition: $2,040 x 50 = $102,000
• Expenses: food $9,000 (before any CACFP reimbursement), supplies $4,000, insurance $1,500, part-time assistant $22,000, other $4,500 = $41,000
• Net before income tax: about $61,000

These numbers are an example only. If one spot sits empty for three months, that is roughly $3,100 less income, which is why most providers charge for the reserved spot regardless of attendance. If you also offer tutoring or after-school help, see how to start a tutoring business for pricing ideas, and compare informal care rates in our babysitting rates guide.

How to Invoice Daycare Parents

Billing in advance, on a fixed day, with clear fees is the standard. Typical fees:

• Registration or enrollment fee (one-time or annual)
• Weekly or monthly tuition, due in advance
• Late pickup fee (often per minute or per 15 minutes)
• Late payment fee after a grace period
• Supply or activity fee

Description	Qty	Rate	Amount
Full-time tuition, toddler, Nov 2 to Nov 27, 2026 (4 weeks)	4	$240.00	$960.00
Annual registration fee 2026-27	1	$100.00	$100.00
Late pickup Oct 21 (15 minutes)	1	$15.00	$15.00
Total due by Nov 2, 2026			$1,075.00

Add your business name, address and EIN to every invoice so parents can use it for their records. The daycare invoice template is set up for weekly and monthly tuition, and you can create invoices with the free invoice generator. For automatic tuition payments, read about recurring payments. At year end, give each family a statement of total tuition paid; the IRS explains what parents need in the Form 2441 instructions.

What Policies Should a Daycare Have?

Clear written policies protect your income and your relationship with families. Put them in a parent handbook and have each family sign the enrollment contract.

Policy	What to decide	Common approach
Payment	Due date, methods, grace period	Paid in advance, late fee after 2 to 3 days
Absences and vacation	Is tuition reduced?	Full tuition for enrolled spot; some allow 1 to 2 free weeks a year
Provider closures	Paid or unpaid holidays	List paid holidays in advance
Late pickup	Fee and timing	Fee per minute or per 15 minutes after closing
Illness	When a child must stay home	Fever, vomiting, contagious conditions per state rules
Withdrawal	Notice period	Two weeks' written notice or tuition in lieu
Discipline and safe sleep	Methods and practices	Follow state rules exactly

Many families use child care subsidies paid by the state. If you accept them, learn your state's billing process, the rate the subsidy pays, and whether you may charge families the difference between the subsidy rate and your private rate, called a copay or differential, which some states restrict.

Common Mistakes When Starting a Daycare

• Enrolling children before the license is issued.
• Charging by attendance. Absences then wreck your income.
• No written withdrawal notice. Ask for two weeks' notice or tuition in lieu.
• Relying on homeowner insurance. It typically excludes business use.
• Mixing household and business money. Use a separate account so the home daycare deduction and food costs are easy to document.
• Not tracking hours for the time-and-space deduction described in IRS Publication 587.
• Underpricing infant care. Infants take more of your capacity under ratio rules.

Daycare Launch Checklist

• State licensing category, orientation and application complete
• Background checks, CPR, first aid and training done
• Space inspected and safety upgrades installed
• Child care liability insurance
• Business registration, EIN and business bank account
• Parent handbook and enrollment contract
• Tuition rates, fee schedule and invoice template

This is general information, not legal or tax advice; your state licensing agency has the final word. Once you understand how to start a daycare in your state, set up tuition billing with the invoice generator on this site. It is free, needs no sign-up, and creates a PDF in your browser that you can download, print or email to parents.