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16 Family Child Care Provider Resources
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Choose a Legal Structure
Decide on the legal structure of your business. You may
need legal advice to decide how to set up your business.
Some local Child Care Resource and Referral (CCR&R)
agencies may provide training or information to help you
understand these business practices.
Here are some ways in which you can structure your
child care business:
• Sole proprietorship. You own an unicorporated business
by yourself.
• Incorporation. Your business is set up so shareholders
exchange money, property or both for the corporation’s
capital stock. This structure protects your personal assets.
• Partnership. You join with one or more partners to own your
child care business. All partners share the business profits
and losses.
• Tax-exempt organization. With this structure, your company
doesn’t pay taxes; any money left over after you pay
expenses must be returned to the operation of your program.
To claim this status, you must meet Internal Revenue Service
(IRS) eligibility requirements.
Taxes
As a small business, you will need to file business
income tax information with local, state, and federal
agencies unless your business is tax-exempt. Taxes
should be a part of any budget for a child care business.
You may want to consult with a tax professional, such as
an accountant or a lawyer that specializes in business
practices, to help you.
Family child care providers can take advantage
of tax benefits and employment benefits such as:
• Home business tax write-os to oset expenses
• Direct expenses such as food, toys, equipment,
and insurance that are 100% tax deductible
• Indirect expenses such as real estate taxes,
mortgage interest, rent, utilities, etc.
Purchase Insurance
Insurance requirements will vary by state. Contact your
local Child Care Resource and Referral (CCR&R) agency or
your state child care licensing oce for information on the
type of insurance required in your state.
Insurance protects you when emergencies or natural
disasters occur. Find out if your family child care is prepared
for disasters.
There are other types of insurance that you will want
to investigate, even if they are not required by your state’s
licensing regulations. Read about them below, and use this
resource when thinking about your insurance needs.
Business Owner’s Insurance generally is a
combination of liability and property insurance.
Buying the package is usually less expensive than
buying two separate policies.
• General Liability Insurance covers
bodily injury or property damage that occurs
during the course or because
of your business.
• Property Insurance covers all of the business
equipment inside and outside
of your program.
Professional Liability Insurance insures you and
your sta for losses due to your negligence while
performing your business. Coverage for sexual
abuse and molestation is generally included in
professional liability insurance, but verify this with
your insurance agent. Sexual or physical abuse
coverage insures you for loss if one or your
employees or others with access to children in
your program abuses a child in your care.
Worker’s Compensation Insurance is required in
many states. This insurance pays benefits when an
employee is injured while working.
Research Legal, Tax, and Insurance Considerations
Opening a Family Child Care Program continued