To open a caregiver agency, you choose between non-medical and medical services, form a legal business entity, secure insurance and financial documentation, hire and vet qualified staff, and apply for a state license — with additional federal certification if you plan to bill Medicare or Medicaid. The full path typically runs three to six months from formation to approval, and the single biggest decision is your service type, because it shapes nearly every requirement that follows.
Decide What Kind of Agency You Want to Run
Non-medical agencies handle companionship, meal preparation, light housekeeping, and help with daily activities like bathing and dressing. Home health agencies provide skilled nursing, physical therapy, wound care, and other clinical services under a physician’s supervision. Most states license both categories, though a handful do not regulate non-medical home care at all.
Home health agencies face stricter licensing standards, must employ registered nurses and licensed therapists, and need to meet federal conditions of participation if they want to accept Medicare or Medicaid patients.1eCFR. 42 CFR Part 484 – Home Health Services Non-medical agencies have a simpler path in most states but still need a business entity, insurance, and usually a state license. If you plan to serve Medicare patients, expect to satisfy both your state’s rules and the federal conditions under 42 CFR Part 484, which cover patient rights, quality assessment, clinical records, infection control, and staffing.
Form the Business Entity
Your first concrete step is registering a legal business entity through your state’s Secretary of State office. Most caregiver agencies form an LLC or corporation. The formation documents — articles of organization for an LLC, articles of incorporation for a corporation — establish the agency as a recognized business that can hire employees, sign contracts, and hold a license. Almost every state licensing application requires stamped copies of these documents as proof the business exists.
Once the entity is registered, apply for a Federal Employer Identification Number using IRS Form SS-4.2Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN) The nine-digit EIN functions as your business tax ID and is required for payroll, business bank accounts, and licensing applications. Online applicants receive it immediately.
You also need a registered agent with a physical street address in your state to accept legal documents and government notices. A P.O. box does not qualify. You can serve as your own registered agent or hire a commercial service, which typically costs a few hundred dollars per year.
Line Up Insurance, Bonds, and Capital
State licensing agencies expect financial stability documentation before they issue a license. General liability and professional liability insurance are near-universal requirements. Coverage limits of $1 million per occurrence and $3 million in aggregate are the most common thresholds, though some states require more. Look for a policy built for home care agencies; standard business liability policies often exclude the claims that arise when employees enter clients’ homes.
If your agency will participate in Medicare, federal law requires a surety bond of at least $50,000.3eCFR. 42 CFR Part 489 Subpart F – Surety Bond Requirements for HHAs CMS can set the amount higher based on the agency’s Medicare payment history, but $50,000 is the floor for new agencies. Some states require surety bonds for state-licensed agencies regardless of Medicare participation, with amounts varying by jurisdiction.
Medicare enrollment also requires documentation showing your agency has enough capital to cover three months of operating expenses after billing privileges begin.4Centers for Medicare & Medicaid Services. CMS-855A Medicare Enrollment Application Institutional Providers Many states impose a similar capitalization requirement for state licensure. Expect to submit a balance sheet, bank statements, and copies of lease agreements for your office space.
Workers’ compensation insurance is required in nearly every state the moment you hire your first employee, with no waiting period. Penalties for operating without it are severe: fines, personal liability for owners, and in some states a court order shutting operations down until you obtain coverage.
Meet the Staffing and Background Check Requirements
State licensing agencies scrutinize who runs your agency and who enters clients’ homes. The agency administrator typically must hold a college degree or have several years of documented management experience in a healthcare setting. If your agency provides skilled medical services, you need a Director of Nursing with a current registered nurse license in good standing. Credentials must be verified through official transcripts and state licensing board records before they go into the application file.
Every person who will have direct contact with clients must pass a criminal background check. The industry standard is a fingerprint-based check run against both state law enforcement databases and FBI records. Individuals with disqualifying offenses involving violence, theft, or abuse of elderly or vulnerable populations are barred from employment. Maintain a roster tracking the clearance date for every employee, because inspectors will ask for it.
Every caregiver also needs current CPR and First Aid certifications from a recognized provider. Most states require medical clearance statements confirming employees are free from communicable diseases, with tuberculosis screening being the most common. These clearances must be renewed annually or every two years depending on the state’s administrative code.
Build a Compliant Training Program
Federal law sets the floor for home health aide training at 75 total hours, with at least 16 hours of classroom instruction before at least 16 hours of supervised practical training. After that initial training, every aide must complete at least 12 hours of in-service training during each 12-month period.5eCFR. 42 CFR 484.80 – Condition of Participation: Home Health Aide Services These are Medicare conditions of participation, so they apply to every agency that bills Medicare regardless of state.
Many states exceed the 75-hour federal minimum, with some going as high as 180 hours, and some mandate topic-specific modules covering dementia care, infection control, or medication management. Check your state health department’s requirements before designing your curriculum. Training documentation is one of the first things inspectors examine, so keep a file for every employee that includes completion certificates, competency evaluations, and dates of all in-service training.
Write Your Policies and Handle HIPAA
Your agency needs a written policies and procedures manual before you submit the license application. Inspectors will review it during the on-site survey, and missing policies can delay approval. Commonly required policies cover infection control, emergency preparedness, client rights and grievance procedures, incident reporting, and medication management for medical agencies.
HIPAA compliance is mandatory for any agency that handles protected health information, which includes virtually every caregiver agency. Federal rules require you to develop written privacy policies, designate a privacy official responsible for implementing them, and train every member of your workforce on privacy practices.6U.S. Department of Health and Human Services. Summary of the HIPAA Privacy Rule You must also establish procedures for individuals to file complaints about privacy violations and maintain reasonable safeguards against unauthorized disclosure.
HIPAA records have their own retention rule: six years from the date of creation or last effective date, whichever is later.6U.S. Department of Health and Human Services. Summary of the HIPAA Privacy Rule That applies to privacy policies, notices, complaint records, and any documentation the Privacy Rule requires. Build this retention schedule into your record system from day one.
Classify Workers Correctly and Follow Wage Rules
Worker classification is one of the most expensive things to get wrong. The IRS uses a three-category test to decide whether a caregiver is your employee or an independent contractor: behavioral control (do you direct how the work is done?), financial control (do you control how the worker is paid, whether expenses are reimbursed, and who provides supplies?), and the nature of the relationship (is the work a key part of your business, and does the relationship continue indefinitely?).7Internal Revenue Service. Independent Contractor (Self-Employed) or Employee? No single factor is decisive.
In practice, most caregivers working through an agency are employees. If you set their schedules, assign them to clients, train them, and provide supplies, they are almost certainly employees under IRS rules. Classifying them as 1099 contractors to sidestep payroll taxes triggers audits, back taxes, and penalties.
Once you have employees, federal unemployment tax applies. FUTA is 6% on the first $7,000 of wages paid to each employee per year.8Office of the Law Revision Counsel. 26 USC 3301 Rate of Tax Most employers receive a credit of up to 5.4% for state unemployment tax payments, bringing the effective rate down to 0.6%.9Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide FUTA is the employer’s obligation and cannot be withheld from employee wages.
On wages, the Fair Labor Standards Act requires you to pay caregivers at least the federal minimum wage of $7.25 per hour and overtime at one and a half times their regular rate for hours worked beyond 40 in a workweek.10U.S. Department of Labor. State Minimum Wage Laws Many states set a higher minimum, in which case you owe the higher amount.
One point about the “companionship services” exemption often trips up new owners. That exemption lets certain domestic workers avoid minimum wage and overtime, but it is only available to individuals or families who directly employ a companion. Third-party employers like agencies cannot claim it. The same applies to the live-in domestic worker exemption. If you run an agency and employ caregivers, you owe them minimum wage and overtime. Caregivers performing medically related services requiring training, such as certified nursing assistants, are excluded from the companionship exemption regardless of who employs them.
Submit the License Application
Most states use an online portal managed by the Department of Health or a dedicated health care administration office. You create an account, upload your business and personnel documents as individual PDFs, and follow a checklist the portal provides. Each required field and attachment must be completed before the system allows final submission.
Application fees vary widely, from under $100 in some states to over $5,000 in others. The fee is typically non-refundable. Most portals accept credit card or electronic fund transfers, and some still accept certified checks by mail, which adds days or weeks to processing.
After submission, the portal generates an application ID and a confirmation email. Keep that receipt. It proves the date you entered the review queue, which matters if the review runs long. The state then conducts a preliminary review for completeness. If anything is missing, or if background checks turn up problems, you get a deficiency notice with 21 to 30 days to respond. Missing the response window can mean withdrawal of your application and forfeiture of the fee.
Get Medicare and Medicaid Certified If You Plan to Bill Them
State licensure lets you operate. Medicare and Medicaid certification lets you get paid by the programs that cover most of your potential client base. These are separate processes with their own requirements.
For Medicare, you submit the CMS-855A enrollment application to your regional Medicare Administrative Contractor.4Centers for Medicare & Medicaid Services. CMS-855A Medicare Enrollment Application Institutional Providers The application requires a Type 2 National Provider Identifier, which you obtain through the National Plan and Provider Enumeration System. The NPI application requires your EIN, your practice location address, and at least one provider taxonomy code that matches your service type.11NPPES. Apply for an NPI Apply for the NPI early; you will need it on both the Medicare enrollment form and many state license applications.
After the MAC reviews your CMS-855A, the state survey agency conducts a certification survey to verify compliance with the conditions of participation under 42 CFR Part 484.1eCFR. 42 CFR Part 484 – Home Health Services The MAC then does a second review, and CMS makes the final eligibility decision. The full sequence can take several months beyond your state license approval, so start the Medicare application as soon as the state license is in hand.
Electronic Visit Verification for Medicaid
If your agency will provide Medicaid-funded personal care or home health services, you must implement Electronic Visit Verification. The 21st Century Cures Act requires every state to mandate EVV for Medicaid personal care and home health services that involve an in-home visit.12Medicaid.gov. Electronic Visit Verification EVV systems electronically record the type of service, the date and location, the individual providing the service, and the start and end times of the visit. Your state may offer a free EVV system or require you to use an approved vendor. Either way, build the cost and training time into your startup budget.
Pass the Inspection
After administrative review clears, a state health inspector conducts an on-site survey of your physical office, typically within 60 to 90 days of your application being deemed complete. Timelines vary by state and by how backed up the survey team is.
The inspector confirms your agency is operational and maintains the required infrastructure. They review what the industry calls “master files”: original background check results, insurance policies, professional licenses, and training records. Expect the inspector to pull several personnel files at random and verify that every required document is present and current. Disorganized files are one of the most common reasons agencies receive deficiency citations during their initial survey.
Once the survey is passed and any correction plans are approved, the state issues your license. You receive a physical certificate that must be prominently displayed in your office. If the license is denied, the state provides a formal notice explaining the legal grounds and the options for administrative appeal.
Stay in Compliance After You Open
Most states require license renewal every one to three years, with renewal fees ranging from nominal amounts to several thousand dollars. Renewal typically requires updated insurance certificates, current background checks for all employees, proof of ongoing training compliance, and sometimes a repeat inspection.
The agencies that run into trouble after launch are almost always the ones that let documentation lapse. Background checks expire. CPR certifications lapse. New hires start working before their paperwork clears. Build a compliance calendar that tracks every expiration date for every employee, and assign someone the specific job of keeping it current. State auditors can arrive for unannounced inspections, and the standard is the same whether it is your first year or your tenth.