The legal requirements to start an after-school program fall into five stages you have to complete in order: form a legal entity with your state, secure a facility that passes zoning, fire, health, and ADA review, run federally mandated background checks and training for every staff member, obtain a state childcare license, and put insurance and written operating policies in place before a single child walks in. Skipping ahead is the most common and most expensive mistake new operators make.
Form Your Legal Entity First
Before anything else, decide whether you’ll operate as a for-profit business or a nonprofit, and register that entity with your state. A for-profit structure, usually a limited liability company, shields your personal assets from business debts and keeps tax filings relatively simple. A nonprofit organized under Internal Revenue Code Section 501(c)(3) opens access to federal grants, foundation funding, and tax-deductible donations, but comes with governance requirements and restrictions on how revenue is used.1Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations
If you go the nonprofit route, file articles of incorporation with your state and draft bylaws covering your board structure and decision-making. Then apply to the IRS for tax-exempt recognition using Form 1023 (filing fee: $600) or the streamlined Form 1023-EZ ($275) if you qualify.2Internal Revenue Service. Form 1023 and 1023-EZ: Amount of User Fee Form the state entity before applying for an Employer Identification Number. The IRS won’t process your EIN application until the entity exists at the state level.3Internal Revenue Service. Get an Employer Identification Number
Tax exemption carries ongoing obligations. Nonprofits must file an annual return in the 990 series, and failing to file for three consecutive years automatically revokes exemption. A brand-new program that has received or been pledged $75,000 or less in its first year qualifies for the short Form 990-N electronic notice.4Internal Revenue Service. Annual Electronic Filing Requirement for Small Exempt Organizations – Form 990-N (e-Postcard) As revenue grows past $200,000 or assets past $500,000, you move up to Form 990-EZ or the full Form 990. Set up clean financial records from day one.
Zoning, Inspections, and ADA Compliance
Call the local planning department before you sign a lease. Many residentially zoned properties don’t allow commercial childcare without a special use permit or variance, and discovering that after renovations is the kind of mistake that ends programs before they open. Confirm in writing that the specific parcel is approved for childcare or educational use.
Once zoning clears, the facility has to pass fire marshal and health department inspections. Fire reviews look at working smoke detectors, extinguishers, clearly marked exits, and evacuation speed. Health inspections cover sanitation, handwashing stations, and any food storage or preparation area. Programs taking part in federally funded meal or snack programs must maintain sanitation and health standards that comply with all applicable state and local regulations.5Food and Nutrition Service, U.S. Department of Agriculture. Health and Safety Inspection Requirements
Making the Space ADA Accessible
The Americans with Disabilities Act applies to after-school programs. For existing buildings, you have to remove barriers where doing so is readily achievable, meaning without significant difficulty or expense. Typical steps include installing grab bars in restrooms, replacing door hardware, and arranging activity spaces so a child using a wheelchair can move freely.6ADA.gov. Commonly Asked Questions About Child Care Centers and the Americans with Disabilities Act
Programs in newly constructed buildings face a higher bar: full compliance with the 2010 ADA Standards for Accessible Design from the start. The obligation is ongoing even if no child with a disability is currently enrolled.7U.S. Department of Justice. Equal Access to Child Care Civil penalties reach $75,000 for a first offense and $150,000 for subsequent violations, so this isn’t an area to postpone.
Background Checks and Staff Qualifications
The Child Care and Development Block Grant Act sets the federal floor every state has to meet or exceed, including health and safety standards, group size limits, and age-appropriate staff-to-child ratios.8Office of the Law Revision Counsel. 42 USC 9858c – Application and Plan It also drives the background check regime you’ll run on every hire.
Under federal law, each check must include a search of state criminal and sex offender registries in every state the employee has lived in over the past five years, a search of state child abuse and neglect databases, a query of the National Crime Information Center, and an FBI fingerprint check.9Childcare.gov. Staff Background Checks These apply to directors, teachers, aides, bus drivers, custodians, kitchen staff, and volunteers with unsupervised access to children. Prior childcare experience doesn’t exempt anyone. Per-employee processing fees typically run from $15 to over $100 depending on the state.
Director Credentials and Staff Training
State licensing agencies set their own director credential standards, and the variation is substantial. Some states require a bachelor’s degree in early childhood education or a related field. Others accept a mix of coursework and supervised experience, or a state-issued director credential earned through approved training. Check your state’s licensing website early. If you don’t meet the threshold yourself, you’ll need to complete additional training or hire a qualified director before a license can be issued.
Federal Child Care and Development Fund guidelines require every caregiver or teacher providing direct care to hold current pediatric CPR certification and have completed pediatric first aid training.10Child Care Technical Assistance Network. 1.4.3.1 First Aid and CPR Training for Staff Most states also mandate annual continuing education, usually in the range of five to twenty-four clock hours depending on the role and state, covering topics like child development, behavior management, nutrition, and recognizing abuse or neglect.
Wage and Hour Rules
After-school staff are generally covered by the Fair Labor Standards Act. The federal minimum wage is $7.25 per hour, though many states and localities set higher floors. Overtime at one-and-a-half times the regular rate applies after 40 hours in a single workweek. The Department of Labor regularly flags childcare employers for paying flat daily fees for early arrival or late departure instead of calculating proper overtime, and for tracking overtime over a two-week pay period rather than weekly as the law requires.11U.S. Department of Labor. Fact Sheet #46: Daycare Centers and Preschools Under the Fair Labor Standards Act (FLSA)
Don’t assume staff are exempt. The FLSA’s teacher exemption only reaches employees whose primary duty is genuine teaching or instruction in a structured educational setting. Staff whose primary duty is supervising children or meeting their physical needs don’t qualify, even if your program includes educational activities.11U.S. Department of Labor. Fact Sheet #46: Daycare Centers and Preschools Under the Fair Labor Standards Act (FLSA)
Getting Your State Childcare License
Every state designates an agency to handle childcare licensing. The name varies: Department of Social Services, Department of Children and Family Services, Office of Children and Family Services, or a division within Health and Human Services. That agency’s site is where you’ll download forms, confirm specific requirements, and schedule inspections.
What the Application Asks For
Licensing applications ask for more than basic business information. Plan to document:
- Facility capacity, calculated from usable indoor square footage. States typically require 35 square feet or more of activity space per child, with the exact figure varying.
- Staff-to-child ratios based on the ages you’ll serve. School-age ratios differ substantially from preschool ratios, and both differ by state.
- Hours of operation, days of the week, and planned closures.
- Names of all owners or board members.
- A description of your daily schedule, curriculum, and planned activities.
- How you’ll collect and maintain immunization records, emergency contacts, and medical release forms.
- Written policies for managing behavior, medical emergencies, and evacuations.
- Your system for documenting attendance each day.
Background check results, staff credentials, and children’s health records must be kept on-site and available for inspection at any time. Most states also require you to retain a child’s records for at least one year after they leave your program.
Submission, Review, and Inspection
Most states accept applications through online portals; some still take paper submissions. Licensing fees range from nothing to several hundred dollars depending on the state and your capacity. After submission, the agency verifies documentation, processes background checks, and reviews your policies, often with follow-up requests. Once the paperwork clears, an on-site inspection confirms the facility meets health, safety, and accessibility requirements in practice. Passing that inspection is the last step before the license is issued.
Licenses aren’t permanent. Most states issue them for one year, and renewal applications must be submitted before expiration. A lapsed license can trigger late fees and leaves you operating illegally, so put renewal on your annual calendar from the start.
Insurance You Need Before Opening
Roughly half of states require center-based childcare programs to carry liability insurance as a condition of licensure. Where it isn’t legally required, operating without it is still a serious mistake. A single injury claim can end an uninsured program. The core policies:
- General liability, covering bodily injury and property damage on your premises.
- Professional liability, covering claims arising from the care and supervision you provide, such as allegations of inadequate oversight.
- Abuse and molestation coverage, which addresses claims of sexual, physical, or emotional abuse. Standard general liability policies often exclude these claims, so you need to purchase it explicitly.
- Workers’ compensation, required in nearly every state once you have employees. The headcount threshold varies.
Annual general liability premiums for a small program can start in the low hundreds and climb into the thousands for larger operations. Get quotes from insurers that specialize in youth-serving organizations; standard commercial policies may not cover childcare-specific risks.
Written Policies the Law Requires
Sign-In and Sign-Out
Every licensing agency requires a documented system for tracking when children arrive and leave and who picks them up. Only a custodial parent or legal guardian can authorize another adult to collect a child, and that authorization should be in writing. Staff should verify identification, check the authorized pickup list, and log the time. Never release a child to an unauthorized adult or to anyone under 18. This is your primary defense in a custody dispute or safety incident.
Medication Administration
If you’ll administer any prescription medication, get written authorization from both the parent and the child’s healthcare provider. Store medications in a locked, limited-access area, label them clearly, and log every dose with who administered it and the exact time. Train designated staff specifically. Document errors, missed doses, and adverse reactions immediately. Sloppy records here create real legal exposure.
Enrollment Agreements
Each family should sign a written enrollment agreement covering tuition and payment terms, hours of operation, pickup and drop-off procedures, illness and exclusion policies, and grounds for termination. Don’t try to include broad liability waivers. Courts in many states have struck down contract provisions attempting to release childcare providers from liability for their own negligence, on the grounds that childcare serves too important a public interest to permit blanket immunity.
Mandatory Reporting of Suspected Abuse
Childcare workers are mandatory reporters of suspected child abuse and neglect in every state. If a staff member observes signs of abuse or neglect, or a child discloses abuse, the staff member is legally required to report it to the designated authorities. Failure to report can bring criminal penalties against the individual.12Child Welfare Information Gateway. Mandated Reporting Federal law reinforces this duty for professionals in federally operated or contracted facilities and explicitly lists childcare workers and administrators as covered professionals.13Office of the Law Revision Counsel. 34 USC 20341 – Child Abuse Reporting
Build mandatory reporting training into onboarding for every new hire. Staff need to know the specific signs to watch for, the state reporting hotline, and that the obligation rests on the individual, not just the director. The legal standard is reasonable suspicion, not certainty; waiting until you’re “sure” is the wrong instinct.
If You’ll Transport Children
Federal regulations from the Federal Motor Carrier Safety Administration apply to vehicles designed to carry nine or more passengers (including the driver) when used for compensation. These cover driver qualification and medical exams, maximum driving time, inspection and maintenance records, and marking vehicles with a U.S. DOT identification number.14Federal Motor Carrier Safety Administration. Passenger Vehicle Brochure: Overview of Federal Requirements Interstate 9 to 15 Passenger Vehicles For-hire carriers operating vehicles with a seating capacity of 15 passengers or fewer in interstate commerce must carry $1.5 million in public liability insurance.
Programs that only transport children locally within a single state still face state-level rules on vehicle safety, driver background checks, and child restraint systems. Many states prohibit the use of 15-passenger vans for transporting children entirely due to rollover risks. If transportation is part of your service model, research your state’s specific rules before purchasing or leasing any vehicle. The liability exposure from a transportation accident dwarfs almost every other risk your program faces.
Federal Funding Worth Knowing About
Two federal programs can offset operating costs once you’re licensed. The Nita M. Lowey 21st Century Community Learning Centers program, authorized under Title IV, Part B of the Every Student Succeeds Act, is the largest federal funding source dedicated specifically to after-school programs; Congress appropriated approximately $1.33 billion for fiscal year 2025. Money flows from the U.S. Department of Education to state education agencies, which run competitive grant processes open to local education agencies, community-based organizations, tribal organizations, and other public or private entities serving students at high-poverty or low-performing schools.15U.S. Department of Education. Nita M. Lowey 21st Century Community Learning Centers (Title IV, Part B)
The Child and Adult Care Food Program reimburses after-school programs for snacks and meals served to children. You must offer regularly scheduled activities in a structured, supervised setting and track daily attendance. There is no federal requirement for after-school care sites operating under CACFP to hold a separate childcare license as a condition of food program eligibility, though you’ll still need your state childcare license for other reasons.16Food and Nutrition Service, U.S. Department of Agriculture. Reimbursement for Snacks in After School Care Programs Reimbursement rates are higher in areas where a high percentage of children qualify for free or reduced-price meals. Your state’s CACFP administering agency handles the application.