How to Start a Nonprofit Daycare

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Last Updated: December 22, 2024 Approved

Nonprofit daycare centers are run similarly to daycare centers that operate for profit. The major difference is that nonprofit daycares are eligible for grants and other funding, and they are exempt from state and federal taxes. Nonprofit daycares are also required to be governed by a board of directors made up mostly of parents. All of the money collected from parents and other sources must be invested in the organization and the service it provides to children and families. Start a nonprofit daycare by obtaining funding and making sure you comply with all of the guidelines set forth by the Internal Revenue Service (IRS).

1

Create a nonprofit corporate entity.

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File nonprofit articles of incorporation with the state in which you are establishing the daycare. You can get the appropriate forms and guidelines from the Secretary of State.^{[1]
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Research source} Include the name and address of your nonprofit daycare in the articles of incorporation, as well as the purpose of starting it. Describe who you will serve and how the daycare will be run and governed.

2

Elect a Board of Directors.

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Try to make sure that parents make up most of the members of your Board.

3

Obtain tax exempt status from the IRS.

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To do this, you'll need to file a Form 1023. This is the form used to apply for exemption from federal income tax in the United States.^{[2]
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Internal Revenue Service
U.S. government agency in charge of managing the Federal Tax Code

Go to source} You will need to demonstrate that your daycare center will operate for charitable purposes.
- Show the IRS or other relevant Tax office that your services are available to the general public so that parents can look for or keep employment.
- Include your articles of incorporation, information on how much you charge for daycare services, the number of students you serve and your curriculum.
- If you're not in the U.S., file whichever form is appropriate in your location.

4

Provide information on the racial makeup of your students and staff.

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You might also want to have a statement of nondiscrimination on file.

5

Determine how much to pay your staff.

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The IRS will require that you not have excessive rates of compensation when you are a nonprofit daycare entity.^{[3]
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6

Look for grants and other funding.

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Fundraising is an important part of opening a nonprofit. While some of your daycare's income will come from what you charge the families who use your services, additional money can help you make improvements, hire more teachers and train staff.^{[4]
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- Obtain a list of grant opportunities from your local Childcare Resource and Referral Agency. Visit www.childcareaware.org and enter your zip code. You will get the contact information for your agency, and they can give you a list of grants available in your area.
- Inquire about grants and funding opportunities from your local United Way, Community Foundation and other organizations which give grants.
- Research your local businesses and find out if they make corporate grants.

7

Attract business to your daycare.

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Once your daycare is up and running, publicize your services. Advertise in grade schools and community centers, as well as in local publications and online.
- Promote your daycare center as a nonprofit organization. This might help you recruit parents who cannot afford private daycare.

8

Stay on top of important paperwork.

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Work with your Board and staff to ensure all required paperwork and other filings are completed on time to keep your nonprofit status.

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How many members should the board have and can they be the same people who run the daycare?

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No, it cannot be all of the same people who run the daycare. Some can be involved, but the entire board cannot be made up of them. There isn't a set number for a board, but consider having an odd number of people, so in the event of a vote, there isn't a chance of a tie.

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Question

How can I start a daycare out of my house?

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Check with your local department of family and child services, or look up child care licensing and you should be directed to the appropriate website for your area. You will need to take a course and pass an examination, and become CPR certified.. Usually you will need at least one fire extinguisher, a carbon monoxide detector and a fire alarm in EACH room of the house, fire escape exits in every room, and appropriate child-proofing. You'll want to make sure your house has sufficient space to meet local requirements as well.

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Can I limit the number of kids in a nonprofit childcare to only 1-2?

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Many times you will need to have more children than that in order to be classified as a non-profit childcare center, but you will need to check about your individual state's requirements.

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Tips

Work closely with an attorney and an accountant. These may be Board members or people you hire professionally. You will need to be transparent about all of the money your daycare earns, and how you spend it. There are reporting requirements and legal issues that will need your attention.

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Consider writing and posting a mission statement. Most nonprofit organizations use a mission statement to explain why they exist. Yours might focus on providing affordable childcare to all members of your community.

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