Legal Matters and Insurance

As with any business, there are risks to owning and operating a family child care. As a small business owner, it is important that you learn about reducing your risks. FCCAM PLC is working to gather resources on this areas/questions:

  • Why Have Insurance?
  • Legal Matters and Insurance
  • Managing the Major Risks in Family Child Care through Insurance
  • Alphabetic List of Insurance Companies
  • Legal and Illegal Discrimination
  • Incorporating
  • Custody Disputes: Married and Unmarried Couples
  • Protecting Yourself Against Allegations
  • You’re Being Investigated… Now What?
  • How to Prepare for an Investigation

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. Here are some ways in which you can structure your
child care business:
• Sole proprietorship. You own an unincorporated 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.

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-offs to offset 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.

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.

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 staff 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.