How to Start a Home Daycare in Colorado: CDEC Family Child Care License and the Four-Child Exemption

If you want to start a home daycare, the first question is not which form to file. It is whether you need a state license at all. In Colorado, that depends on how many children you care for, how they are related to you, and how old they are. This guide walks through how to start a home daycare business in Colorado, beginning with that licensing threshold and then moving through entity filing, tax accounts, zoning, and local permits.

Disclaimer: This article is informational content, not legal, tax, or licensing advice. Rules change, and the agencies named here make the final determination for your situation. Talk to a qualified attorney or CPA before you form an entity, sign a lease for a childcare space, or hire staff. Confirm current requirements directly with each agency.

What You Need Before You Start

• A written count of the children you plan to care for, with each child's age and relationship to you
• Your home address, your lease or deed, and any HOA covenants that apply to the property
• A valid Colorado driver's license or state ID for yourself, and for any individual you plan to name as registered agent
• Two or three backup business names, so you can check availability quickly
• A payment method for online state filings and fees
• Contact information for your city or county zoning office, building department, and fire department
• A calendar or spreadsheet for filing deadlines and fee reminders

Step 1: Determine Whether You Need a License or Qualify for the Exemption

Colorado defines a family child care home as care in the provider's residence for less than 24 hours (C.R.S. 26.5-5-303(7)). Care in your own residence is exempt from state licensing under C.R.S. 26.5-5-304(1)(f) when the children fall into one of these groups:

• Children related to you
• Siblings from a single unrelated family
• No more than four children from multiple families, with no more than two of them under age two

The statutory repeal that was scheduled for September 1, 2026 was removed by HB26-1259, which was signed on May 5, 2026. The exemption therefore continues. Because the exact current wording matters for your count, ask the Colorado Department of Early Childhood (CDEC) to confirm it before you rely on it.

If you use the exemption, you must tell parents that you operate under a license exemption and that the state has not checked your home or run background checks. Exempt does not mean unregulated. Zoning, fire, sanitation, and building rules still apply to you (see Step 2).

If your care goes beyond the exemption, CDEC licenses the home. Ask CDEC about the license types available, capacity limits, fees, and training requirements. Do not budget from figures you have seen in older articles. Get the current numbers from CDEC.

Step 2: Confirm Zoning, Fire, and Building Rules

Local governments must treat family child care homes as residential use for zoning, fire, sanitation, and building codes (C.R.S. 26.5-5-310(1)(b)). That is a useful protection, but it does not eliminate paperwork. Do these three things before you commit to a space:

1. Call your city or county zoning office and ask whether your address needs a home occupation permit or any other approval.
2. Ask the building department whether any renovation you plan, such as a finished basement or an added bathroom, needs a permit.
3. Read your HOA covenants. They are a separate set of private rules, and many HOAs restrict business activity or traffic.

Step 3: Choose Your Business Structure

Colorado has no general state business license. You form your entity with the Secretary of State, open a Department of Revenue account if you collect or withhold tax, and then add the licenses your activity requires from the state, your city, or your county. Your structure determines what you file.

Structure	What You File	State Fee	Notes
Sole proprietorship	Nothing for the entity itself	None	You operate under your own name. A different business name requires a Statement of Trade Name.
Limited liability company (LLC)	Articles of Organization for a Limited Liability Company	$50	Separates business and personal liability. Requires a registered agent.
Corporation	Articles of Incorporation for a Profit Corporation	$50	Usually more complex than a home daycare needs. Discuss with a CPA first.

Most home daycare owners choose between a sole proprietorship and an LLC. The LLC adds annual cost and a registered agent requirement, but it can help separate business obligations from your personal assets. Whether that trade-off makes sense depends on your situation, so ask a CPA or attorney before you file.

Step 4: Check and Reserve Your Name

Search the Colorado business database at coloradosos.gov business search before you settle on a name. Keep these rules in mind:

• LLC names must include a term such as Limited Liability Company, LLC, or Ltd. Liability Company (C.R.S. 7-90-601). The name must also be distinguishable from existing names on Secretary of State records. Punctuation and capitalization do not count, so ABC Inc and abc inc are treated as the same name.
• Name reservation holds a name for 120 days for a $25 fee. See the Secretary of State name FAQ for details.
• Trade names (a business name different from your own) are filed statewide with the Secretary of State, not with your county. The fee is $20 to file online and $5 to renew. See the trade name FAQ.

Step 5: File Your Entity Online

Most business documents must be filed through the Colorado Secretary of State Business Organizations online filing system, available at the Secretary of State online filing page. Online filings are processed in real time, and the record updates immediately after payment unless your document states a delayed effective date. Paper filings are the exception and take about 7 to 10 business days.

Once your LLC is formed, know the annual obligation. A new LLC files no periodic report in its first year. Starting in the second year, the Periodic Report costs $25 and is due every year in the entity's periodic report month. You can file it up to two months before or two months after that month without penalty. If you do not file, the entity becomes Delinquent. A corporation follows the same $25 periodic report schedule.

Step 6: Name a Registered Agent

Every entity must name one registered agent, either an individual or a business entity, and that agent must consent to the appointment. If you name an individual, the rules that took effect July 1, 2025 require that the person:

• Is at least 18 years old
• Holds a current valid Colorado driver's license or state ID card
• Lives in Colorado or has a usual place of business there

Enter the agent's name and ID number exactly as they appear on the credential. A person without Colorado identification can request an agent passcode from the Secretary of State, which expires 45 days after it is issued. The registered agent address must be a physical Colorado street address where documents can be received during normal business hours. A P.O. box is not allowed.

Step 7: Set Up Your Tax Accounts

1. Income tax. Colorado's personal income tax is a flat 4.40 percent. An LLC's income generally passes through to its owner's personal return, so the same flat rate applies to the business income. Confirm your filing treatment with a CPA.
2. Sales tax. Child care is a service, and services are generally not subject to the Colorado state sales tax. Confirm this with the Department of Revenue for your situation. If you sell tangible goods, such as supplies, merchandise, or retail items, you will likely need a sales tax license. The state sales tax rate is 2.9% plus special district taxes. The Department of Revenue sales tax license page explains the application.
3. Home-rule cities. Denver, Aurora, Colorado Springs, Boulder, and Fort Collins license and collect their own city sales tax. A state sales tax license does not cover those cities, so apply directly with the city if it applies to you.
4. Employees. If you hire an assistant, you take on withholding obligations through the Department of Revenue and premium obligations through the FAMLI Division. Check with the Department of Labor and Employment and the FAMLI Division about registration and premium amounts before your first payroll. Do not assume a figure without confirming it.

Start at the Colorado Department of Revenue, Taxation Division site for any account you need.

Step 8: Obtain Local Licenses and Permits

Colorado does not license general contractors, handymen, or home inspectors at the state level, and that matters only if you hire them for renovations. Your city or county building department handles those licenses. Electricians and plumbers are licensed by the Department of Regulatory Agencies (DORA). For a home daycare, your more likely local steps are:

• A home occupation or zoning approval from your city or county
• Building permits for any renovation that changes the space
• A fire safety inspection or sign-off if your local fire department requires one
• A city business license, if your city requires one

Ask each office for a written list of what applies to your address. Local requirements can differ from one jurisdiction to the next.

Step 9: Apply for a CDEC License if You Exceed the Exemption

If you plan to care for more children than the exemption allows, contact CDEC before you enroll anyone. Ask about the license type that fits your plan, the capacity limit for that type, the application fee, required training, and background check requirements. Start the application early. Inspections and approvals can take time, and you cannot lawfully enroll children beyond the exemption until your license is in place. Confirm the timing with CDEC.

Step 10: Build Your Operating Foundation

Before you open, put these in writing:

• An enrollment agreement that states hours, fees, late pickup terms, and holiday schedules
• The exemption disclosure for parents, if you operate under the exemption
• Emergency contacts, health forms, and medication permission forms for each child
• A safety plan covering evacuation, first aid, and sick-child procedures
• A conversation with your insurer about home-based business coverage. A standard homeowners policy may not cover business activity, so ask for a written answer.

Costs at a Glance

Item	Amount	Where to Confirm
LLC Articles of Organization	$50	Secretary of State
Corporation Articles of Incorporation	$50	Secretary of State
Name reservation (120 days)	$25	Secretary of State
Statement of Trade Name, online	$20	Secretary of State
Trade name renewal	$5	Secretary of State
Periodic Report (from the second year)	$25 per year	Secretary of State
Child care license fees (above the exemption)	Check with CDEC	Colorado Department of Early Childhood
Local zoning, building, and city licenses	Check with your city or county	Local zoning and building offices
Sales tax license (if you sell tangible goods)	Check with the Department of Revenue	Department of Revenue

Expected Results

Completing these steps may help you open on a firmer legal footing, with clearer records and fewer surprises from regulators. It is not a guarantee of enrollment, revenue, or any specific outcome. Many new providers start with a small group and grow gradually as families learn about their program. Results depend on your local market, your reputation, your capacity, and your ability to keep consistent records. Plan your budget for a slow ramp, and build a reserve before you open.

Common Mistakes to Avoid

• Miscounting children. Keep a daily roster and confirm with CDEC how the exemption limits apply to your household and your enrollment pattern.
• Skipping the parent disclosure. If you operate under the exemption, parents must be told about the exemption and that the state has not checked your home or run background checks.
• Assuming exempt means unregulated. Zoning, fire, sanitation, and building rules still apply.
• Using a P.O. box as a registered agent address. The address must be a physical Colorado street address.
• Entering the registered agent's ID details incorrectly. Enter the name and ID number exactly as they appear on the credential.
• Assuming a state sales tax license covers a home-rule city. Denver, Aurora, Colorado Springs, Boulder, and Fort Collins collect their own city sales tax.
• Forgetting the periodic report. Starting in year two, the $25 report is due every year, and missing it makes the entity Delinquent.
• Ignoring HOA rules. A valid city approval does not override private covenants.
• Relying on old fee figures. Confirm CDEC and local fees directly with the agency before you budget.

Tips for a Smoother Launch

• Call before you commit. A 15-minute call to zoning, CDEC, and your city can save you a lease you cannot use.
• Get free help. The Colorado Small Business Development Center (SBDC) Network offers advising for new businesses, and the SBA Colorado district page lists regional resources.
• Keep one compliance calendar. Track the periodic report month, trade name renewal, tax filing dates, and any CDEC renewal dates in one place.
• Document everything. Save filing confirmations, zoning letters, and written answers from agencies. Verbal answers are hard to prove later.
• Get the entity question answered by a professional. The sole proprietorship versus LLC choice depends on your assets, insurance, and tax situation.

Next Steps

Start with the headcount. Confirm whether the exemption covers your plan, then call your zoning office before you sign anything. Once you know your path, file your entity online, set up your tax accounts, and complete your local approvals. If you exceed the exemption, begin your CDEC application early.

Reminder: this article is informational content, not legal, tax, or licensing advice. Confirm every requirement with CDEC, the Secretary of State, the Department of Revenue, and your local government, and consult a qualified attorney or CPA for your specific situation.