How to Start an Adult Foster Care Business

Start an adult foster care business by following these 10 steps:

1. Plan your Adult Foster Care Business
2. Form your Adult Foster Care Business into a Legal Entity
3. Register your Adult Foster Care Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Adult Foster Care Business
6. Get the Necessary Permits & Licenses for your Adult Foster Care Business
7. Get Adult Foster Care Business Insurance
8. Define your Adult Foster Care Business Brand
9. Create your Adult Foster Care Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your adult foster care business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Adult Foster Care Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening an adult foster care business?

Preparing the space will likely be the most expensive part of the adult foster care business. If the home doesn’t have the necessary safety features (e.g., shower bars, higher toilets, etc.), you may need to retrofit these features. You’ll also need to account for registration fees for the business and the salaries for caregivers. Adult foster care facilities may offer pre-planned activities, transportation, and meals, so you’ll need to budget for gas, car insurance, home insurance, commercial insurance, and food.

What are the ongoing expenses for an adult foster care business?

An adult foster care business will need to budget for the cost of home upkeep, supplies, marketing, salaries, and insurance. Owners also need to budget for vehicle maintenance if they offer transportation and food prep.

Who is the target market?

Adult foster care is the ideal solution for people who don’t have severe enough needs for a nursing home, but who need someone to watch over them and help with daily tasks. The target demographic is stereotypically older people in relatively good health. However, owners can also consider opening up residential facilities for people of any age who have minor physical or mental disabilities.

How does an adult foster care business make money?

Adult foster care businesses typically have anywhere from one to five people in a residential setting. Owners charge rent and utilities plus an extra premium for the caregivers' assistance.

How much can you charge customers?

The range for adult foster care can range from $1,500 to $3,500 a month, depending on the location and level of services. Check prices in your area for similar facilities before setting your own rents.

How much profit can an adult foster care business make?

Some adult foster care facilities are set up as non-profit facilities. You’ll need to check on your state Medicaid program to learn more about what is covered and what isn’t. However. adult foster care businesses typically set a healthy margin between the cost of expenses and the rent charged to cover the cost of trained workers (whether they're for-profit or not).

How can you make your business more profitable?

Consider offering optional activities (e.g., painting classes, language lessons, etc.) for residents who choose to take advantage of them. You can also open and manage multiple facilities.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your adult foster care business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

This business is perfect for those who want to help senior citizens or those with special needs, but who don't have the medical background to open a full-fledged nursing home.

What happens during a typical day at an adult foster care business?

Caregivers will follow a routine based on the needs of the people in their care. They may dispense medicine, help with basic daily hygiene, cook meals, and take charge of any planned activities or outings. Owners will also need to schedule time to manage the home's finances, pay staff, and market their business.

What are some skills and experiences that will help you build a successful adult foster care business?

Owners should have some experience in caregiving. They should also have a strong enough business background to execute a larger vision, whether you choose to train your own staff or not. Marketing skills will also come in handy if you're not planning to hire an outside team to design the website or create advertising.

What is the growth potential for an adult foster care business?

As the population ages, the growth potential for this business grows. More and more people want additional full-time care options that don't involve moving into a nursing home. Because it’s not a medical facility, your adult foster care business can also be run for fewer expenses than a nursing home. Residents can share a room or pay a premium for a single.