How to Start an Assisted Living Facility

Start an assisted living facility by following these 10 steps:

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

We have put together this simple guide to starting your assisted living facility. 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 Assisted Living Facility 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 assisted living facility?

The facility must be constructed. Though some facilities can be rented, the majority are either purchased or built by the entrepreneur. Additional costs include employee wages, utilities, internet, nurse call buttons, security cameras, computer hardware, food and drink for patients, bedding, and medical equipment. You might also decide it is prudent to purchase software designed to ameliorate the challenges of assisted living facility businesses.

What are the ongoing expenses for an assisted living facility?

Ongoing expenses include overhead costs like employee wages, utilities, high-speed Internet, insurance, medical supplies, and rent/payments toward debt owed on the property. A state licensed assisted living facility manager will likely command a salary between $35,000 and $75,000 or more. If you do not want to handle advertising efforts, a marketing director will be necessary. Expect to pay such a professional between $40,000 and $70,000 per year. Nursing staff will likely demand a salary in the range of $30,000 to $50,000. Administrative staff will cost between $10 and $15 per hour. Kitchen/food prep staff will cost between $10 and $12 per hour. The cost of food and beverages hinges on quality. Expect to spend several thousand dollars per month on sustenance for your residents. The cost of utilities depends on the size of the facility. In general, utilities cost a couple hundred dollars per month. Medical supplies and bedding must be replenished/replaced as time progresses. Plan to spend at least $500-$1,000 per month for these supplies and adjust your budget accordingly as you get a better gauge of your clientele's needs and demands.

Who is the target market?

Most assisted living facilities house as many in need as they can reasonably accommodate.  However, younger patients can be ideal, as younger patients are more likely to remain in the facility for years to come. The passing of a patient can be extremely difficult emotionally, and an extended stay in the facility is a consistent source of income.

How does an assisted living facility make money?

Assisted living facilities make money by charging residents a fee for staying in the facility. This cost is applied on a per-month or per-year basis.

How much can you charge customers?

In general, assisted living facilities can charge between $2,000 and $4,000 per resident per month. However, the exact cost depends on the location and the quality of the facility.

How much profit can an assisted living facility make?

Profit level depends on the size of the facility as well as its amenities. If you have a large facility with top-notch amenities and maintain full capacity, profits have the potential to reach the six figure mark or higher. If you build a true brand and open additional assisted living facilities at new locations, it is possible to make millions of dollars in profit.

How can you make your business more profitable?

You can boost profitability by offering auxiliary services on-site. It is possible to charge residents additional fees for optional niceties like cable TV packages, nuanced dining options, on-site entertainment events, specialized care, and so on. If your facility reaches full capacity, it might be possible to receive financial kick-backs for referring prospective residents to other facilities with available space.

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 assisted living facility 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.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an assisted living home. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Certificate of Occupancy

An assisted living home is usually run out of a large, hotel-like space. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

• If you plan to lease a space:
• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to an assisted living home.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

• If you plan to purchase or build a space:
• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for you business’ location to ensure your assisted living home will be in compliance and able to obtain a CO.

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 ideal for those who are interested in medicine, caregiving, and generally improving the human condition. If you are especially compassionate toward the disabled and elderly, opening and operating an assisted living facility will prove to be quite rewarding.

What happens during a typical day at an assisted living facility?

Assisted living facility owners perform a wide range of duties each day. They do everything from ordering medical supplies to ensuring compliance standards are met, interviewing job candidates, and reviewing applications for residency.

What are some skills and experiences that will help you build a successful assisted living facility?

The entrepreneur should be able to assess the potential of a market. He should have a firm grasp on local demography as well as the medical industry. Furthermore, the entrepreneur should have excellent interpersonal skills. Owning an assisted living facility requires regular interaction with employees, residents, and medical equipment suppliers.

What is the growth potential for an assisted living facility?

The growth potential depends on the quality of the assisted living facility's condition and level of care. Another critically important factor in terms of growth potential is location. An assisted living facility located in an area with a large population of senior citizens will have considerable growth potential.