How to Start a Daycare in Tennessee (2026)

Last updated: May 4, 2026

Tennessee licenses child care under T.C.A. § 71-3-501 et seq. through the Department of Human Services (TDHS) Child Care Services Division – not the Department of Education and not TDCI. The operating rules at Tennessee Compilation of Rules and Regulations Chapter 1240-04-01 were substantially revised effective February 8, 2026, replacing the prior version with updated background check, training, and health and safety requirements. Plan around the 2026 rules, not older guidance still circulating online.

Three structural facts shape Tennessee daycare planning. First, Tennessee uses a five-category licensing structure tied to capacity and setting: Family Child Care Home (5-7 children in residence, up to 12 if related to caregiver), Group Child Care Home (8-12 + 3 school-age), Drop-In Child Care Center (15+ children, hourly/short-term), Child Care Center (13+ full-time), plus a Voluntarily Registered exemption for 4 or fewer children. Each category has different square footage, ratios, staffing, and fees. Second, Tennessee runs a 3-Star Quality Program rather than a 4 or 5-star QRIS – earning stars adds 5%, 10%, or 15% to your CCAP reimbursement rate, making the star track a real revenue lever. Third, Tennessee’s Voluntary Pre-K (VPK) serves ~18,000 4-year-olds in 935 classrooms across 138 of 142 school districts, with $85M+ annual state funding – community-based providers can partner with their local school system to host VPK classrooms, opening a state-funded revenue stream.

This guide covers what genuinely differs about starting a daycare in Tennessee specifically: the five-category license structure, the 1240-04-01 ratios and capacity rules, background check requirements, 3-Star Quality math, CCAP enrollment, VPK partnership, and the local fire and health layer in Nashville, Memphis, Knoxville, and Chattanooga.

Daycare Requirements in Tennessee at a Glance

Requirement	Agency / Detail	Cost	Timeline
TDHS Family Child Care Home License (5-7 children)	TDHS Child Care Services Division	$85-$105 initial license fee	60-90 days from application to issuance
TDHS Group Child Care Home License (8-12 + 3)	TDHS Child Care Services	~$150-$200 initial	60-90 days
TDHS Child Care Center License (13+)	TDHS Child Care Services	Capacity-based fee schedule	60-90 days, longer for facility build-out
Drop-In Child Care Center License (15+ short-term)	TDHS Child Care Services	Capacity-based	60-90 days
Voluntarily Registered Family Day Care Home (≤4)	TDHS – registration only, not licensed	$0 (registration is free)	Immediate registration; no inspection required
TBI/FBI background check (per adult)	Tennessee Bureau of Investigation	~$28-$48 per check	2-4 weeks
Fire safety inspection	TN State Fire Marshal or local fire marshal	~$0-$200 inspection fee	2-6 weeks scheduling
Health department review (Centers)	Local health department (Metro Public Health, Shelby County, Knox County, Hamilton County)	Varies by jurisdiction	2-4 weeks
3-Star Quality enrollment (voluntary)	TDHS Star-Quality Child Care Program	Free to enroll; earns reimbursement bonus	~6-12 months for first star
LLC formation	TN Secretary of State (TNCaB)	$50/member, $300 min, $3,000 max	Same-business-day approval
Workers’ compensation insurance	Private carrier	~1.5-3.5% of payroll (NCCI 9059)	Required at 5+ employees (non-construction)

How to Start a Daycare in Tennessee (Step by Step)

Step 1: Choose Your TDHS License Category

Tennessee’s five license categories under Rule 1240-04-01 each have distinct capacity, setting, and operational rules:

License Category	Capacity	Setting	Rule Section
Voluntarily Registered Family Day Care Home	4 or fewer children (excluding caregiver’s own)	Residence; no license required – voluntary registration only	T.C.A. § 71-3-501 exemption
Family Child Care Home	5-7 children (up to 12 if any number above 7 are related to caregiver)	Residence (an occupied home)	1240-04-01-.20
Group Child Care Home	8-12 children + up to 3 additional school-age supplementary	Residence or larger setting	1240-04-01-.21
Child Care Center	13+ children, full-time	Commercial/non-residential building	1240-04-01-.22
Drop-In Child Care Center	15+ children at one time, but ≤7 hrs/day or ≤14 hrs/week per child	Commercial; gym childcare, hourly drop-in, retail-attached	1240-04-01-.23

The licensing category determines:

• Capacity ceiling and how children of different ages count
• Square footage per child (30 sq ft indoor minimum across all categories)
• Staffing requirements (Director credentials, Lead Teacher qualifications, ratios)
• Inspection requirements (Family Home is residence-based; Center triggers commercial fire and health review)
• Initial and renewal fees
• Eligibility for 3-Star Quality and CCAP (most categories qualify; Voluntary Registered does not)

The most common owner-operator path is the Family Child Care Home (5-7 children in your residence). It has the lowest fixed cost, fastest ramp-up, and qualifies for CCAP. The Group Home and Center categories require more capital but support meaningfully higher revenue.

Step 2: Form Your Tennessee LLC and Lock Down a Compliant Facility

File Articles of Organization through TNCaB at sos.tn.gov for $300 minimum (single-member LLC). Get your EIN at IRS.gov. Register for Tennessee Franchise and Excise Tax through TNTAP. Daycares are exempt from sales tax on their service revenue but pay sales tax on supplies, equipment, and meals served.

Facility considerations for Tennessee:

• Zoning: Home daycares (Family/Group) typically need a zoning verification letter even where allowed by-right. Centers require commercial zoning (most municipalities have a “Daycare” or “Child Care” use category). Verify with the planning department before signing a lease.
• Indoor space: 30 sq ft minimum usable indoor play space per child. A 5-child Family Home needs at least 150 sq ft of dedicated play area.
• Outdoor space: Required for Centers (and recommended for Homes). Local parks may not substitute for required on-site outdoor space.
• Building code: Tennessee state building code is 2012 IBC (Centers) and 2018 IRC (residential) at the state level – many cities have layered local amendments. Centers in older buildings often face occupancy upgrade requirements.

Step 3: Submit TDHS Application and Complete Orientation

Tennessee TDHS uses a multi-step pre-licensure process:

1. Contact the regional TDHS Pre-Licensure Unit (Nashville, Memphis, Knoxville, Chattanooga, Jackson)
2. Get assigned a Program Specialist
3. Create an account in the eLicensing system
4. Attend the mandatory orientation/intake session (typically 4-6 hours, in-person or virtual)
5. Submit the formal application package with fees
6. Pass background checks for licensee + staff + adult household members
7. Pass facility inspections (fire, health, environmental)
8. Receive license

Plan for 60-90 days from application start to license issuance assuming all documentation is complete and inspections pass on first visit. Centers with construction or fit-out work need 4-9 months total.

Step 4: Complete TBI and FBI Background Checks

Tennessee requires fingerprint-based TBI (Tennessee Bureau of Investigation) and FBI background checks for:

• The licensee/owner
• All staff members 18 years or older
• All adult household members (Family Home and Group Home in residence)
• Substitutes, regular volunteers, and consultants with unsupervised access

Background checks cover criminal history (state and federal), Tennessee sex offender registry, and child abuse/neglect registry. Disqualifying convictions are listed in T.C.A. § 71-3-507 and Rule 1240-04-01-.05; the list expanded in 2024-2026 rule revisions to include additional violent and sexual offenses. Background checks must complete and clear before any individual has unsupervised contact with children.

Cost is roughly $28-$48 per check (TBI fee + FBI fee + processing). Plan for 2-4 weeks per check; some come back faster, multi-state criminal histories take longer.

Step 5: Plan to Tennessee Ratios and Group Sizes

Tennessee child-to-staff ratios under Rule 1240-04-01:

Age Group	Child:Staff Ratio	Maximum Group Size (Centers)
Infants (birth through 15 months)	1:4	8
Toddlers (16-30 months)	1:6	12
Two-year-olds	1:8	16
Three-year-olds	1:10	20
Four-year-olds	1:15	20
School-age (5 and older)	1:20	25

These are cap ratios – the maximum permitted, not best practice. Many Tennessee centers operate slightly tighter ratios for quality reasons; 3-Star Quality assessments reward ratios below the regulatory cap. Family Child Care Home capacity caps at 7 (or 12 with related supplements), which essentially limits the practical ratio range to 1:7.

Director qualifications: Tennessee requires the Director to hold a Tennessee Director’s Credential. The credential has multiple pathways: Bachelor’s degree in early childhood or related field, Associate’s in early childhood + experience, Child Development Associate (CDA) credential + experience, or equivalent education and experience determined by the TDHS.

Lead Teacher qualifications: Vary by program type but typically require a Tennessee CDA, an associate’s degree in early childhood, or progress toward such qualifications under a Professional Development Plan.

Annual training: Center staff complete annual continuing education hours (typically 18-30 hours/year) per Rule 1240-04-01-.10. The Tennessee Early Childhood Training Alliance and TNECP (Tennessee Early Care and Education Pathways) approve training providers.

Step 6: Pass Local Fire and Health Inspections

Fire Marshal Inspection

Centers and Group Homes typically require an inspection by the Tennessee State Fire Marshal’s Office (Bureau under TDCI) or by the local fire marshal where Tennessee delegates inspection authority (Nashville, Memphis, Knoxville, Chattanooga have local marshals). Fire inspections cover egress, fire suppression, smoke detection, alarm systems, electrical safety, and emergency drill procedures. Family Child Care Homes operating in residences typically need a smoke detector audit only.

Health Department Review (Centers)

Centers in Tennessee’s major metros undergo health inspection through the local health department:

• Nashville (Metro Public Health Department) – 2500 Charlotte Avenue, Nashville
• Memphis (Shelby County Health Department) – 1826 Sycamore View Road, Memphis
• Knoxville (Knox County Health Department) – 140 Dameron Avenue, Knoxville
• Chattanooga (Hamilton County Health Department) – 921 East 3rd Street, Chattanooga

Health reviews cover diapering procedures, food preparation areas (if meals are served on-site), handwashing facilities, sanitation, illness exclusion policies, and water testing (if on private well). Centers serving meals may need a separate Mobile Food or Limited Food Service permit depending on scope.

Step 7: Enroll in Tennessee 3-Star Quality Program

The Star-Quality Child Care Program is voluntary and recognizes providers exceeding minimum licensing standards. Tennessee uses a 3-Star scale (not 4 or 5 like many states). Stars are earned across:

• Director education: Higher Director credentials earn star points
• Staff qualifications: Lead Teacher and assistant credentials
• Staff compensation: Higher wages relative to industry medians
• Program assessment: Environment Rating Scale (ITERS, ECERS, FCCERS) scores
• Parent involvement: Family engagement practices
• Professional development: Continuing education beyond minimums

The financial impact is direct:

Star Rating	Reimbursement Bonus on CCAP Rate	Effect on Annual Revenue (40-child center)
Licensed (no star)	0% (base rate)	Baseline
1 Star	+5%	~$20,000-$35,000 additional/year
2 Star	+10%	~$40,000-$70,000 additional/year
3 Star	+15%	~$60,000-$105,000 additional/year

The path to 1 Star usually takes 6-12 months and is achievable for any operator committed to professional development. Two and three stars require sustained investment in staff credentials and program quality. For any center taking CCAP families, the math typically favors pursuing at least 1 star within the first year of licensure.

Step 8: Apply for CCAP and Explore TN VPK Partnership

Tennessee Child Care Certificate Program (CCAP)

Tennessee CCAP (covering Smart Steps, Families First, Transitional Child Care, At-Risk Child, Teen Parent, SNAP E&T, and Foster Care tracks) subsidizes child care for eligible families. 2026 income limit is 85% of State Median Income – approximately $50,664 for a family of 4. Smart Steps requires 30+ hours/week in qualifying work, education, or training. Families with active TANF, foster placement, or homeless status receive priority bypass.

Apply to be a CCAP-active provider through the One DHS Customer Portal (onedhs.tn.gov). CCAP reimbursement rates vary by region and care type; metro areas (Nashville, Memphis) reimburse higher than rural counties. Star Quality bonuses apply on top.

Tennessee Voluntary Pre-K (VPK) Partnership

TN VPK is a state-funded program for 4-year-olds serving roughly 18,000 children in 935 classrooms across 138 of Tennessee’s 142 school districts. State funding is roughly $85+ million annually. Statutory priority goes to free/reduced-price lunch eligible children, then to children with disabilities, English language learners, and other at-risk categories.

Community-based daycare providers can partner with their local education agency (LEA) to host VPK classrooms in their facility. The LEA provides curriculum, teacher (with required credentials), and reimbursement; the daycare provides the space and may continue operating other age groups in adjacent rooms. This partnership opens a state-funded revenue stream for 4-year-old enrollment that doesn’t compete with the daycare’s other programming.

Contact the TN Department of Education Office of Early Learning for partnership specifics; also reach out to your county school system’s Early Learning coordinator.

Tennessee Daycare Market Context

Demand factors shaping Tennessee daycare:

• Large infant and toddler waitlists in Nashville and Williamson County. Nashville’s growth has outpaced child care supply; centers in 37027 (Brentwood), 37067 (Franklin), and 37205 (Belle Meade) routinely have 6-18 month infant waitlists. Pricing in these zip codes runs $1,800-$2,800/month for infants – among the highest in the Southeast.
• Memphis: meaningful CCAP-eligible population + St. Jude/FedEx workforce demand. Shelby County has substantial families at or below 85% SMI, making CCAP reimbursement a primary revenue source for many centers. St. Jude Children’s Research Hospital and FedEx World Hub anchor a large workforce of professionals seeking care during 24/7 shift schedules.
• Murfreesboro/Smyrna corridor. Rutherford County’s manufacturing and population growth (fastest-growing TN county) creates new daycare demand particularly for second-shift coverage at the Nissan Smyrna plant and supplier facilities.
• Knoxville and Oak Ridge. University of Tennessee faculty/staff and Oak Ridge National Laboratory employees support steady demand for academic-aligned center programs. Several centers hold Department of Energy contractor relationships.
• Sevier County tourism workforce. Pigeon Forge/Gatlinburg’s hospitality workforce schedules don’t align with traditional daycare hours – extended-hour and weekend daycare in Sevierville fills a real niche.
• VPK partnership opportunity. The four counties without VPK in the 138-district list, plus underserved communities within larger districts, are areas where new community-based VPK partnerships are sought by school systems.

Cost to Start a Daycare in Tennessee

Cost Category	Family Child Care Home (5-7 kids)	Child Care Center (40 kids)
LLC formation (TN min)	$300	$300
TDHS application + license	$85-$105	~$300-$700 capacity-based
TBI/FBI background checks (per adult)	$28-$48 × adults	$28-$48 × all staff
Fire safety inspection	$0-$100	$100-$300
Health department review (Centers)	N/A	$0-$500
Director’s Credential education (if needed)	$0-$3,000	$0-$5,000 (Director already credentialed typical)
Facility build-out / renovation	$1,500-$8,000 (residence retrofit)	$50,000-$300,000+
Furniture, supplies, learning materials	$2,000-$6,000	$25,000-$60,000
Insurance (general liability, abuse/molestation, workers’ comp)	$1,500-$3,500/yr	$5,000-$15,000/yr
Working capital (3-month payroll buffer)	$3,000-$10,000	$30,000-$80,000
City/county business license + first-year tax	$50-$200	$200-$1,000
Approximate total Year 1	$10,000-$35,000	$120,000-$475,000

Related Tennessee Business Guides

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Frequently Asked Questions

What does it cost to license a daycare in Tennessee?

Initial license fees range from $85-$105 for Family Child Care Homes (5-7 children in residence) to capacity-based fees for Centers, typically $300-$700 depending on enrollment ceiling. Add background check costs (~$28-$48 per adult), fire and health inspection fees ($0-$500), and your LLC formation ($300 minimum). Tennessee provides free TBI/FBI background checks for some staff in certain TDHS programs – confirm with your Program Specialist whether your role qualifies.

What are the staff-to-child ratios for daycares in Tennessee?

Under Rule 1240-04-01: 1:4 for infants (birth-15 months), 1:6 for toddlers (16-30 months), 1:8 for two-year-olds, 1:10 for three-year-olds, 1:15 for four-year-olds, and 1:20 for school-age (5+). Maximum group size in Centers also applies (8/12/16/20/20/25 by age band). These are caps, not best practice – 3-Star Quality assessments reward operating below the cap. Family Child Care Homes are limited to 7 children (or 12 with related supplements), which constrains practical ratios.

What is Tennessee’s 3-Star Quality Program and is it worth pursuing?

Tennessee’s Star-Quality Child Care Program is voluntary and recognizes providers exceeding minimum licensing standards. Programs earn 1, 2, or 3 stars based on director education, staff qualifications, program assessments, parent involvement, and professional development. Each star adds 5%, 10%, or 15% to your CCAP reimbursement rate. For a 40-child center serving CCAP families, that’s $20,000-$105,000 in additional annual revenue. The 1-Star level is achievable in 6-12 months; 2-3 Stars require sustained investment but the math typically pays back within 1-2 years.

What is the income limit for Tennessee CCAP child care subsidies?

Tennessee Child Care Certificate Program (CCAP) eligibility is 85% of State Median Income – approximately $50,664/year for a family of 4 in 2026. Smart Steps (the broadest CCAP track) also requires the parent(s) to be in qualifying work, education, or training for 30+ hours per week. Families on TANF, with foster placement, or experiencing homelessness receive priority bypass of work requirements. Application is through the One DHS Customer Portal at onedhs.tn.gov.

Can my Tennessee daycare partner with TN VPK?

Yes. Tennessee Voluntary Pre-K serves about 18,000 4-year-olds across 935 classrooms in 138 of 142 school districts, with $85+ million in annual state funding. Community-based daycares can partner with their local education agency (LEA) to host VPK classrooms in their facility. The LEA provides the certified teacher, curriculum, and per-pupil reimbursement; the daycare provides the space and may continue operating other age groups in adjacent rooms. Contact your county school system’s Early Learning coordinator to explore. Statutory priority goes to free/reduced-price lunch eligible children.

Do I need workers’ comp for a small Tennessee daycare?

Daycare is non-construction, so Tennessee’s general workers’ comp threshold of 5 or more employees under T.C.A. § 50-6 applies. A Family Child Care Home with one or two helpers below 5 total employees is technically not required to carry workers’ comp – but most daycares carry it voluntarily because injury risk is non-trivial and many CCAP and 3-Star applications expect coverage. Workers’ comp for daycare class codes (NCCI 9059) typically runs 1.5-3.5% of payroll. The cost is usually well worth the protection.

What are the differences between Tennessee’s daycare license categories?

Tennessee uses five categories: Voluntarily Registered Family Day Care Home (4 or fewer children, no license required, free registration); Family Child Care Home (5-7 children in residence, up to 12 if related to caregiver); Group Child Care Home (8-12 + up to 3 school-age supplementary); Child Care Center (13+ full-time, commercial setting); and Drop-In Child Care Center (15+ children, ≤7 hrs/day or ≤14 hrs/week per child, often gym childcare or hourly/short-term). Capacity, square footage, staffing, fees, and inspection requirements differ across categories – choose before facility planning.