Beyond the state license: the federal and business steps to open a care business

Which federal steps apply to your care type

The table maps the seven care types this site covers to the federal layers described below. “If billing” means the step applies only when you take that payer’s money. The state license itself is covered type by type on the license pages and state by state on the state pages.

Scroll the table sideways to see every column.

Sources: ⁠¹¹⁠¹⁵⁠¹⁶⁠²⁷⁠²⁸⁠²⁹⁠³³⁠³⁶

1. Form the entity and register it with the state

The license application asks who owns and controls the business, so the entity should exist before you apply. The SBA says most states register LLCs, corporations, partnerships and nonprofit corporations through the Secretary of State’s office or a similar business agency. These entities need a registered agent located in the state before filing.⁠¹ If you will operate in more than one state, you will probably need to register in each state where you do business (foreign qualification).⁠¹

Settle the legal name now and keep it identical everywhere. The CMS-855A Medicare application requires the legal business name and tax ID to match the ones used for the NPI, letter for letter, in both PECOS and NPPES.⁠¹⁵

2. Get an EIN from the IRS

The IRS issues an employer identification number online, free, and immediately if approved. You can get only one EIN per responsible party per day.⁠² You generally need one to hire employees or to operate as a partnership or corporation.⁠² Apply after the entity exists: the IRS tells corporations and LLCs to form the entity with the secretary of state first, or the EIN application may be delayed.⁠² The legal name and tax ID then have to match on the NPI and the CMS-855A.⁠¹⁵ The IRS EIN page also points some corporations and LLCs to FinCEN beneficial-ownership reporting where it applies.⁠²

3. Secure the site and the local approvals

Facility-based care (assisted living, small residential homes, adult day, child care centers and family child care homes) can also face city and county rules, such as zoning or a use permit, a local business license, and a fire or building inspection. Which ones apply, and whether the state asks for them before it licenses you, differs by state. Each state guide on this site lists the ones that state requires; start from the state pages.

For homes that house people with disabilities, federal law limits what a city can demand. In their November 10, 2016 joint statement, HUD and the Department of Justice say that zoning which treats groups of unrelated people with disabilities less favorably than other groups of unrelated people violates the Fair Housing Act.⁠⁴¹ Their example: if an ordinance lets a set number of unrelated people live together anywhere as a “family”, it cannot require a use permit for a group home of the same size whose residents have disabilities.⁠⁴¹ The statement defines a group home as a dwelling occupied by unrelated people with disabilities. It applies whether or not support services are provided and whether the operator is for-profit or nonprofit.⁠⁴¹

This does not exempt you from licensing. Group home operators remain subject to state and local health and safety rules and licensing, as long as those rules are consistent with the Fair Housing Act and are not based on stereotypes about disability.⁠⁴¹ Use the statement as grounds for a reasonable accommodation request when a local rule singles out your residents. It does not replace a fire inspection or the state license.

4. Get the state license, insurance and bonds

The state license is the core approval, and the rules vary by state. Each care type has its own national overview: home health, non-medical home care, assisted living, small residential care, adult day, child care centers and family child care. Some types also face certificates of need or moratoriums at the state level, which those pages track.

Insurance and surety bond requirements, where they exist, are set by each state and sometimes by its Medicaid program. This guide found no federal rule that sets a coverage amount or premium for these care businesses. Use the state guide for your license to find what your state requires. Workers’ compensation is covered in the next step.

5. Put caregivers on payroll under the federal rules

Employee or contractor. The IRS requires you to withhold income tax, Social Security and Medicare tax from employees’ wages, pay the employer share, and pay federal unemployment tax. Generally none of that applies to independent contractors, so the IRS asks every business owner to determine which one each worker is.⁠³ The IRS page explains how to apply the test and how to ask the IRS for a determination on Form SS-8.⁠³

The home care wage rule. Under the Fair Labor Standards Act, “companionship services” means fellowship and protection for an elderly, ill, injured or disabled person. It can include hands-on care (bathing, dressing, toileting, meal preparation, medication help) only if that care stays within 20% of the hours worked per person per workweek.⁠⁴ The exemption from minimum wage and overtime does not belong to agencies. Third-party employers may not claim the companionship exemption or the live-in overtime exemption, even when the family is a joint employer.⁠⁵ That rule took effect on October 13, 2015, and DOL began enforcing it on November 12, 2015.⁠⁶

On July 2, 2025, DOL proposed returning to the 1975 regulations, which let third-party employers claim both exemptions.⁠⁶⁠⁷ In the eCFR text updated through October 21, 2026, 29 CFR 552.109 still bars agencies from the exemption.⁠⁵ Budget your pay rates and overtime under the rule in force, not the proposal. DOL’s direct care page tracks the rulemaking.⁠⁷

New-hire reporting. Federal law requires employers to report each new or rehired employee to the state where the employee works within 20 days of hire. Some states require it sooner.⁠⁸ Many employers send the W-4, though electronic filing through the state new-hire site is preferred. If you employ people in more than one state, you can register with HHS as a multistate employer and report all new hires electronically to one state where you have employees.⁠⁸

Unemployment insurance and workers’ compensation. Each state runs its own unemployment insurance program within federal guidelines. In most states, benefits are funded only by a tax on employers.⁠⁹ Register with your state’s UI tax agency as an employer. Workers’ compensation is also a state system; DOL keeps a directory of each state’s workers’ compensation office.⁠¹⁰ Ask that office whether and from when your business must carry coverage before the first shift.

6. Run background checks under the federal layer

States run the checks, but two federal programs shape them.

Child care (CCDBG). Every state that takes Child Care and Development Fund money must check child care staff at licensed, regulated or registered providers and at any provider paid with CCDF subsidy.⁠²⁹ Each check includes:⁠²⁹

1. FBI fingerprint check

   through Next Generation Identification.

2. National Sex Offender Registry

   search through the NCIC.

3. State searches

   of the criminal repository, sex offender registry and child abuse and neglect registry, in the state where the person lives and in every state they lived in during the past five years.

“Staff member” covers contract and self-employed workers, anyone with unsupervised access to children, and any person aged 18 or older living in a family child care home.⁠²⁹ The state must return results within 45 days of the request. It tells you only whether the person is eligible or ineligible, without the record behind the decision.⁠²⁹ A new hire may start after clearing either the FBI fingerprint check or the fingerprint-based check in their state of residence. Until every component clears, they must be supervised at all times by someone with a qualifying check in the past five years.⁠²⁹

Long-term care (NBCP). Section 6201 of the Affordable Care Act set up the National Background Check Program for direct patient access employees of long-term care providers. Eligible providers include home health agencies, personal care providers, adult day providers, assisted living and other residential care providers.⁠³⁶⁠³⁷ CMS has awarded more than $65 million to 28 states to build these programs.⁠³⁶ State participation is voluntary, so whether a fingerprint-based national check is required depends on your state’s law.⁠³⁷

Owners. Medicare and Medicaid screening reach the owners too. Newly enrolling home health agencies are high-risk in Medicare, and everyone with a 5% or greater direct or indirect ownership interest must submit fingerprints for an FBI check.⁠¹⁹ A state Medicaid agency must fingerprint high-risk providers and their 5% owners, and any provider or 5% owner must submit fingerprints within 30 days when CMS or the state asks.⁠²³

7. Get an NPI if you will bill health plans

The National Provider Identifier is a 10-digit number assigned through NPPES. Type 1 NPIs are for individuals, including sole proprietors, and each person can have only one. Type 2 NPIs are for organizations such as hospitals, nursing homes and physician groups, which can hold more than one.⁠¹¹ An incorporated individual can hold both a Type 1 for themselves and a Type 2 for the company.⁠¹¹ You can apply online at NPPES, on the paper CMS-10114 form, or through an employer’s bulk enumeration.⁠¹¹

Who must have one: every HIPAA-covered health care provider. You are covered if you transmit health information electronically in a HIPAA standard transaction, such as a claim, even through a billing company.⁠¹² Covered providers must use the NPI in those transactions and report changes to NPPES within 30 days.⁠¹⁴ Home health agencies need one regardless, because an NPI is required for Medicare enrollment.⁠¹¹ A private-pay companion agency that never sends a HIPAA standard transaction is not a covered provider and has no federal duty to get an NPI, although any health care provider may obtain one.⁠¹²⁠¹⁴

The NPI is only an identifier. It does not license you, enroll you in any plan, or guarantee payment.⁠¹¹ The application asks for a primary 10-digit taxonomy code describing your provider type, chosen from the NUCC list at taxonomy.nucc.org.⁠¹³ You may add more codes if one does not describe all your services.⁠¹³

8. Medicare enrollment (home health agencies only)

The moratorium comes first. CMS imposed a six-month nationwide moratorium on Medicare enrollment of home health agencies, effective May 13, 2026. No new HHAs, branches or practice locations will be enrolled unless the Medicare contractor received the application before that date.⁠¹⁶ It covers every state, territory and the District of Columbia. CMS can extend it in six-month increments, and must announce any extension in the Federal Register.⁠¹⁶ As of October 23, 2026, the Federal Register showed no notice extending or lifting it.

The moratorium also blocks a common workaround. It does not cover routine changes of ownership. It does cover HHA ownership changes that require a new initial enrollment.⁠¹⁶ Under the 36-month rule, if majority ownership of an HHA changes within 36 months of its initial Medicare enrollment or its last majority ownership change, the Medicare billing privileges do not transfer to the buyer. The buyer must enroll as a new HHA and pass a state survey or accreditation survey.⁠¹⁸ Exceptions include an HHA that has filed two consecutive years of full cost reports, internal corporate restructurings, entity-type changes with the same owners, and the death of an owner.⁠¹⁸ Buying a young agency during the moratorium therefore leaves you unable to enroll.

The moratorium is Medicare-only nationally. CMS left it to each state to decide whether to impose a home health moratorium in Medicaid and CHIP.⁠¹⁶ You can still get a state license and serve private-pay or Medicaid patients where the state allows it.

When enrollment reopens, the sequence is:⁠¹⁵

1. CMS-855A

   File the CMS-855A, on paper or through PECOS, with the Medicare Administrative Contractor (MAC). Pay the application fee before you submit: $750 for applications filed in 2026.⁠¹⁵⁠²⁰

2. MAC review

   The MAC reviews the application and recommends approval or denial to the state survey agency.⁠¹⁵

3. Survey

   The state agency, or a CMS-approved accrediting organization you chose instead, surveys the agency against the Medicare conditions of participation (see step 12).⁠¹⁵

4. Final review

   The MAC may re-check enrollment requirements. CMS decides, and you sign a provider agreement.⁠¹⁵

Capitalization. At application and throughout enrollment, a new HHA must hold “initial reserve operating funds” to run the agency for the first three months after billing privileges are granted, not counting Medicare receivables.⁠¹⁷ The MAC sets the amount from the first-year cost per visit of at least three comparable HHAs, multiplied by your projected visits for the first three months, with a floor based on the comparison agencies’ visit volume.⁠¹⁷ You prove the funds with account statements and, where the bank offers one, a bank officer’s attestation. At least 50% of the required amount must be your own, non-borrowed money. The rest may come from a loan or a line of credit from an unrelated lender.⁠¹⁷ No federal dollar figure exists; the number depends on your projections and local comparison agencies.

Expect high-risk screening. That means fingerprints for all 5% owners and a site visit.⁠¹⁹

9. Medicaid enrollment, waivers and managed care

Each state Medicaid agency enrolls its own providers, under federal screening rules in 42 CFR part 455. Every applicant is screened at a “limited,” “moderate” or “high” risk level:⁠²¹

• Limited: license verification (including licenses in other states) and database checks before and after enrollment.
• Moderate: the limited checks plus an on-site visit.
• High: both of the above plus a criminal background check and fingerprints.

The state sets the risk level for each provider category, and if a provider fits more than one level, the highest applies.⁠²¹⁠²³

Application fee. States must collect the federal application fee before signing a provider agreement.⁠²² The fee is for institutional providers: in Medicaid-only enrollment that means nursing facilities, ICF/IIDs and psychiatric residential treatment facilities, plus any other provider types the state designates in its state plan.⁠²⁰ It does not apply to individual physicians and nonphysician practitioners, providers already enrolled in Medicare or another state’s Medicaid or CHIP program, or providers who have paid the fee to a Medicare contractor or another state.⁠²² CMS set the fee at $750 for enrollment applications submitted between January 1 and December 31, 2026. The same fee applies to revalidation.⁠²⁰

Waivers. For non-medical home care, assisted living, small residential homes and adult day, Medicaid money usually arrives through home and community-based services (HCBS) programs such as 1915(c) waivers. These programs are run and defined by each state; the EVV page lists the HCBS authorities.⁠²⁷ Residential providers should read the federal HCBS settings rule before signing a waiver contract. In a provider-owned or controlled residential setting, each resident must have a lease or comparable written agreement with eviction protections. They must also have a unit door they can lock, a choice of roommate if they share a unit, control of their own schedule, food at any time, and visitors at any time.⁠²⁶ Any limit on these must be justified by an assessed need in the person-centered plan.⁠²⁶ These rules affect the building and house rules, so check them before you buy or remodel.

Managed care is a separate step. Where the state pays through managed care plans, the state must screen and enroll every network provider under part 455 itself, even a provider who will never bill fee-for-service.⁠²⁴ Each plan then credentials you under a uniform policy the state sets, which covers long-term services and supports providers.⁠²⁵ In practice that is two applications: state Medicaid enrollment, then a contract and credentialing file with each plan you want referrals from.

10. Electronic visit verification (Medicaid in-home services)

Section 12006 of the 21st Century Cures Act requires states to use electronic visit verification (EVV) for Medicaid personal care services and home health services that involve an in-home visit.⁠²⁷⁠²⁸ For personal care it covers state plan, 1915(c), 1915(i), 1915(j), 1915(k) and section 1115 services. For home health it covers state plan or waiver services under section 1905(a)(7).⁠²⁷ States had to require EVV for personal care by January 1, 2020, and for home health by January 1, 2023.⁠²⁷

The system must electronically record six items for every visit:⁠²⁸

1. Type of service.
2. The person receiving it.
3. Date.
4. Location.
5. The person providing it.
6. Start and end times.

Personal care in hospitals, nursing facilities, ICF/IIDs and institutions for mental disease is excluded. CMS also excludes congregate residential settings with 24-hour staff, such as group homes and assisted living, because they are not “in-home visits.”⁠²⁸ CMS also states that personal care which does not require an in-home visit is not subject to EVV; adult day care delivered at the center falls on that side of the line.⁠²⁸

The state chooses the EVV model, and some states run more than one system.⁠²⁸ Ask the Medicaid agency which system or data aggregator you must use before you buy scheduling software.

11. Child care: CCDF subsidy and CACFP meals

CCDF. The Child Care and Development Fund is a federal block grant run by states, territories and tribes. It helps low-income working families pay for care at a provider they choose, and it reimburses providers who serve them.⁠³¹ Parents can either use a provider that holds a state grant or contract, or take a child care certificate (voucher) to any eligible provider.⁠³² Becoming a subsidy provider triggers the CCDBG background checks in step 6. For licensed providers paid with CCDF, the state must also carry out at least one pre-licensure inspection for health, safety and fire standards and an unannounced inspection at least once a year.⁠³⁰ Each state runs its own subsidy enrollment, so ask the state CCDF lead agency how to become an eligible provider.

CACFP. USDA’s Child and Adult Care Food Program reimburses meals and snacks served at participating child care centers, day care homes and adult day care centers. Your state agency runs it.⁠³³ Requirements differ by setting:

• Child care centers. Public and nonprofit centers that are licensed or approved can join, either on their own or under a sponsor.⁠³³ A for-profit center qualifies if, in the calendar month before it applies or reapplies, at least 25% of the children in care (enrolled or licensed capacity, whichever is lower) are eligible for free or reduced-price meals, or receive Title XX benefits while the center is paid from Title XX funds.⁠³⁴
• Adult day. A for-profit adult day center needs at least 25% of enrolled adults to be Title XIX (Medicaid) or Title XX beneficiaries in the calendar month before it applies or reapplies, and must receive compensation from those funds.⁠³⁴
• Family child care homes. A home can join only under a public or private nonprofit sponsoring organization, which signs a permanent agreement with the home.⁠³⁵ Homes are reimbursed at Tier I or Tier II rates, depending on household income or the poverty level of the local school or area.⁠³⁴

12. Accreditation: optional, but a substitute for the survey

Accreditation is not required for any of these care types federally. For home health it matters because it can replace the state survey in Medicare certification. If an agency shows through a CMS-approved accrediting organization that it meets Medicare requirements, CMS deems it compliant. CMS states that accreditation “is voluntary and is not required for Medicare participation.”⁠³⁸ As of October 23, 2026, three organizations hold CMS approval for home health agency programs:

• Accreditation Commission for Health Care (ACHC): February 24, 2025 through February 24, 2031.⁠³⁸
• Community Health Accreditation Program (CHAP): March 31, 2024 through March 31, 2030.⁠³⁹
• The Joint Commission: March 31, 2026 through March 31, 2032.⁠⁴⁰

The CMS-855A process accepts an accreditation survey in place of the state agency survey.⁠¹⁵ While the Medicare moratorium is in force, accreditation cannot get a new agency enrolled.⁠¹⁶

Some states also accept accreditation for state licensing or Medicaid purposes. Where they do, the state guide for that license says so.

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