A one-person babysitting business needs less paperwork than most people expect. You are a sole proprietor the day you take paid work; an EIN is free; insurance and a separate bank account are good habits rather than federal rules; and a child care license is usually needed for care in your home, not for sits in the family's. Each section below says what the government page it comes from actually says, with the link, so you can check it. Rules change and differ by state: this is a starting point, not legal or tax advice.
You do not have to file anything to be a sole proprietor. The U.S. Small Business Administration puts it this way: "You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business." The catch is that a sole proprietorship is not a separate entity, so "you can be held personally liable for the debts and obligations of the business." The SBA calls it "a good choice for low-risk businesses and owners who want to test their business idea."
A limited liability company (LLC) is something you file with your state, for a fee your state sets. The SBA says an LLC protects you "from personal liability in most instances" (your car, house and savings), and that "members of an LLC are considered self-employed and must pay self-employment tax." So an LLC does not lower a babysitter's self-employment tax. Whether the protection is worth the state fee and paperwork depends on what you own and the risks you take on; insurance (section 3) is the other half of that question.
Source: SBA, Choose a business structure (read 2026-10-30).
An Employer Identification Number is free. The IRS's own page says you can "get an EIN directly from the IRS in minutes for free" and warns: "Beware of websites that charge for an EIN. You never have to pay a fee for an EIN." If you form an LLC, form it with your state first, then apply. The SBA notes an EIN lets you open a business bank account.
Families who claim the child and dependent care credit on Form 2441, or are reimbursed from a dependent-care plan at work, must give the IRS your name, address and taxpayer identification number (IRS Publication 503). They can ask for it on Form W-10, which stays with their records and is never sent to the IRS.
A point many guides get wrong. It is often said that an EIN lets a sole proprietor give families a taxpayer ID without sharing a Social Security number. The IRS instructions on Form W-10 (Rev. October 2020), which we read, say: "For individuals and sole proprietors, the TIN is a social security number (SSN)… For other entities, it is the employer identification number (EIN)." Publication 503 says the same for an individual provider. So if you are a sole proprietor, plan on families needing your SSN, and ask a tax preparer before giving an EIN in its place. If a family cannot get the information, Publication 503 lets them show "due diligence" in trying.
Sources: IRS, Get an employer identification number; IRS, About Form W-10 and the form's instructions; IRS, Publication 503, "Care Provider Identification Test" (all read 2026-10-30).
No federal rule makes a babysitter carry insurance, and this guide will not tell you a price: quotes depend on your state, the insurer and what you do. What the SBA's insurance guide describes: general liability insurance "protects against financial loss as the result of bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments"; professional liability insurance is for "businesses that provide services to customers" and covers "malpractice, errors, and negligence"; and a home-based business rider on a homeowner's policy can add "liability coverage for third-party injuries." Ask an insurer about each in the context of in-home child care, and get the answer in writing.
If you drive children, ask your car insurer in writing whether your personal policy covers driving for pay, and keep your license and policy dates in the app's tracker so neither lapses.
Source: SBA, Get business insurance (read 2026-10-30).
The SBA says: "As soon as you start accepting or spending money as your business, you should open a business bank account," that you can open one once you have your EIN, and that it "offers limited personal liability protection by keeping your business funds separate from your personal funds." For a sitter, the practical win is cleaner records: every family payment lands in one place, and every supply or training cost leaves from it.
Source: SBA, Open a business bank account (read 2026-10-30).
The IRS says "you may choose any recordkeeping system suited to your business that clearly shows your income and expenses," backed by supporting documents such as invoices, receipts and deposit slips, kept "in an orderly fashion and in a safe place." For how long: "Keep records for 3 years" in the usual case, with longer periods in some situations listed on the IRS page. The app's Money & taxes tab is a record of every sit, payment, expense and mile; download a backup now and then and keep the receipts.
Sources: IRS, What kind of records should I keep and How long should I keep records (read 2026-10-30).
Child care licensing is set by each state and territory, not nationally. Childcare.gov, the federal government's child care site, describes babysitting in the family's home as informal in-home care that "is not usually regulated by states or territories," and says "most states and territories do not require an in-home child care provider to be licensed if they provide care on an occasional basis, provide care in your home, or are related to the children in their care."
Care in your home is where licensing starts. Childcare.gov's page on family child care homes says "some states and territories require a family child care provider to be licensed when they care for more than one nonrelated child in their home, while others may not require a license until the provider cares for six or more children," and some states offer a certification or registration instead. So if you start watching several unrelated children at your house, check before you do.
Check your state's child care licensing office; childcare.gov's state resources page links to each one, and local child care resource and referral agencies answer this question too. Separately, some cities and counties want a general business license from anyone selling a service: ask your city or county clerk. We tried to read the federal database of state licensing rules (licensingregulations.acf.hhs.gov) and could not reach it, so this guide quotes no state's numbers.
Sources: Childcare.gov, Informal in-home child care and Family child care homes (read 2026-10-30).
Childcare.gov points out to parents that an unlicensed in-home provider is "not monitored to ensure that they are meeting basic health and safety requirements (including passing criminal background checks)" or training such as "being first aid and CPR certified." That is why families ask you about them. A current pediatric CPR and First Aid card and a recent background check you can show answer the question before it is asked. Both expire, so track the dates.
The free app keeps this list for you. In the Babysitting Business Kit, Settings has a credentials tracker (CPR and First Aid, background check, driver's license and car insurance if you drive kids, liability insurance, a local license) with issue and expiry dates. The Today tab reminds you 60, 30 and 7 days before anything expires, your website drops a certification the day after it lapses, and a business-readiness checklist shows what is done and what is missing. It runs in your browser with no account.
No. If you babysit for pay and do not register any other kind of business, you are already a sole proprietor. The SBA says a sole proprietorship is easy to form but your business debts and liabilities are your personal ones, while an LLC protects your personal assets in most instances. Members of an LLC still pay self-employment tax.
Not by itself, according to the IRS form families use. The instructions for Form W-10 (Rev. October 2020) say that for individuals and sole proprietors the taxpayer ID is a Social Security number, and an EIN is for other entities. An EIN is still free and useful, for example to open a business bank account, but ask a tax preparer before giving families an EIN in place of your SSN.
Usually not for sits in the family's own home. Childcare.gov says most states do not require an in-home provider to be licensed if they care for children occasionally, in the child's home, or are related to them. Caring for other people's children in your own home is different: some states require a license once you care for more than one unrelated child, others at six or more. Check your state's child care licensing office.
The IRS says to keep records for 3 years in the usual case, longer in some situations, and that any recordkeeping system is fine if it clearly shows your income and expenses. Keep a record of every payment and the receipts for what you spend.
No federal rule requires it, but the SBA describes general liability insurance as coverage for any business against bodily injury, property damage and lawsuits, and professional liability insurance for businesses that provide services. If you drive children, ask your car insurer in writing whether your policy covers driving for pay.