Nonprofit, LLC or Franchise? How to Set Up a Kids Program

Updated September 17, 2026

Choose by who owns it, who funds it and who sets the rules. An independent business, usually an LLC, is yours to grow and sell, and it runs on tuition. A nonprofit can take grants and donations, and nobody owns it. A franchise hands you a brand and a playbook in exchange for fees and the franchisor's rules. State rules differ, so confirm your choice with an accountant or attorney.

People usually pick a structure by accident. A friend said "just get an LLC," or a grant application asked for a nonprofit letter, or a franchise ad showed up at the right moment. The choice deserves an hour of real thought, because it decides where your money comes from, how you grow and what you have at the end.

I chose the first path. Journey to STEAM is independently owned: no storefront, no franchise, built from a first class in 2023 to programs at 75+ school sites. Before that I sat through a franchise sales call and gave it real consideration. All three paths can serve kids well. Here's what each one means in practice.

What are the ways to set up a kids enrichment business?

Three: an independent business, a nonprofit, or a franchise. They differ on ownership, funding and control.

What does running as an independent business mean?

You form a business, most often an LLC, and you own everything you build: the curriculum, the name, the school relationships, the trained team. Revenue is tuition and contracts. What's left after costs is yours.

On the legal form, the U.S. Small Business Administration explains the options in plain language. It says a sole proprietor can be held personally liable for the debts and obligations of the business, that LLCs protect you from personal liability in most instances, and that an LLC's profits and losses can pass through to your personal income without facing corporate taxes (sba.gov/business-guide/launch-your-business/choose-business-structure). When your work involves other people's children, that liability line is worth reading twice.

The trade: nobody hands you anything. You write the lessons, design the flyer, find the schools and figure out registration, payroll and insurance yourself. My guides on starting a kids enrichment business in schools and starting one in your own space walk through that setup step by step.

Should my kids program be a nonprofit?

Choose a nonprofit when the mission needs money that tuition can't supply. If you're serving families who can't pay what the program costs to run, grants and donations fill the gap, and many of those funders require tax-exempt status.

Know what you're agreeing to. The IRS says that for a 501(c)(3), none of its earnings may inure to any private shareholder or individual, and that the organization must not be organized or operated for the benefit of private interests (irs.gov). The SBA puts it this way: nonprofits can't distribute profits to members. In practice:

• You can work for the nonprofit you start and be paid for that work. A board oversees it, and you answer to the board.
• There are no owners, so there's nothing to sell later. What you build belongs to the mission.
• Grants come with applications, reporting and renewal dates. A program funded this year may not be funded next year.

Nonprofits charge tuition all the time, and many pair it with scholarships. If that's you, enrops for nonprofit youth programs shows how registration, payment plans and discount codes for scholarship seats work.

Is a kids enrichment franchise worth it?

It can be, when you want to run a proven program more than you want to design one. A franchise gives you curriculum, a brand, training and a playbook on day one. That's real value, and it's months of work you don't do.

You pay for it, and you agree to rules. The Federal Trade Commission's guide for buyers is the best free reading on the subject (ftc.gov). From that guide:

• You must receive the Franchise Disclosure Document at least 14 days before you are asked to sign any contract or pay any money. It has 23 numbered items.
• The initial franchise fee and other expenses can run from tens of thousands of dollars to several hundred thousand, and may be non-refundable.
• You may pay royalties based on a percentage of your weekly or monthly gross income, plus advertising fund contributions.
• Franchisors may restrict the goods and services you sell and limit you to a specific territory.
• Renewals are not automatic. At the end of the term, the franchisor may decline to renew or offer different terms.

Two questions I'd ask in a school-based market. First, does the brand open doors with principals in your town, or will you be introducing it from scratch? Second, may you change the curriculum when a school asks for something different? Call current and former owners in the disclosure document and ask them both.

How do the three compare on money?

Run the same year through all three. These numbers are made up to show the method. Say the program brings in $200,000 of tuition in a year.

Then add what the table can't show. The franchise column also has an initial fee. At an example $40,000 spread over a five-year term, that's $8,000 a year, so five years of fees come to 5 x $18,000 + $40,000 = $130,000. The independent column has a cost too: every hour you spend writing curriculum and building a brand that a franchise would have handed you. The nonprofit's $40,000 has to be won again each year, and whatever is left at year end stays in the organization.

Price your own version with real numbers from the disclosure document or the grant guidelines. The pricing guide covers the tuition side.

Does my structure change how schools work with me?

Less than you'd think at the building level, and sometimes a lot at the funding level. I spent a decade in public education, leading schools. What a principal remembers at renewal time is simple: kids were safe, families were happy, and the office never had to chase you. Your tax status isn't part of that memory.

Funding is where structure can matter. Some grants and contracts are open only to certain kinds of organizations. Others are broad. The largest federal after-school program, 21st Century Community Learning Centers, lists local education agencies, community-based organizations and other public or private entities as eligible (ed.gov). Ask each district and funder what they require before you assume you're in or out. How to get your program into schools covers the paperwork every structure needs.

How do I decide?

Answer five questions in writing.

1. Can families' tuition cover the full cost of the program? If yes, an independent business works. If no, look hard at a nonprofit.
2. Do I want to design the program or run one? Designers go independent. Runners should price a franchise.
3. Do I want to own something I can sell or pass on? That points to independent, or a franchise unit with transfer rights you've read.
4. Who do I want to answer to? Yourself, a board, or a franchise agreement. Each is a real boss.
5. What can I put in up front? An LLC filing is a state fee that varies by state. A franchise is a large check. A nonprofit is time: a board, an IRS application and patience.

Then take your answers to an accountant or attorney in your state. This post is general information. It is not legal or tax advice.

Frequently asked questions

Do I need an LLC before I teach my first class?

Schools and insurers will usually want to see a registered business, and the SBA notes that a sole proprietor is personally liable for the business's debts and obligations. Many operators form the LLC, get an EIN from the IRS and buy insurance before the first class. Check your state's requirements.

Can I change structures later?

Sometimes, with legal work. One route is keeping the LLC and forming a separate nonprofit for scholarship programs. Leaving a franchise depends on the agreement you signed. Get advice before you switch.

Does enrops work for all three?

Independent businesses and nonprofits can create a registration and start today. enrops is free for businesses, and your only cost is Stripe's standard processing. Franchise and multi-location brands can talk with our team.

Create your first registration. Free for businesses. Live in under 5 minutes. Or click through a sample registration first.

Arielle Hammond, Ed.D. is the founder of enrops and host of The Youth Enrichment Leader, presented by enrops.