HI JS,
I'm a little late responding, but I've just now had a chance to write...This could be a really long response, but I don't want to do that, so feel free to private message me if you want specifics. I'd be happy to pass along advice and experience.
I think when I started I googled contracts online and I edited one to meet the policies I wanted. It was much easier than trying to think of everything and write one from scratch. Happy to share that if you want a copy. It's long and covers any questions that parents ever have. Whether having a contract hold up in court or not, I don't know... but it is still worth taking the time to create one. It makes parents realize that you are serious about running your business and lets them know ahead of time what your expectations are. And it just makes things clearer and easier all around. For instance, if you have nothing in there about a late pick up policy, it can be awkward to try to talk to a parent about that when it comes up. In terms of payment, my parents pay at the beginning of the month, (so they prepay like rent).
Decide what kind of program you want to have. I like having structure in mine because he kids know what to expect. But mine is also child directed, so if I have easel painting planned for the day and no one want to paint, then we do something else. I did not start out with a preschool facet, but I did many "preschool" things and now after 5 years, I have a preschool component. Parents will appreciate that you've given some though in to what the days will look like and they like a schedule, so make one and post it on the wall.
If you have kids keep their rooms off limits unless you're using them for napping...and then use them for napping only. Let you kids know that anything in the "daycare area" is fair game for kids to play with so if they don't want to share something they should put it in their rooms. You'll have plenty of other toys for the daycare kids to use.
There's so much more I could write, but it would be a novel... The last thing I'll say here though, is to realize that having a daycare in your house is a lot of work and a huge commitment if you do it well. It's much more than the hours that you have kids. Your home is your work, so you have to keep it clean and picked up... company ready all the time. plan meals, plan activities, organize... My house looks like a preschool and there are times that I would just like to have a house. But there are a lot of benefits to being self employed. Be sure to give your self time off though or you'll burn out.
Good luck!