What Does It Really Cost to Start a Business?


Paula Kehoe


Reviewed by


December 1, 2021

This article is Tax Professional approved


You have a great idea for a new business and want to bring it to life. But before you take the leap, it’s good to have an idea of the amount of money you’ll need to cover to get you up and running.

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Understanding your business expenses ahead of time can help you plan ahead and avoid future cash flow problems. Sadly, some small business owners and entrepreneurs start fast and neglect this process, which can lead to the business being unable to sustain itself. The stats back it up, too: 38% of startups don’t last because they run out of capital.

If you want to start your own business, you need to do it right. But what will it cost to start?

What are business startup costs?

Think of startup costs as the funds you need before your business starts making money. Some of these expenses will be one-time costs, like incorporation fees or hiring a logo designer. Other expenses, like insurance, salaries, inventory, or bookkeeping, will be ongoing.

Your startup expenses all depend on business type, business structure, and industry. For instance, a brick-and-mortar business will have different business costs than an online business that doesn’t need office space or utilities.

How much are we talking here?

You don’t want to risk running out of funds after you launch. Figuring out how much money you need upfront will help you decide if you’ll need to take out loans and grants, apply for a line of credit, or raise funds with investors.

Recent research shows that accounting, online retail, construction, and landscaping companies can most likely get started with under $5,000. The most expensive small businesses and startups to launch, like restaurants, medical offices, and manufacturers, typically need more than $100,000.

One of the best ways to figure out the real numbers is with a detailed business plan. Be truthful with yourself about how much you’re likely to spend and how much revenue you’ll bring in over the next three to five years. Then, be realistic about how long it’ll take before you turn a profit.

Another source to help you calculate your early startup costs is the Small Business Administration (SBA) startup costs worksheet. When using this template, enter at least six months’ worth of any expense, rather than just the first month, to give you a full financial picture.

Funding options for your new business

If you’re operating on a shoestring budget and looking for more capital, there are many avenues to explore for financial support. New business owners can seek out investors or apply for small business loans through banks or the SBA. Crowdfunding platforms like Indiegogo make it easy for business owners to secure funding quickly and rally support for their new products or services.

If you need help finding lenders or business financing options, the team at Bench has compiled several resources to help you get started:

Common business startup costs

1. Registration and incorporation fees

Other than filing to get a federal tax ID, most businesses don’t need to register with the federal government to become legal. If you register your business name, it’ll cost less than $300.

Choosing a business structure is a critical step as it can have financial, legal, and tax implications.

Your business can operate as a sole proprietorship, partnership, limited liability corporation (LLC), C corporation, or S corporation. The business structure you choose will affect the cost of registration. The fees also depend on what state your business operates in.

If you plan to operate as a sole proprietorship or general partnership, you’ll need to register your business only using your personal name. This is the least expensive business structure and will cost about $25 to file with the Secretary of State.

If you use any other name for your business, you’ll have to file a DBA (‘Doing Business As’). It costs between $10 to $110 depending on where you’re operating, or register as a different business like an LLC.

The fee for registering as an LLC can be as low as $40 (in Kentucky) or as high as $500 (in Massachusetts). The cost to incorporate also varies on the state but is similar to the range you’ll find with an LLC.

2. Permits and licenses

It’s up to you to do your due diligence and make sure you’re operating legally. The types of business licenses and permits you may need will differ based on your location and industry.

A few startup licenses and permits you might need are:

  • Professional license: There are a number of industries that require you to have a professional license to practice, including medicine, law, accounting, engineering, and many more. A professional license fee depends on the field, and you’ll most likely have to renew it each year.
  • Business permits: Health permit ($25), building permit ($1,156), fire inspection ($100), and sales tax permit ($0 - $100). All of these are average costs.

3. Website

Your business website is your virtual storefront 24/7 and should feature your products, services, hours, and contact information. A strong online presence can be a huge revenue generator, so it’s important your site looks pro. It’s not just design, either: you’ll also need to pay for hosting and your domain name, which usually bill on an annual basis.

There are a few ways to build a website:

  • Hire a professional web designer: It’s the most expensive option starting at around $5,000. But it takes the hassle out of your hands, especially if you’re not tech-savvy.
  • Use WordPress: While WordPress is a free, open-source platform, you have to pay for hosting, themes, and plugins.
  • Use a website builder: DIY website builders like Wix and Squarespace make creating a website easy, fun, and cost-effective. Expect a minimum of $12 to $13 per month to build an ad-free website.

4. Business space

Unless you’re a digital nomad or operating out of your home, the biggest expense is typically your office, retail, or factory space. Space expenses are also the most variable, as there’s a price range depending on the size of the space you need.

Keep in mind that when you lease a commercial space, there are other costs you may have to pay for—think utilities, building maintenance, taxes, furniture, equipment, renovations, and more. Commercial real estate may also require you to sign a long-term lease.

On average, it costs roughly $34 per square foot to rent an office space, but that number surges in cities trendy for startups. For example, in New York, it’s $84 per square foot compared to $26.83 per square foot in Denver.

If you can’t manage high rent for office space, consider a coworking space instead. Coworking agencies have locations across the country. Many of them are complete with furniture, Internet, meeting rooms, and kitchens.

Coworking spaces allow entrepreneurs, freelancers, and creative professionals to work in the same space for a fraction of the cost of traditional office space. These shared office spaces are increasingly popular since they offer budget-friendly opportunities to share ideas, collaborate on projects, and network with others in your field. There are many flexible membership options and benefits available.

You also can join collaborative communication and project management apps like Asana and Slack. These platforms allow team members to collaborate from multiple locations but on a much friendlier budget.

5. Equipment

One of the highest costs of any startup is the equipment, averaging from $10,000 to $125,000.

If you’re starting a landscaping company, you’ll need to purchase manual tools, a truck, and a trailer to transport everything. Or, if you’re opening a pizzeria, you’ll need ovens, utensils, and refrigerators.

Like other costs, equipment depends on industry and business type. Here are other ballpark startup costs by industry:

  • Arts and entertainment: $16,000
  • Real estate and property rentals: $75,000
  • Restaurants and hotels: $125,000

If you worry that you can’t afford essential equipment, you might benefit from applying for equipment financing (loans, leases, or lines of credit) to get started.

6. Advertising and promotion

There are many avenues for getting the word out. Traditional advertising might include business cards, direct mail, billboards, TV and radio ads. You might also try online advertising campaigns through Google Ads or add extra production costs for graphic design, photography, or videos. The average marketing budget for startups is 11.2% of overall revenue.

You can advertise your new business for free on social media (Facebook, Instagram, and LinkedIn) until your business starts generating attention and sales.

7. Payroll

If you’re hiring employees, you’ll need to pay them even if your business isn’t making money yet. You’ll have to account for benefits, bonuses, commissions, overtime pay, and paid time off. The Bureau of Labor Statistics says that benefits alone make up 31.8% of the cost of an employee on average.

Payroll costs will vary across startups. An employee will cost 1.25x to 1.4x their salary. Take an employee on a $40,000 salary, for example. That’ll actually cost you $54,000 after adding in various payroll tax costs and insurance. You should also be allocating an amount to pay yourself.

Learn more: Owner’s Draw vs. Salary: How to Pay Yourself

To make payroll easier, payroll software goes a long way in helping you plan out your costs.

8. Business insurance

Business insurance protects against unexpected costs that could run you out of business, like accidents, natural disasters, and lawsuits.

To get the best quote, you’ll need to contact different insurers. It’s best to research all options before landing on the insurance that will serve your business best. You’ll want to consider things like industry standards, your business size, how many employees you have, and other risk factors. For example, a sole proprietor running an e-commerce business will have fewer insurance requirements than a restaurant with multiple employees.

Here’s a breakdown of some of the insurance options you might be looking into for your business:

  • General liability insurance: roughly $400-$800 annually
  • Commercial property insurance: $300-$2,500 annually
  • Worker’s compensation: $0.75-$2.74 per $100 spent on payroll
  • Errors and omissions insurance: $2,000-$5,000 annually

9. Office supplies

Don’t overlook office supplies, as they can eat up a large chunk of your budget. If you have office space, employees will need desks, chairs, and computers. If you count office furniture, appliances, small office supplies (paper, staplers, pens), and computer software, it all adds up.

10. Bookkeeping

If you’re in the pre-revenue stage, you’re probably not thinking about your books yet—but you should be. Bookkeeping is a time-consuming, detail-oriented task. When you’re already hustling to launch your business, it can be easy for your financials to fall through the cracks.

Having someone (like Bench) do your books can take one more demanding thing off your plate. When tax season rolls around, your bookkeeper can help save you money in deductions on your tax return.

Make the numbers work from the start

Starting and maintaining a sustainable business doesn’t come cheap. But a little market research can uncover the startup costs that you’ll need before opening your doors, and you’ll be well on your way to business success.

Learn more:

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
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