Business Start-Up Costs: What You Should Plan For
Before you can do the first thing, you must determine what type of business you are going to run, how you are going to run the business, and where you are going to conduct business. All of this has an effect on start-up costs. A brick-and-mortar business has higher start-up costs than a home-based business. A business that provides products and requires you to keep inventory costs more than a business with service only even if you must have a small inventory of things used in your service.
Taxes and licenses vary from state to state and even from county to county. Overhead also varies depending on location. A location in
one part of a city may be thousands more per month than a location three blocks away.
Depending on the size and scope of your business, you may also have research start-up costs. Whether you do the research yourself or hire a company to do it, you will have some costs involved. Even if you start small, you can grow big. Steve Jobs started a small business in his garage, and it grew to be one of the largest businesses in the world.
Planning
You can only determine what your start-up costs are if you know what you need to pay for. Make a checklist of everything you need and as you determine the cost for each item on the checklist add the cost. This ensures that you do not forget anything. As you find out more information, you can add it to the checklist. For example, you may know you need an occupational license, but you may not know you need a license from the Department of Agriculture for your business. A checklist allows you to add this on as you go and to figure that cost in.
- Developing a Start-Up Cash Flow Projection
- A Collection of Resources: All About Business Startups
- The Basics to Starting a Business
- Budgeting Tips for Startup Businesses
- Start-Up Worksheet for Opening a Small Business
Choosing a Business Entity
One of the start-up costs is registering your business entity. You must choose whether you want to form a corporation, a non-profit corporation, a partnership, a sole proprietorship, an LLC or an LLP. The cost varies between entities and also varies from state to state.
Many states have information about the formation of a business entity on their Secretary of State’s web page. If you are not
sure which entity is best for you, consult an attorney for an explanation of each entity and their tax structures. Add the consultation fee or retainer for the attorney into your start-up costs.
- Forming Your Business: Choosing Your Business Structure
- Business Entity Planning Worksheet
- What Are the Different Types of Business Entity Structures?
- Four Advantages of a Corporation over Other Organizational Forms
- A Comparison of S Corporations and C Corporations
- How to Start a Limited Liability Partnership
- Tax Advantages of an LLC
- Corporate Taxation Variations
Business Licenses
You must have certain business licenses to start-up the business, and each license has its cost. Cost varies from state to state, county to county, and city to city for the various licenses. You may also be required to obtain a special license; for example, if your new business is a wholesale business, you may be required to obtain a wholesaler’s license.
Other licenses include occupational licenses, licenses from the Department of Agriculture, OSHA licensing, and various other state licenses. Also, if you specialize in certain industries, you will need to obtain those licenses.
For instance, if you open an auto repair shop, you need a MACS license for air conditioning and you, or at least one technician employee, should be A.S.E. certified.
- What Permits or Licenses Do I Need for My New Business?
- Buying a New Business? This Guide Will Better Prepare You
- Do You Need a Wholesale License?
What Do You Need to Start Your Business?
As mentioned, each business has its own costs depending on what service or product you are offering. Certain businesses have additional costs because those businesses use chemicals or have to discard chemicals. For example, an auto shop must make provisions to discard oil and antifreeze and must have garagekeeper’s insurance.
A business that offers writing services or legal services doesn’t require special licenses for chemicals nor does it require that you are insured although it is probably a good idea to get insurance. A restaurant or a mobile food vending service must obtain certain licenses and insurance. All these costs must be figured into start-up costs.
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- The Basics of Starting a Franchise Business
- Starting a Web Design Business
- Creating a Checklist for Starting a New Business
- How to Start a Tourism Business
- Starting a Sole Proprietorship Business
- How to Start a Home Healthcare Business
- How to Get Started: Your Own Medical Billing Business
- Starting a Pre-Paid Legal Services Business
Considerations
Other start-up costs include computer hardware and software, phone systems, office supplies and if your business requires it, transportation. Keep a list of what you’ve done and what needs to be done, so you can keep a handle on the costs to start your business.
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References
- Photo: Steve Jobs and Bill Gates by Joi Ito under CC-BY-2.0
- Photo: SBA Logo by U.S. Government under Public Domain
- Author’s experience.
