Business Startup Costs Business Owners Need to Know

How much will it cost you to run a business? Of course, you can’t ever be sure but you can always estimate what it may cost to start and stay afloat. Startup cost is the minimum cost required to run a business. It varies depending on the type of business you will be running. In this article, we will break down the costs and highlight all the important things you need to keep in mind before starting a business.

Let’s dive deep into what startup cost actually is. It is generally defined as the cost before the business has even started running yet, also known as startup expenses, and the cost required to cover for operating expenses when the business is generating insufficient revenue, also known as startup assets. Startup costs require careful consideration and perfect accounting. Many businesses tend to ignore this extremely important factor, when starting a business, thinking that their sales will be sufficient enough to keep the business going but according to statistics, that has not been the case. You can start by breaking down costs and making lists and gradually work through them. Of course, the list will lack accuracy but will give you an idea of of the startup costs.

Research expenses

Scrutinizing the market and looking for scope and expected progress is very important before starting a business. Some businesses hire professionals to get this job done. For those who opt to hire these officials, this cost must also be included. The term research in this context also means market and product research, trademark searches, travel expenses, attendance cost at major events.

Legal expenses

Fees paid to lawyers and other business personnel to help decide the best business structure, obtain paperwork and agreements from the state, reserve its name, obtain EIN, draft charter documents of the company, and overall legalize your business. This category also includes payment of corporate charters, fictitious names, business licenses, tax registrations, etc.  It’s highly advisable to hire lawyers to check your terms of use and privacy policy.


Opening a business account requires a fixed service fee which is to be paid by the company every month. A business account becomes mandatory once the business is operational. They may also charge you an extra fee when you exceed the number of checks or deposits.

Pay Roll

The hired employees and other staff members need to be paid and their wages, salaries and benefits need to be planned. Failure to do so may lead to lethargy, unethical attitude of employees and an overall bad publicity which can be dangerous for the promotion of the company on larger platforms.


Rent needs to be paid before you have even started using the office. Sometimes, the owner might even expect an advance and all of that amount will be included in your startup expenses. This includes all the utility and other miscellaneous costs like parking fee etc.

Office Equipment

Equipment and basic supplies are a necessity in every office. Before adding these costs, you want to consider whether you want to lease or buy. This decision depends on your financial situation. However, it is advised that you purchase the items and only consider leasing if the item is of temporary use.

Startup Assets

These consists of things you require pre-launch like equipment, furniture, machinery as well as land. These costs are depreciated over time. Assets are not deductible against income.

Cash for Operating Expenses

These are the items that require payment either every month or every other month. Examples are Rent, Utilities, Marketing etc.

A detailed and precise Business Plan

A detailed and precise business plan which includes all the possible outcomes and backups is what is extremely crucial to run a business successfully. Miscalculation of expenses might lead to higher expectation of profit which will eventually lead to higher expenses: this whole scenario sounds nothing less than a disaster which is what will happen if you don’t have a good business plan. Of course, all the wide range of businesses require a wide range of startup costs, however, some costs are common to all business like

  1. Billboards and promotional activities
  2. Technological costs
  3. Borrowing Costs
  4. Branding, etc.

Do Not Delay Launch Date

One of the most fatal instances which often lead to the collapse of business before it even had the chance to flourish is a delay in the launch. Delays may not sound like a big deal to a non-entrepreneur, I mean, how bad can postponing it to the next day be, right? Delay in launch is BAD. Time is money. A day late means time and money, both, wasted. The booked location, the people hired from PR agencies, the decorators hired, and much more, all for that particular delay and it doesn’t happen. That’s a lot of revenue loss. Cherry on top would be that it also kills the vibe.


The amount of tax paid by companies impacts their investment and growth. Total tax often includes a profit tax, four labor taxes and contributions, a property tax, a turnover tax,  and technology, science tax and innovation tax. It is mandatory to pay these taxes as they contribute to the economic growth and development of a country. This money helps them fund social programs and public investments. It acts as a contract between citizens and the economy in order to allow the country to prosper.

It is important to highlight the fact that the cost or sole proprietorship will be very different from the startup cost of a partnership or corporation.


Hopefully, all this knowledge will help you safely analyze what kind of reality you are looking forward to, if you want to open a business.

Brad Nakase, Attorney

Free Consultation: 619-550-1321