How Much Does It Cost to Start a Business? 11 Startup Expenses to Know

Starting a business requires careful planning, and one of the most important steps is understanding the costs involved. Whether you’re launching an online service or opening a physical storefront, knowing what to expect financially can help you avoid surprises and build a stronger foundation for long-term growth.

While exact costs vary depending on your industry, location, and business model, many expenses are common across most startups. Below is a breakdown of 11 typical startup costs, along with budgeting insights to help you plan effectively.

1. Business Registration and Licensing Fees: $50–$800+

Before you can begin operating legally, you’ll need to register your business and obtain the required licenses and permits. These costs depend on your state, your business structure, and your industry.

For example, registering a limited liability company (LLC) can cost anywhere from $50 to $500 depending on your state. If you’re entering a regulated industry—such as food service, construction, or healthcare—you may need special licenses or permits that carry additional fees.

Other costs to consider:

• Filing a DBA (“Doing Business As”) if you plan to operate under a different name
• Local permits for zoning or signage
• Federal registration such as an EIN (Employer Identification Number), which is free but often required

Handling these administrative tasks early ensures you’re compliant from day one and avoids costly delays or penalties.

2. Legal and Accounting Services: $500–$5,000+

Setting up a business often requires legal and financial guidance, especially if you’re forming an LLC, corporation, or partnership. Professional support at this stage can help you avoid costly mistakes and ensure your business is compliant from the start.

Legal costs may include:

• Drafting and filing incorporation documents
• Creating partnership or operating agreements
• Reviewing contracts or leases

For accounting, new businesses typically need help with:

• Choosing a tax structure
• Setting up a bookkeeping system
• Preparing for quarterly or annual filings

While online services can offer basic incorporation packages for a few hundred dollars, hiring a dedicated attorney or CPA will raise the cost but may be worthwhile for more complex needs. Businesses in highly regulated industries or with multiple partners should expect to pay on the higher end of the range.

3. Office or Retail Space: $500–$10,000+ (monthly)

If your business requires a physical location, rent will likely be one of your largest recurring expenses. Costs vary widely depending on city, square footage, and whether the space is office, retail, or industrial.

Commercial leases typically require:

• First and last month’s rent upfront
• A security deposit
• Possible build-out or renovation costs

Location matters. A storefront in a high-traffic urban area could cost several thousand dollars per month, while a small office in a suburban setting might run closer to $500–$1,500.

For solopreneurs or remote teams, working from home can significantly reduce overhead. In some cases, coworking spaces or flexible leases may offer a cost-effective middle ground.

4. Equipment and Supplies: $500–$20,000+

Most businesses require at least some basic equipment and materials to operate. These costs can range from modest to substantial depending on your industry and business model.

Common startup purchases include:

• Computers, monitors, printers, and networking hardware
• Office furniture such as desks, chairs, and storage
• Industry-specific tools or machinery (e.g., restaurant kitchen appliances, salon stations, manufacturing equipment)

In addition to larger equipment, you’ll also need to budget for everyday supplies like stationery, cleaning products, packaging materials, or safety gear.

Some equipment can be leased or financed to reduce upfront costs, but you’ll still need capital for deposits, delivery, and setup.

5. Inventory: $1,000–$30,000+

If your business sells physical products, purchasing initial inventory is a major upfront cost. The amount you need will depend on your product type, supplier terms, and expected sales volume.

Initial inventory expenses may include:

• Raw materials or finished goods
• Bulk purchases from wholesalers
• Shipping and freight charges
• Storage or warehousing fees

Retailers and e-commerce businesses often invest heavily in inventory early on to meet demand and qualify for volume discounts. However, overstocking can tie up cash and lead to storage challenges—especially if your products are perishable or seasonal.

If possible, consider starting with a lean inventory strategy and scaling as customer demand becomes clearer.

6. Marketing and Advertising: $500–$10,000+

Getting the word out about your business is essential, especially in the early stages. Marketing and advertising costs can vary based on your strategy, channels, and whether you hire outside help.

Common early-stage marketing expenses include:

• Logo and brand design
• Website development and domain hosting
• Paid advertising (e.g., Google Ads, Facebook/Instagram ads)
• Social media content creation or influencer partnerships
• Printing business cards, signage, or promotional materials

While some entrepreneurs manage these tasks on their own, hiring a freelance marketer or agency can increase visibility more quickly—but at a higher cost. A strong marketing plan can accelerate customer acquisition, so it’s important to budget accordingly.

7. Technology and Software: $300–$5,000+

Modern businesses rely on digital tools to operate efficiently. From day one, you’ll likely need software for communication, customer management, and financial tracking.

Common startup tech expenses include:

• Accounting software (e.g., QuickBooks, Xero)
• Customer Relationship Management (CRM) systems
• Project management tools (e.g., Asana, Trello)
• Email and collaboration platforms (e.g., Google Workspace, Microsoft 365)
• Cybersecurity tools and cloud storage

Some tools offer free tiers, but most business-grade software requires monthly or annual subscriptions. Costs add up quickly if you need multiple platforms or advanced features.

For tech-driven startups, custom software development or integrations can push this cost even higher.

8. Insurance: $500–$5,000+ (yearly)

Business insurance is a critical but often overlooked startup cost. It protects you from legal claims, property damage, employee injuries, and other unforeseen risks that could disrupt or sink your business.

Key policies to consider include:

• General liability insurance: Covers third-party injuries or property damage
• Professional liability insurance: Protects against service-related claims (important for consultants or agencies)
• Commercial property insurance: Covers your physical assets, including equipment and inventory
• Workers’ compensation: Required in most states if you have employees
• Cyber liability insurance: Increasingly important for online businesses handling sensitive data

Premiums vary widely based on your location, industry, number of employees, and coverage limits. Many providers offer bundled plans for small businesses to keep costs manageable.

9. Employee Salaries and Benefits: $3,000–$20,000+ (monthly)

If you plan to hire employees, labor costs will quickly become one of your largest operating expenses. Salaries vary depending on role, experience level, and location, but even a small team can add significant monthly overhead.

Key expenses include:

• Base wages or salaries
• Payroll taxes (Social Security, Medicare, state unemployment)
• Benefits such as health insurance, retirement plans, and paid time off
• Recruitment and onboarding costs
  

For many startups, hiring begins with one or two key employees—often in sales, operations, or technical roles. Even if you’re starting with contractors or freelancers, you’ll still need to budget for hourly rates and potential retainer agreements.

Additionally, setting up a payroll system or outsourcing payroll processing may come with initial setup and monthly service fees.

10. Working Capital and Emergency Fund: $2,500–$50,000+

Even with careful planning, most businesses experience uneven cash flow during their first year. Setting aside working capital helps cover day-to-day expenses while revenue ramps up. An emergency fund acts as a financial cushion for unexpected challenges.

Working capital may be used for:

• Rent, utilities, and payroll during slower months
• Replenishing inventory
• Covering marketing or operational shortfalls
• Managing delayed customer payments

Financial experts often recommend budgeting enough to cover at least 3 to 6 months of operating costs. This buffer can make a significant difference in staying afloat while building your customer base.

If you plan to apply for financing, showing that you’ve accounted for working capital also strengthens your business plan in the eyes of lenders or investors.

11. Utilities and Ongoing Overhead: $200–$2,000+ (monthly)

In addition to rent and salaries, businesses incur recurring monthly costs to keep operations running. These overhead expenses may seem small individually but can add up quickly over time.

Common utility and overhead costs include:

• Electricity, water, and gas (especially for physical locations)
• Internet and phone service
• Waste disposal or recycling services
• Office cleaning or maintenance
• Software renewals and cloud service fees

For home-based businesses, some of these costs may be shared with personal use—but it’s still important to account for the portion attributable to your business. Budgeting for overhead ensures that your day-to-day operations remain stable and uninterrupted.