How Much Does It Cost to Start a Business?

You have the idea. You have the motivation. But somewhere between “I should start a business” and actually doing it, a very practical question shows up: How much is this going to cost me?

The answer depends enormously on what kind of business you’re starting. A freelance graphic designer working from a laptop has a very different cost structure than someone opening a brick and mortar bakery. But here’s the encouraging news: according to the U.S. Small Business Administration (SBA), most microbusinesses (those with fewer than 10 employees) can launch for under $3,000. Many online businesses start for well under $500.

This guide breaks down every common startup expense with real dollar amounts, so you can build a realistic budget before you spend a dime.

The Core Startup Costs Every Business Faces

Regardless of your business type, there are a handful of expenses that nearly every new business owner encounters. Let’s walk through them one by one.

1. Business Entity Formation (LLC Filing)

If you’re forming an LLC (which most new business owners should at least consider), you’ll need to file articles of organization with your state. Filing fees vary significantly by state.

LLC Formation Costs by State (2026):

State	Filing Fee	Notes
California	$70	Plus $800 annual franchise tax (first year waived for new LLCs formed in 2024 or earlier; check current rules)
New York	$200	Plus mandatory publication requirement ($1,000 to $2,000 in some counties)
Texas	$300	No state income tax
Florida	$125	Plus $138.75 annual report fee
Delaware	$90	Popular for corporations; less advantageous for small LLCs
Wyoming	$100	No state income tax, strong privacy protections
Colorado	$50	One of the cheapest states to file
Kentucky	$40	The lowest filing fee in the country
Massachusetts	$500	One of the most expensive states to file
Illinois	$150	Relatively straightforward process

Most states fall in the $50 to $300 range. You can file directly through your state’s Secretary of State website. Online formation services like LegalZoom, ZenBusiness, or Northwest Registered Agent charge $0 to $299 on top of the state fee, depending on the package. If your state’s filing process is straightforward (most are), you can save money by doing it yourself.

2. Employer Identification Number (EIN)

Your EIN is essentially a Social Security number for your business. You need one to open a business bank account, hire employees, and file business taxes.

Cost: $0. The IRS issues EINs for free through their website at irs.gov. The online application takes about five minutes and you get your number immediately. Do not pay a third party for this service. Any company charging you for an EIN is simply filling out the same free form on your behalf.

3. Business Bank Account

Separating your personal and business finances is not optional. It is one of the most important things you can do from day one. It simplifies taxes, protects your personal liability (especially with an LLC), and makes you look professional.

Cost: $0 to $25/month. Many banks offer free business checking accounts with no minimums. Some popular options:

• Mercury: Free, online only, popular with startups
• Relay: Free, designed for small businesses with smart budgeting features
• Chase Business Complete Banking: $15/month (waivable with $2,000 minimum balance)
• Local credit unions: Often free with low or no minimum balances

Most new business owners do fine with a free online business checking account to start.

4. Business Insurance

Your insurance needs depend on your business type, but here are the most common policies:

Insurance Type	Typical Annual Cost	Who Needs It
General liability	$300 to $1,000	Almost every business
Professional liability (E&O)	$500 to $1,500	Service providers, consultants, freelancers
Business owner’s policy (BOP)	$500 to $2,000	Businesses with a physical location
Workers’ compensation	Varies by state and payroll	Required if you have employees

If you’re a solo freelancer or consultant working from home, you may be able to start with just a general liability policy in the $300 to $600 per year range. Companies like Hiscox, Next Insurance, and Thimble offer affordable policies tailored to small businesses and solopreneurs.

5. Accounting and Bookkeeping Software

You need to track every dollar coming in and going out from day one. Not doing this is one of the most common (and most expensive) mistakes new business owners make.

Cost: $0 to $35/month.

• Wave: Free accounting software with invoicing. Great for freelancers and very small businesses.
• QuickBooks Self-Employed: $15/month. The industry standard for a reason.
• QuickBooks Simple Start: $30/month. Better for businesses with inventory or more complex needs.
• FreshBooks: $19/month. Strong invoicing features.
• A simple spreadsheet: $0. Honestly, for the first few months of a very simple business, a well-organized spreadsheet works fine.

At tax time, you’ll also need to decide between DIY tax filing ($50 to $200 for software like TurboTax Self-Employed) or hiring a CPA ($300 to $1,000 for a basic small business return). Many new business owners benefit from hiring a CPA for at least the first year to make sure everything is set up correctly.

6. Website and Online Presence

Nearly every business needs some kind of web presence, even if it is just a simple landing page.

Cost: $0 to $200/year for a basic site.

Component	Cost Range
Domain name	$10 to $15/year
Website hosting	$0 to $150/year (many platforms have free tiers)
Website builder	$0 to $200/year
Professional email (Google Workspace)	$84/year ($7/month)

If you’re building a simple brochure site or portfolio, platforms like Carrd ($19/year), WordPress.com (free tier available), or a single page site on Squarespace ($16/month) will get the job done. If you’re starting an e-commerce business, Shopify starts at $39/month and WooCommerce (on WordPress) can be set up for the cost of hosting alone.

7. Business Licenses and Permits

Depending on your location and industry, you may need local or state business licenses.

Cost: $25 to $500. A general business license in most cities costs $50 to $100. Some industries (food service, childcare, construction, real estate) require specialized licenses that can cost several hundred dollars. Check your city and county clerk’s website for specific requirements. The SBA’s website also maintains a directory of state and local licensing requirements.

Startup Costs by Business Type

Now let’s put it all together. Here’s what realistic first year costs look like for different types of businesses, based on data from the SBA, Shopify’s 2024 startup cost survey, and industry benchmarks.

Online Freelance or Consulting Business

This covers graphic designers, writers, web developers, marketing consultants, virtual assistants, and similar service businesses.

Expense	Cost
LLC formation	$50 to $300
Domain + website	$30 to $200
Professional email	$84
Accounting software	$0 to $180
Professional liability insurance	$500 to $1,500
Business cards and branding	$0 to $200
Software tools (project management, etc.)	$0 to $500
Total first year	$664 to $2,964

Many freelancers launch for under $500 by using free tools and skipping insurance initially (though insurance is strongly recommended if you’re providing professional advice or services).

E-commerce (Online Store)

Selling physical products online through your own store or platforms like Etsy and Amazon.

Expense	Cost
LLC formation	$50 to $300
E-commerce platform (Shopify/WooCommerce)	$0 to $468/year
Domain + hosting	$30 to $150
Initial inventory	$500 to $5,000
Product photography	$0 to $500
Shipping supplies	$100 to $500
General liability insurance	$300 to $600
Accounting software	$0 to $360
Marketing (ads, social media tools)	$0 to $2,000
Total first year	$980 to $9,878

Inventory is the wildcard here. Print on demand and dropshipping models can reduce that initial inventory cost to near zero, though margins are typically lower.

Content or Digital Product Business

Blogs, online courses, membership sites, and digital downloads (templates, ebooks, stock photos).

Expense	Cost
LLC formation	$50 to $300
Domain + hosting	$30 to $150
Email marketing platform	$0 to $300/year
Course platform (Teachable, Gumroad)	$0 to $468/year
Design tools (Canva Pro, etc.)	$0 to $130/year
Professional email	$84
Accounting software	$0 to $180
Total first year	$164 to $1,612

This is one of the lowest cost business models, which is why it is so popular. Your primary investment is time, not money.

Local Service Business

Think cleaning services, lawn care, tutoring, pet sitting, personal training, or handyman services.

Expense	Cost
LLC formation	$50 to $300
Business license	$50 to $200
General liability insurance	$400 to $1,200
Vehicle expenses (gas, maintenance)	$1,000 to $3,000
Equipment and supplies	$200 to $2,000
Simple website	$30 to $200
Business cards and flyers	$50 to $200
Accounting software	$0 to $180
Total first year	$1,780 to $7,280

Brick and Mortar Retail or Restaurant

This is where costs jump significantly.

Expense	Cost
LLC formation	$50 to $300
Lease deposit (first + last + security)	$3,000 to $15,000
Buildout and renovation	$5,000 to $50,000+
Equipment and fixtures	$2,000 to $25,000
Initial inventory	$2,000 to $20,000
Business owner’s policy insurance	$500 to $2,000
POS system	$500 to $2,000
Licenses and permits	$200 to $2,000
Signage	$200 to $2,000
Accounting + legal setup	$500 to $2,000
Marketing (grand opening)	$500 to $3,000
Total first year	$14,450 to $123,300

According to a 2024 survey by Guidant Financial, the average small business owner spends between $25,000 and $50,000 in the first year when opening a physical location. This is why many financial advisors recommend starting lean, testing your concept online or at pop-up locations, and scaling into a physical space only after you have proven demand.

Hidden Costs Most People Forget

Even with a thorough budget, new business owners are regularly caught off guard by these expenses.

Self-employment tax. If you’re used to W-2 employment, you’re about to discover that you now pay both the employee AND employer portions of Social Security and Medicare. That is 15.3% on top of your income tax. On $60,000 of profit, that is roughly $8,478 in self-employment tax alone. Set aside 25% to 30% of your profits for taxes from day one.

Quarterly estimated tax payments. The IRS expects you to pay taxes throughout the year via quarterly estimated payments (due in April, June, September, and January). Miss these deadlines and you will owe penalties and interest.

Health insurance. If you’re leaving an employer, you’ll need to budget for individual health insurance. According to KFF, the average annual premium for individual marketplace coverage was approximately $7,900 in 2024, though subsidies through the ACA marketplace can reduce this significantly based on your income. Budget $200 to $800 per month depending on your situation.

Retirement savings. No more employer 401(k) match. You’ll want to set up a Solo 401(k) or SEP IRA and contribute consistently. The money has to come from your business revenue.

Software subscription creep. It starts with one $15/month tool and before you know it, you’re spending $300/month on subscriptions. Audit your tools quarterly and cancel anything you’re not actively using.

How to Fund Your Startup

You don’t need to have all the money upfront. Here are the most common funding paths for small businesses, from lowest risk to highest:

1. Self-funding (bootstrapping). The most common approach. According to the Kauffman Foundation, about 75% of new businesses are funded primarily by the founder’s personal savings.
2. Side hustle first. Start the business while you still have a full-time job. Build revenue before you make the leap.
3. Small business grants. Federal, state, and local grants exist for specific demographics and industries. Grants.gov and your state’s economic development office are good starting points.
4. Small business loans. SBA microloans range from $500 to $50,000 with competitive rates. Traditional bank loans are also an option if you have good credit and a solid business plan.
5. Business credit cards. Useful for managing cash flow and earning rewards on business purchases, but dangerous if you carry balances. The average business credit card interest rate in 2025 was approximately 22%, according to Bankrate.
6. Friends and family. If you go this route, put the terms in writing. Treat it as a formal loan or investment, not a handshake deal.

Your First Month Startup Checklist

Here is a practical order of operations for launching with minimal waste:

1. Decide on your business structure (see our guide on LLC vs. sole proprietorship)
2. File your LLC (or register your sole proprietorship, if applicable)
3. Get your EIN from the IRS (free, takes five minutes)
4. Open a business bank account (free options available)
5. Set up basic accounting (even a spreadsheet counts)
6. Get business insurance (at minimum, general liability)
7. Register your domain and set up a basic website
8. Set up a professional email address
9. Research any required licenses or permits
10. Set aside 25% to 30% of projected revenue for taxes

The Bottom Line

Starting a business does not have to be expensive. A freelance or online business can launch for a few hundred dollars. Even a local service business can get off the ground for under $3,000 if you’re strategic about spending.

The most important thing is to know your numbers before you start spending. Write down every expected expense, add a 20% buffer for surprises, and make sure you have enough personal savings to cover your living expenses for at least three to six months while the business gets traction.

The businesses that survive aren’t always the ones with the most funding. They’re the ones that manage their money well from the very beginning.

This guide is for informational purposes only and does not constitute financial or legal advice. Consult a licensed financial advisor or attorney for guidance specific to your situation. Costs cited reflect 2025/2026 estimates and may vary by location.