Starting a business is an exciting and daunting adventure. You are putting everything on the line to make your mark on the economy. However, if you have never owned a business, you may not consider a few of the costs that startups face.
Legal Fees
When you initially start your company, you may have a lawyer help you set everything up. However, as your company grows, you may need additional legal advice and help, especially when it comes to drawing up and reviewing contracts. Most corporate attorneys charge up to $500 per hour. If you are in an industry with high risk, you may need more legal help than those in other industries. These costs add up quickly, so set aside a legal fund.
Business Insurance
Most companies need some form of insurance. You may have disaster, property, unemployment, health and unemployment insurance. Each type of insurance has its own costs, which are typically based on risk within the industry or location. For example, property insurance may be more expensive in states in tornado alley than in northern states that don’t receive regular tornados. In addition, health insurance will be higher in areas with lower population density than in large cities.
Therefore, be sure to accurately calculate all the insurance costs you could face as you open your company.
Taxes
One of the major costs that many small businesses and startups forget about is taxes. You will pay yearly unemployment and company taxes, and you won’t get out of paying just because your company has marginal or no profits. You may still face sales and income tax in these cases. If you own an LLC, sole proprietorship or partnership, you will also face self-employment taxes.
An experienced accountant or attorney can help you prepare for your tax responsibilities.
Licensing and Professional Fees
At the start of your business, you will pay licensing fees, but these fees are recurring, so every year, you need to pay additional fees. In addition, you may have city or county licensing fees that are due regularly. You may also need permits for building or operating your company in some areas. Consider a restaurant that wants to serve alcohol. Gaining an alcohol permit may be costly. In addition, manufacturers typically need special permitting and licensing from the city or county they operate in.
To gather information about all the hidden costs and fees you may face, consider working with an experienced attorney or a consulting company that guides new businesses.