Startup Costs: Where Do You Start?

1. Startup Costs: Where Do You Start? What is Business Start Up Costs? New companies may use startup expenses to significantly reduce corporate taxes, however there are restrictions and limitations on these expenditures. Startup expenses are amounts paid by the new business that go toward the purchase of assets and/or property required for business operations. These include inventory, office furniture, software, hardware, etc. In most cases, these funds are required within six months of opening a business. The purpose of incorporating is to register and retain control of your company, its assets and liabilities, and your business operations so that you will be responsible for all tax and SSA (Social Security) obligations associated with your company. All of these issues must be addressed before incorporation. To help with the burden of business startup fees, there are incorporation services available. These services provide an expedited filing and registration process for the new business owners, along with professional assistance in the preparation of their start your own business startup checklist. There are two basic areas to consider when calculating startup costs. These include start up marketing and promotional expenses. The first expense is the cost to purchase a commercial printer, fax machine, sign printer, etc. that will be used to maintain a website. While the cost of a website is primarily related to its maintenance, you may also need to spend money to obtain domain name registration and hosting. Taxes are another area to consider when calculating business startup costs. The first item you will need to deduct is the amount of tax required to start your business. You have two choices for deductions; you can choose to deduct the full amount of taxable income or take a standard deduction. If your taxable income is less than the filing status's threshold for personal exemption, you will also need to take a business asset exemption on your personal tax return. Be sure to consult a qualified tax professional to help you determine which deductions you are eligible to take. Business startup costs do not end with tax preparation. A large portion of the start up costs will be for business licenses. Many cities require new businesses to secure business licenses before they are allowed to operate. A qualified tax professional will be able to assist you in obtaining your business license.

2. The second area where you can expect to incur expenses when establishing your own business is operating expenses. While it might be nice to save money on office space and supplies, such expenses are necessary to make your business startup happen. While there are some great deals to be found through free or low-cost supplies, you'll still need to pay for basic office equipment, supplies, furniture and miscellaneous expenses. Be sure to estimate these expenses ahead of time so you don't end up spending more than you plan. When you are preparing your business startup costs, it's important to understand the difference between a consultant and an accountant. An accountant will generally handle the bookkeeping and payroll for your new business, while a consultant will be responsible for all of the above. If you're unfamiliar with the different startup costs associated with starting your own business, seek out the advice of a professional who can guide you through the process. This will allow you to understand the different areas that you need to consider when starting a new business. Whether or not you need to spend any money at all to get set up, there is one important area that every new business owner should consider - business startup expenses. These costs vary from city and state to city and county and are often the single largest expense you will have during the startup process. If you're ready to get started but aren't sure how much startup capital you'll need, use our affordable business startup costs worksheet to help you get started today. Contact us to learn more about how a business startup costs worksheet can help you with determining the startup capital you need.