While starting your own business can be a rewarding venture, it’s wise to take a step back and formulate a checklist of costs before you take the plunge. Credibility is everything to a new company with an as-yet unproven reputation. Bearing that in mind, it’s best to come forewarned and forearmed with knowledge of the costs you will incur and should have earmarked for at least the first 90 days of operation. Here are just a few of the initial expenses to consider when starting your own business.
Cost of Formation
Even a small company can benefit from incorporating. Doing so can help enhance a fledgling business’ credibility while providing protection of personal assets from lawsuits or claims by creditors. Additionally, incorporation affords businesses a lower tax rate, as well as obtaining a credit rating and ability to sell stock in the company.
Although your business itself may operate in a specific state or geographic region, you may elect to incorporate your business in a different state from where your business is housed. Many companies often choose to incorporate in Delaware.
So, with 49 other states in the country, why incorporate in Delaware? For starters, Delaware is one of the most inexpensive states where businesses can incorporate. It affords businesses a low franchise tax and has no sales tax or tax on capital stock. The state’s General Corporation Law, which provides flexible laws in terms of structuring and allocating rights among officers and shareholders, is another of the advantage which makes incorporating in Delaware so attractive.
Entities such as The Company Corporation can help new businesses throughout each step the formation process — from choosing a name; deciding whether their business should be structured as a Limited Liability Company (LLC), S-Corporation, non-profit, or other type of business entity; obtaining a Federal Employer Identification Number (FEIN); and other facets of the process. Companies such as these can help new business owners decide whether Delaware incorporation — or incorporating in another state would yield the most benefit. Aligning with an outside company to take care of incorporation needs can also alert the business owner to fees and licenses required that they might otherwise not be aware of.
While many new businesses often start as a single shingle based out of the owner’s home, some new enterprises may require space to accommodate several employees under one roof. While telecommuting has become more prevalent, many companies still prefer the traditional, brick-and-mortar office model where employees can collaborate in a face-to-face environment throughout the work week. Depending upon your budget and geographic location, leasing a temporary office space or executive suite may suit your needs. Another option is to lease space from a private landlord who specializes in industrial property. If renting an office space is beyond your business’ current means or needs, a virtual office (including services as an off-site receptionist and a professional address in a desirable business zip code) may be a cost-effective investment to consider.
Chances are, your company will have more than one employee. Consider costs of placing advertisements or headhunter fees involved with recruiting qualified talent. While the prospect of working for a start-up business is attractive to some experienced professionals despite the initial decrease in pay, you will still need to offer wages and/or benefits that are competitive with more established companies, as well as benefits. There are several professional employment and co-employment companies that can help new and smaller businesses provide an attractive benefits package to prospective employees at a reasonable rate.
Overhead and Equipment
In addition to office space, additional overhead costs must be considered. Depending on the number of employees you have and what is included in your lease, you may be responsible for furnishing desks, chairs, phones, computers, and other equipment to employees. Depending upon the size and industry in which your business operates, you may require office machines such as printers and scanners — and a service and/or tech support contract, should anything go wrong with the equipment.
Beyond office peripherals, if your lease does not include amenities such as heat, water, and electricity, these are additional costs you must be prepared for as part of your monthly business expenses. Do not forget to factor in the cost of internet and telephone services each month, as well.
The Company Corporation provides incorporation services and products to small businesses and entrepreneurs nationwide including incorporating in Delaware, Florida, and California. The Company Corporation offers products and services including permit assistance, corporate kits, certificates of good standing, and business education books.
Image Credit: Shutterstock.comSuscribe to the podcast