How Much Does It Cost to Start a Business? Real Numbers

"How much does it cost to start a business?" is one of the most searched questions in entrepreneurship and one of the worst served. Most answers give you a single number — and a single number is useless, because the honest range runs from roughly a hundred dollars to several hundred thousand depending entirely on what you are building.

What actually helps is knowing which costs are unavoidable regardless of business type, which are specific to your model, and which ones catch people out because nobody warned them. This guide covers all three, with real figures and sources.

One thing worth naming first: cost is the most commonly cited barrier to starting, and it is also the most commonly overestimated one. In the Harris Poll conducted for Zapier, 63% of Americans who never pursued their business idea named lack of funding as the reason (The Harris Poll for Zapier, 2,001 U.S. adults, December 2020). Some of those businesses genuinely needed capital. Many did not — they needed a smaller first version.

The costs almost every business has

Regardless of what you are building, this is the floor. These are the line items that apply to a freelance consultant and a restaurant alike.

Business registration

If you form an LLC, you pay a state filing fee. This varies more than people expect: filing fees range from $35 to $500 depending on the state, with a national average around $132 (LLC University, 2026). Montana is currently the cheapest at $35; Massachusetts the most expensive at $500.

Critically, that is the one-off cost. Most states also charge an ongoing annual or biennial fee — an annual report, franchise tax or similar. Some states charge nothing. California charges an $800 annual franchise tax; Delaware charges $400 a year. Budget for the recurring cost, not just the formation cost.

A sole proprietorship costs nothing to form, though you may still need a "doing business as" registration, typically $10–$100.

Do not form your LLC in a "cheap" state you do not operate in. You will end up registered as a foreign entity in your actual state and paying both sets of fees.

Licences and permits

Enormously variable and almost entirely local. A freelance writer may need nothing. A food business needs health permits, and often a commercial kitchen. A contractor needs state licensing. Check city, county and state — all three — because requirements stack.

Business bank account

Often free. Many banks and online providers offer no-fee business checking. Some charge a monthly maintenance fee waived above a minimum balance. There is no good reason to run business money through a personal account, and it will cost you at tax time.

Insurance

General liability is the common baseline. Professional liability matters if you give advice. Both are underrated: one claim without coverage ends most early businesses. Get quotes early — it is usually less than founders assume, and it is not optional in most client contracts.

Accounting

Software subscriptions for basic bookkeeping are modest monthly costs. A tax professional for your first business return costs meaningfully more and is generally worth it — first-year business taxes have traps.

Web presence

A domain is a small annual cost. Hosting is modest. Website builders charge monthly. A custom-built site is a different order of magnitude entirely. Early on, a simple site you build yourself is almost always the correct call — you will change your positioning three times in year one and rebuilding a custom site each time is wasted money.

Cost by business type

This is where the ranges diverge sharply. The figures below are directional planning ranges for the first year, not quotes — local costs vary enormously.

The pattern is straightforward: cost scales with physical footprint and inventory. Anything requiring a lease, stock or a kitchen sits an order of magnitude above anything that does not.

If cost is your binding constraint, that is not a reason to abandon the idea — it is information about which version to start with. Our guide to starting a business with no money and our list of small business ideas for beginners both work through low-capital routes.

The costs nobody warns you about

These are the ones that break first-year budgets, because they are invisible until they arrive.

Self-employment tax

When you are employed, your employer pays half of Social Security and Medicare. Self-employed, you pay both halves. This surprises nearly every first-year founder and it is a substantial percentage of net earnings. Set money aside from your first invoice.

Quarterly estimated taxes

You do not pay annually. You pay quarterly, in advance, based on estimates. Miss them and you owe penalties on top of the tax.

Payment processing

Every card transaction takes a percentage plus a fixed fee. On thin margins this matters far more than it appears — a few percent off the top of every sale is not a rounding error.

Software creep

Individually trivial monthly subscriptions that collectively become one of the larger recurring line items by month twelve. Audit them quarterly. Our roundup of tools every entrepreneur needs before launching is deliberately short for this reason.

Your own unpaid time

The largest cost in almost every early business, and the one nobody puts in the spreadsheet. If you spend six months building this while earning nothing, that foregone income is a real cost. It does not mean don't do it — it means count it honestly, particularly when comparing against building alongside a job.

The cost of being wrong

Most first ideas change. Money spent on branding, inventory or a custom website before you have validated demand is frequently money spent on a version of the business that will not exist in nine months. This is the strongest single argument for spending as little as possible until someone has paid you.

How to spend dramatically less

Sell before you build

The cheapest validation is someone paying you before the thing fully exists. Presales, a pilot client, a waiting list. If nobody will pay in advance, that is information worth far more than the money you were about to spend.

Start with the smallest honest version

Not a worse version — a smaller one. One product instead of a range. One service instead of a menu. A market stall instead of a lease. You can add later; unwinding a lease is harder.

Use the free help that already exists

SCORE and Small Business Development Centers provide free counselling funded through the SBA, including help building financial projections (SBA resource partners). Many public libraries provide free access to market research databases that cost thousands commercially. Paying a consultant for work you can get free is a common and avoidable early mistake.

Buy used, rent, and borrow

Equipment depreciates immediately. Restaurant closures supply excellent used kitchen equipment. Commercial kitchens rent by the hour. Co-working beats a lease until headcount forces the issue.

Delay incorporation until it earns its keep

An LLC provides liability protection worth having — but if you are still testing whether anyone wants this, a sole proprietorship costs nothing and converts later. Weigh actual liability exposure rather than the feeling of legitimacy.

Working out your own number

Build three figures, not one:

• Launch cost — everything required before your first customer can buy.
• Monthly burn — everything you must pay each month regardless of sales.
• Runway — months of burn you can cover before revenue must arrive.

Runway is the number that actually determines survival. A business with low launch costs and twelve months of runway is in a far stronger position than one with the same launch cost and two months. Then add 20–30% contingency, because your estimate is optimistic. Everyone's is.

Our business roadmap template and 90-day goal setting template both help sequence spending against milestones rather than spending everything up front.

The number that matters more than the number

Most people asking this question are not really doing budgeting. They are looking for permission — trying to find out whether this is possible for someone in their situation.

For a large share of business types, the honest answer is that the financial barrier is far lower than assumed. Funding is the most cited reason people never start, and for service businesses in particular it is frequently not the real one. The real barrier is more often not knowing the sequence, and having nobody to check the plan with.

Money is a solvable constraint. Work out your three numbers, start with the smallest honest version, and use the free help before you pay for any.

If you want the sequence mapped out rather than assembled from scratch, that is what SideKix does. Browse the free templates, or read where to get help starting a business.