MJust eleven business inquiries averaged 430,000 nationwide in November, according to the US Census Bureau. This is the 11th consecutive month with numbers well above the 342,000 of December 2020. While starting a business is exciting, it can also be more difficult than you expected. And because about a third of businesses with employees fail in the first two years, according to the Small Business Administration Advocacy Office, it’s important to get all the benefits you can get.
Knowing the cost of running your business is essential. Engaging business experts and performing due diligence can keep you from being caught off guard by industry specific costs like customs brokerage services, music streaming licenses, and more.
Often overlooked expenses
Rent, utilities and equipment are well known business start-up costs, but there are less obvious expenses that can be overlooked.
Licenses and permits
You may need to register your business in the state and city where it is located. The fees you pay may vary and may depend on whether you plan to operate as a partnership, corporation, nonprofit, or limited liability company.
For example, in New Jersey, a for-profit LLC will pay a $ 125 fee to register, Tennessee charges a $ 300 application fee, and San Diego charges all businesses operating within the boundaries of $ 34. city for a business tax certificate.
Additional licenses and permits may also be required depending on business activities. For example, a business selling alcoholic beverages must meet the requirements of the Treasury Department’s Office of Alcohol and Tobacco Tax and Trade as well as state and local regulations, and a business operating an oversized vehicle will often need assistance. ‘a state permit.
Most businesses will need more than one type of business insurance, such as general liability, professional liability, commercial automobile and commercial real estate. Some coverages can be bundled into a business owner’s insurance policy to save money.
When you operate a business from your home, a home business insurance rider may be required to supplement your home insurance policy. If you have employees, don’t neglect workers’ compensation insurance, which is required in most states.
You will typically pay monthly fees for accounting, payroll, and other business software. If you select a point of sale system To accept customer payments, expect to pay a processing fee for each debit and credit card transaction. This expense can be significant if your business has a large volume of card transactions.
Social security and health insurance taxes
When you are self-employed, you pay a self-employment tax rate of 15.3% on your net income. It is 12.4% for social security and 2.9% for health insurance. If you have employees, this cost is shared between the employee and the employer. As an employer, you contribute 6.2% of employees’ wages for social security and 1.45% for health insurance. Federal and state unemployment taxes are other costs that you may need to include in your budget.
Discover additional costs
Every business is unique and operating expenses can depend on industry, location, size, sales channel, and other factors. To learn more about the specific costs associated with start a business, you may need to rely on the experience of others and your own research.
Chat with an expert
The SBA is a great resource. You can get free business advice through partner agencies: Small Business Development Centers, Women’s Business Centers, and Veteran Business Awareness Centers. Business advisers at these centers can help identify lesser-known costs of starting a business, such as opening expenses, employee training, and manager certifications.
“If you’ve never run a business before, you’ve got a huge learning curve,” says Richard Sifuentes, director of the University of Texas at the San Antonio Small Business Development Center. If a person lacks knowledge of the sector, Sifuentes suggests hiring someone as a manager or staff member with experience in the field or with a job in the field for a short period.
“One of the biggest mistakes people make is not budgeting for three to six months of working capital,” says Sifuentes. This pool of funds can be used for the first few months of operation before sales revenues are sufficient to cover costs. An additional amount could be added to this reserve to cover possible unforeseen expenses, says Sifuentes.
Whether you’re buying a business, acquiring existing inventory, or agreeing to transfer a liquor license, you don’t want to be surprised with back taxes, liens, or other liabilities. Research a business thoroughly before going ahead. The information can be found through a title firm if real estate is involved or through online searches and public records.
“You don’t want to find yourself in a position where you buy a business and now you’re responsible for something the previous owner overlooked,” says Marlo Richardson, founder of Business Bullish, a free online resource for people interested in start a business. .
“Be patient. Don’t rush through the process,” she adds. “It’s a very exciting experience, but it can also be a waste of a lot of money. Just take your time and make sure you do everything.”
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Lisa Anthony writes for NerdWallet. Email: email@example.com.
The article How to Find the Hidden Costs of Starting a Small Business originally appeared on NerdWallet.
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