Startup 101: 25 Hidden Costs of Starting a New Business

If you’ve set aside some money and have a budget in mind for starting your own company, it’s important to consider the hidden business startup costs. Calculating all your expenses beforehand will ensure that you have the money you’ll need to keep the wheels turning well into the future. While there will be variances based on the type of business you plan to run, the following are the 25 most common hidden costs of a business startup.

Key Takeaways There are daily, monthly and annual fees for running a business. Some costs deserve a larger portion of a budget over others, and the type of business you own will dictate which expenses to prioritize. Having a sound budget will prevent payment delays which can lead to hefty fines and even bankruptcy.

1. Research

Even before you set up shop, even if it’s a digital company or a service you provide, you’ll need to know who your customers are. Market research firms charge a bundle and even if you’re doing the research yourself, there will be costs. You can generally expect to pay a market research company $20,000 to $50,000 for a qualitative or quantitative custom market research project based specifically on your brand. Short online surveys may cost $15,000 to $30,000. ⁽¹⁾ 

Of course, you will find lower rates, based on factors like, how challenging it is to compile the data and how many hours it takes to create the studies and surveys. For instance, it may only cost $1,000 to $10,000 for a basic report. ⁽²⁾Your needs will greatly affect the price you’re quoted, as will the company you choose to work with. 

Alternatively, you can do your own market research using tools like Survey Monkey. This method will cost you time over actual cash but you’ll need to hustle hard to get large enough data sets for the effort to be worthwhile.

2. Getting the Right Permits

Most businesses need a permit or several to operate legally, and the cost of permits is wide-ranging, depending on where you live and the type of permit needed. Permits can cost as little as a couple of hundred dollars or $10,000. 

Even if you plan to run a home-based business, you may need a permit to operate and only if you’re not breaking the zoning laws.

You’ll need a seller’s permit to sell or lease just about any tangible item that is taxable.

If you live in a school district, you may be restricted from certain types of permits.

The best place to start figuring out which permits you need is to visit your state and local government websites, like the Office of Small Business or contact the local planning and zoning department  in your area for more detailed information.

Depending on the type of business you plan to open, the following are common types of permits you may need:

• Zoning permit

• Building permit

• Sign permit

• Health permit

• Fire department permit

• Fictitious business name permit

• Seller’s permit

3. Incorporation Costs

You will have more personal liability protection if you incorporate your business. There are potential tax benefits too. Filing fees alone will cost anywhere from $50 to $500, on average, and much more in some states. There is an annual filing fee as well, as set by the local government. ⁽³⁾ Most businesses should expect to pay less than $300.

Limited liability companies (LLCs) are an inexpensive alternative to forming a corporation and a great option for many small businesses.

4. Getting Licensed

For different types of companies, there may be licensing requirements, so it’s important to do the research about your industry because you may need to pass trade-specific licensing exams. 

Let’s say you are an insurance agent opening their first agency: You’ll need to get licensed in the states where you plan to sell policies, and each license may cost a few hundred dollars. It costs roughly $525 to get licensed as a real estate agent. ⁽²⁰⁾

Some businesses in agriculture and certain types of transportation and cargo-transport companies require federal licensing. 

State business licenses range from $50 to $500, depending on the location and type of business. ⁽⁴⁾

5. Annual Dues

The average annual filing fee for an LLC in the U.S. is $91 but this fee ranges widely based on where the business is located. It’s as high as $800 in California! ⁽⁵⁾ 

In some states, you only pay dues every two years, not annually. Zoning may determine some annual local fees.(see above under Getting the Right Permits).

6. Business Property or Equipment

Business equipment costs will range anywhere between $10,000 and $125,000. ⁽⁶⁾ Even a bare-bones office or agency needs computers and computer equipment, furniture and perhaps a xerox or fax machine. A restaurant will have to finance an efficiently running commercial kitchen and dining area, as well as dishes, cutlery, cooking equipment and more. A dog groomer will need shears, dog grooming arms, clippers and blowdryers. They may also need to invest in spe

The average annual filing fee for an LLC in the U.S. is $91 but this fee ranges widely based on where the business is located. It’s as high as $800 in California!

cial sinks to accommodate larger dogs or even a trailer, if it’s a mobile grooming business. 

Some people buy existing businesses that already have all the equipment they’ll need and the depreciated cost will most likely be included in the sale of that business.

7. Business Insurance

General Liability

Most businesses have general liability coverage at the very least. General liability covers bodily injuries and property damage to third parties, not employees. A simple slip-and-fall accident can be costly. Employees are covered with workers compensation. General liability also covers reputational harm, which includes malicious prosecution, libel, slander, wrongful eviction, privacy violations and more. 

General liability insurance can also cover advertising injury, say, if you injure the reputation of a competitor. 

Commercial Property

Business property coverage includes the building or unit the business is located in and improvements made to a leased commercial space. Commercial property insurance also includes equipment, supplies, furniture and any other tangible assets.

Business Income

Business income coverage will cover lost revenue triggered by a covered peril. It also covers operating expenses with fixed costs, like a mortgage, payroll, business loan payments and more. If your work space becomes uninhabitable and you need to move, business income coverage may help with relocation and advertising costs to reestablish you in a new location.

Workers’ Comp

If your business has even one employee, workers’ compensation is required by law in most states. Workers compensation offers insurance coverage for when employees become ill or injured on the job. It also covers employees’ medical costs and a portion of their lost wages. 

Workers compensation includes employee rehabilitation and death benefits to families of employees if their death is due to the job.  

Professional Liability

Professional liability insurance covers errors and omissions in the services your business provides. If an accountant omits important information on taxes and the taxpayer is penalized for the omission, the account or accounting firm with this coverage can cover that loss, with a higher likelihood of not losing that person’s business.

Professional liability insurance will cover legal defense bills if the errors and omissions lead to a lawsuit.

Professions that utilize professional liability insurance include:

• Legal professionals and law firms

• Consultants 

• Accountants and other tax preparation professionals

• Home inspectors

• Internet technology professionals

• Website developers

• Doctors

• Chiropractors

• Medspas

Mistakes covered by professional liability insurance:

• Negligent professional services

• Breaking a contract

• Turning in incomplete or subpar work

• Mistakes or omissions in the services rendered

• Third-party financial losses due to services (sometimes even product)

• Missing deadlines

Product Liability

Businesses that manufacture, distribute and sell products are open to lawsuits due to injuries and damages caused by the product. Legal fees are covered with product liability insurance.

Cyber Liability

In 2020, one in six businesses fell victim to cyberattacks or faced ransomware, and 28% of breaches targeted small businesses. ⁽²²⁾ Cyber liability coverage can help you handle breaches, by helping you issue state-mandated customer notifications to recover compromised data. Insurance providers can reimburse you for lost funds, such as a loss of productivity and customers, even lawsuits.

Commercial Auto

If you have an accident in a vehicle while conducting a work-related activity, you will not be covered with your personal car insurance policy. A commercial auto insurance policy covers vehicles that you own, lease or rent for your business. A commercial auto insurance policy covers liability, collision, comprehensive, personal injury protection and uninsured and underinsured motorist coverages.

Commercial Umbrella

A commercial umbrella policy will ensure that your business does not take a financial hit if your losses exceed the limits placed on any of the above-mentioned coverages. If you do reach limits, commercial umbrella coverage will pay the rest, but again, up to limits.

Most businesses have general liability coverage at the very least.

8. Utilities

You’ll need water, electricity and you will have heavier costs during summer and winter because of air conditioning and heating, so plan ahead for those higher bills. The average cost of commercial utilities is over $2.14 per square footage. ⁽⁸⁾ If you have to install an HVAC unit, the average cost is $7,500. ⁽⁹⁾

9. Maintenance

Computers will need professional technicians to install security on your network. Also, computers break down, and if you have a large enough staff, this may be an ongoing problem if you don’t have an IT specialist who works for your organization and knows the ins-and-outs of your digital needs.

Other types of equipment break down too, like commercial ovens and refrigerators or blowdryers at a hair salon will need replacing. Unless you have a warranty, you should expect to have maintenance costs specific to your business. 

You will also need a handyman to come in and take care of small fixes, like leaks. You may also need to hire a professional cleaning service to come in and clean the place of business, unless you have designated workers who will do the job.

10. Employees

Most businesses should allot 20-30% of their budget to payroll. The more employees you have, the more overhead you have. However, growing your business may require those employees and you may go over that amount. It’s not advised to allocate more than 50% to payroll. ⁽⁷⁾

The benefits you offer, like matching 401K, health insurance, vision and dental insurance and time off will also cost you money but help to retain workers. Turnover is expensive, so the perks are important. 

Your business will also determine whether or not you’ll allow for overtime, which is a heavy cost, and you’ll create a bonus structure to determine how much you can afford to reward employees at year’s end.

Each employee may need work-related equipment to do their job properly. Some may need to be equipped with a laptop, a massage table, or a business vehicle.

11. Travel

Will you need to attend trade shows or conventions? If so, how many employees will attend? This will help you determine hotel stays and a food allowance, if you’ll provide one. Or, do you plan to fly in remote workers once a year, just to meet in-person every so often?

12. Inventory Shrinkage

If you sell a service and have no inventory, skip this and #13. Otherwise, you may be interested to know that In 2019, costing American businesses 1.62% of their revenue and $61.7 billion combined. ⁽¹⁰⁾ You may be wondering what inventory shrinkage is and how it applies to your business. Here are some examples of the type of loss we call shrinkage:

• Theft of products by employees or third-party employees after delivery.

• Lost shipments during in transit

• Spoilage of perishable goods

• Damage to products 

• Mistakes made in inventory counts

• Returns of incomplete or damaged products

53% of companies’ legal spend goes towards internal disputes and 47% external. Basically, a disgruntled employee may trigger legal spending.

13. Inventory

If you plan to sell a product, you need to spend money on inventory and possibly a space to hold the inventory, like a warehouse or storage space. Whether you’re in retail, wholesale or manufacturing, you’ll need the products you’re selling on hand. The type of industry you’re in will inform you as to how much inventory you need. For people who sell perishable goods, figuring out how much inventory you’ll turn over is tricky and ever-changing as your company grows. Even if you’re running a small home business and selling on Tik Tok, you may need several thousand dollars worth of inventory on a regular basis to ship to customers.

14. Legal and Accounting Fees

The average total legal cost for a small business ranges between $2,000 and $10,000. ⁽¹²⁾ You will want an experienced attorney to help you if you decide to incorporate the business. It will cost much more, but is advisable. If you’re doing a DIY incorporation that is for an uncomplicated business you may not need a lawyer. ⁽³⁾

In 2023, it was reported that legal fees for American companies rose 29% in one year alone. One interesting fact is that 53% of companies’ legal spend goes towards internal disputes and 47% external. Basically, a disgruntled employee may trigger legal spending. ⁽¹¹⁾ 

Your accounting fees will depend on whether or not you have an accounting department or if you need to consult an accountant a few times a year. The majority of small businesses in the U.S. spend $1,500 or less annually, but more complex financial needs may end up costing as much as $5,000. ⁽¹³⁾

15. Credit Card Fees

Credit card processing fees are a big cost for retailers, and they can range from 1.5% to 3.5%. You’re charged this fee for every sale you make, if the shopper uses a credit card network that you accept: Visa, Mastercard, American Express and Discover. 

It is possible to negotiate better processing fees with each credit card processor, not network, and the more sales you make, the more inclined they will be to offer you a better rate. You’ll also get a break if you charge in person. 

Online purchases, or what’s called “not present transactions” are riskier and more expensive because they pose a greater risk of fraud. If most of your transactions are online sales, you are paying higher processing fees.

If you use an address verification system, you will pay a lower interchange fee. Here are

The types of fees you’ll be charged for:

Interchange Fees

This is the swiping fee, which you pay the card issuer (Chase, Visa, Wells Fargo, etc.)  each time a person makes a purchase of your goods or services. Fees are higher with ecommerce sales and any online purchase.

Payment Processor Fees

Payment processor fees are charged monthly or annually and go to processors like Square, Stripe, Stax, Shopify and Helcim to cover operating costs. These fees are usually the most negotiable.

Assessment Fees

These fees are paid to the card network: Amex, Visa, Discover and Mastercard. Assessment fees cover operating costs for the networks.

Chargeback Fees

There’s usually a hefty fee if a customer disputes a charge for a product or service they claim. A chargeback fee can range anywhere from $15 to $70. ⁽¹⁴⁾

16. Software and Apps

Whether you’re connecting a remote team via Slack or needing a good Content Management System (CMS), Customer Relationship Management system (CRM), or accounting software for your team, you’ll probably need to spend some money to get various tasks done. Some Apps, like SEMRush and Ahrefs are essentially for marketing purposes and they come with annual subscription fees at different tiers. 

17. Taxes

How much you pay in taxes largely depends on your business income and the state you live in. Taxes are much lower in some states than others. If you own a franchise you will have to pay a franchise tax. ⁽³⁾ Currently, the corporate tax rate is 21% and will not expire.

18. Supplies

Every business needs supplies. Whether it’s toner, pens and paper for an office or shampoo and conditioner for a hair salon, it’s a good idea to figure out where you can buy all your business supplies as cheaply as possible. Annual costs vary widely based on the type of business.

19. Website

This cost can be as cheap as around $20 a month but heavier in terms of time if you create a website based on a template from Squarespace, Weebly or something comparable. 

If you want a website built for you and customized with elaborate features and blog articles, you can expect to pay anywhere from $1,000 to $48,000, depending on the complexity of the project. ⁽¹⁵⁾ 

You may have recurring costs if you hire someone or a team of people to handle your advertising and marketing, which would include writing blog articles (for more, see #24 on Advertising and Marketing below).

The more you borrow, the more you pay in fees. The longer you take to pay back the loan, the more you pay in interest.

20. Borrowing Costs

According to a 2024 report, 40% of businesses took out a business loan to cover rising costs. ⁽¹⁶⁾ The more you borrow, the more you pay in fees. The longer you take to pay back the loan, the more you pay in interest. Expect to have to pay back the loan plus interest and other fees. 

Interest rates can range anywhere from 6% all the way to 99%. Factor rates may also be added onto loans for high-risk borrowers who do not qualify for standard loans. Factor rates often convert to high-interest rates, which can really increase the loan amount over time. ⁽¹⁷⁾

Other fees that may apply include:

• Application cost

• Closing costs

• Insufficient funds fee

• Late payment fee

• Loan guarantee fee

• Origination cost

• Packaging cost

21. Trademark

If you need a patent or trademark, there are fees you’ll have to pay, usually per item. The application fee for each class of goods or services costs $350. What this means is that if you sell handbags, that is one class of goods but also selling sunglasses may require a separate application. There may also be additional fees based on how complex your filing is. 

Trademarking is not a one-and-done deal. You have to maintain registration of the trademark, and may be required to upload various documents at various intervals. After ten years, you again have a fee, this time in the amount of $650, when you renew the registration. ⁽¹⁸⁾

22. Payment Delays

Payment delays can be more than costly, as they create bottlenecks in the operational functions of any organization. Fees may be applied for late payments for rent and utilities. Third parties may become disgruntled at unpaid invoices, and some vendors may stop working with you if it happens repeatedly.

Having to hold paychecks and commissions to make essential other payments worries and demoralizes staff, who may sense that the company is not doing well financially – and they wouldn’t be wrong. In the worst case, payment delays are the death knell of a bankrupt company.

23. Advertising and Marketing

As a general rule, advertising is immediate while marketing may take some time. Each business’s advertising and marketing goals are different, and there are varying types of advertising and marketing campaigns. 

Start with your goals first. Is it to get users to reach your website? If so, focus on driving traffic, which will mean spending the largest portion of your marketing budget on advertising and website pages and blog articles that will drive traffic to the website. These types of campaigns will focus on social media, SEO, digital ads, content marketing, and email marketing.

 If you’re trying to get people into a retail space or a salon, you may want to work with local business listings on Nextdoor, Angi, Yelp and even Groupon. You may even invest in print, radio or television ads.

When possible, hire people with experience in the types of advertising and marketing campaigns you think will most significantly impact your business.

Early-stage startups often spend  10% of their total budget or less. This amount will increase over time to as much as 50% of a budget as the startup matures and you reach for growth, but spend then falls back down to maintain a steady stream of business. For SaaS businesses, spend may be as much as 120% of revenue. ⁽¹⁹⁾ 

If you’re unsure how much you should be budgeting, it’s always a good idea to research or hire a consultant.

When possible, hire people with experience in the types of advertising and marketing campaigns you think will most significantly impact your business.

24. Printing and Mailing Costs

Depending on the type of business you have, you may spend more on printing and mailing brochures and flyers than creating an elaborate website. For instance, mailers work great for people who work in insurance or real estate. 

Real estate agents, on average, spend $50 per listing flyer.

25. Shipping

Most businesses qualify for reduced commercial shipping rates. How much a business spends on shipping costs depends on whether or not their business is built around home deliveries. You may qualify for volume discounts if you’re a frequent shipper and prices with carriers are negotiable. You may also pass the cost to the consumer. On average, a small package costs around $8, and a large package costs $18 to $21. ⁽²¹⁾

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