How Much Does It Cost to Start a Business?

What It Costs to Start a Business

1. Business Formation Costs by Entity Type

The first expense is registering your business with the state. What you pay depends on the structure you choose:

Formation fees are only part of the picture. The state you form in changes the total more than the structure does, which is why it’s worth comparing states before you file.

2. State Filing Fee Comparison

LLC filing fees range from $35 in Montana to $500 in Massachusetts, and the ongoing costs vary even more. The table below compares filing fees and the first-year ongoing cost for states founders ask about most often.

Fees are set by each state and change periodically, so confirm the current amount with your Secretary of State before filing. As a general rule, forming in your home state is cheaper and simpler than forming in a low-fee state and then registering as a foreign LLC where you actually operate.

3. Registered Agent Fees

Most states require businesses to designate a registered agent who can receive legal and tax documents on their behalf. You can act as your own agent in most states, but many owners prefer a professional service to avoid missing an important notice.

A professional registered agent typically costs $100 to $300 per year, and a handful of states, including Delaware and Nevada, expect this even from very small LLCs.

4. Licenses and Permits

After forming your entity, you may need licenses or permits before you can legally operate.

Unlike formation fees, license costs vary widely by industry and location. A general business license typically runs $50 to $400 annually, while industry-specific permits, such as health permits for restaurants or contractor licenses in construction, can run from a few hundred dollars to over $1,000.

Check both state and local requirements. Many counties and cities layer their own licensing on top of state-level rules, and it’s easy to miss one if you only check the state’s website.

5. Operating Costs Before You Open

Even before your first sale, you’ll likely have startup expenses such as:

• Business bank account: $0 to $25 monthly fees, often waived with a minimum balance
• Website and domain: $10 to $20 per year for a domain, $100 to $500 per year for hosting and basic setup
• Marketing and branding: logo design, business cards, and initial ads typically run $200 to $2,000 or more
• Software and subscriptions: accounting, payroll, or project management tools often run $20 to $100 per month
• Office or retail space: if not working from home, rent and security deposits can run into thousands per month

6. Professional Services

Many owners invest in professional help early on. Hiring an accountant can cost a few hundred dollars up front, but it can prevent expensive mistakes in tax compliance and recordkeeping down the line. Legal advice is another common expense, with attorneys typically charging $150 to $500 per hour for contracts, partnership agreements, or intellectual property work.

Some entrepreneurs use business formation services that handle state filings on your behalf. These typically charge $300 to $500 on top of the state fee. They’re not required, but they can save time if you’d rather focus on the business itself.

7. Ongoing Annual Costs

Costs don’t stop once you launch. Most states require annual or biennial reports to keep your company in good standing, with fees ranging from $0 to $500 depending on the state.

Franchise taxes are the biggest ongoing surprise for new owners.

California charges $800 per year on every LLC regardless of income, and Delaware charges a flat $300 per year. States like Wyoming and Texas don’t impose a meaningful franchise tax on small businesses, which is part of why they’re popular with founders who don’t need to be tied to a specific state.

8. Sample Startup Budgets by Business Type

How much you actually need depends heavily on what kind of business you’re starting. Here’s how three common starting points compare.

Online Freelancer or Solo Service Provider (Wyoming LLC)

Local Service Business (Home State LLC)

Retail or Storefront Business

These are examples, not universal numbers. An online freelancer may spend a few hundred dollars total, while a storefront can easily need $15,000 to $20,000 before opening day once rent, inventory, and buildout are factored in.

9. Ways to Keep Startup Costs Down

1. Act as your own registered agent if your state allows it and you’re comfortable using your own address for public filings.
2. Form your LLC in your home state instead of a low-fee state you don’t operate in, to avoid paying twice through foreign qualification.
3. Start with a simple website and basic branding, then reinvest in design once the business has revenue coming in.
4. File your own formation paperwork directly with the state instead of paying a formation service, if your situation is straightforward.
5. Use accounting software from day one so a CPA isn’t reconstructing a year of records later at an hourly rate.

Should You Handle Setup Yourself or Hire a Professional?

Founders with a simple, single-owner business and no employees can often handle formation themselves using a state’s online filing portal and general guidance. The paperwork isn’t complicated for a straightforward LLC.

Professional help becomes more valuable when there’s more than one owner, outside investment, employees, or any uncertainty about which structure or state fits your situation. A CPA or attorney costs more up front, but the cost of an incorrect election, a missed franchise tax deadline, or a poorly drafted operating agreement is usually much higher.

The cost of starting a business isn’t one-size-fits-all. While some entrepreneurs launch lean, others need significant investment to cover compliance, professional services, and setup. Planning for both the upfront costs and the ongoing ones is what keeps a new business from being caught off guard in year two.

If you’re weighing how your business structure affects your books once you’re up and running, our guide to accrual vs. cash accounting for corporations covers how that decision plays out in practice.

And if you’re forming a C-Corp rather than an LLC, it’s worth understanding what Form 1120 requires before your first filing deadline arrives.