If you have dreams of entrepreneurship, don’t quit your day job just yet. As lovely as it would be, you can’t start a business for free. Here are only a handful of the fees you’ll incur to get started.
Federal Requirements
The Employer Identification Number (EIN) is one of your first steps to starting a business. To request a number for your business, you will fill out an SS-4 on paper or online at the Internal Revenue Services website. Completing the process online takes a few minutes and is free. You will receive an email with an official letter providing your EIN, which you need to keep in a safe place. You need this number to file your federal income taxes whether you’re a sole proprietor or larger entity. This number is also essential when you open a business bank account. Your financial institution will need your EIN to report any income, such as interest earned, to the IRS.
Trademarks and patents are additional costs you have to consider. They can be extremely expensive, primarily because you will more than likely need legal advice. Make sure you factor all of your needs while registering to protect your intellectual property.
State Requirements
Your next step is to register the name of your business with your state. Each state has different requirements, but a good number of them allow online filing. There are fees to register your business name, your tax status, and your trade name – “Doing Business As.” In some states, you need to register with your county for taxes too. If you plan to incorporate as a limited liability corporation, there may be additional fees. Prepare to spend two to three hundred dollars upfront, and around one hundred dollars every year to keep your business active.
You may have additional conditions based on your type of business. For example, if you plan to work in real estate in Florida, you have several requirements. You must apply, get fingerprinted, take the required courses, and pass the licensing exam within two years. These can add on over two hundred dollars, depending on your class format.
Other Costs
Keep in mind that all of these costs are before you started working in your business. We haven’t gotten to the intangibles yet. In our technology-driven world, you will need a website. Domains can run from $3 to $12 per year, depending on the site. Namecheap.com tends to have the best prices over GoDaddy and others. If someone else owns the web address you want, it could cost you hundreds or thousands to buy your specific domain.
Luckily, you can use a template to build your website. When you build your website through Wix or Squarespace, you may end up paying more because you’re purchasing through a third party. However, it is far less time consuming because coding can take a long time. Plus, the templates you can choose are attractive and come formatted for different devices.
Some other intangible costs to consider are marketing and branding. Do you want to have sponsored posts on Instagram? Are you selling insurance by having your face on a bench at a bus stop? Perhaps you want custom t-shirts or polo shirts with your logo and slogan? Your budget and preferred method will determine how much you spend.
I know this sounds like a lot, and it is. However, if you want to own your own business, think of it as an investment. Plus, all of the fees incurred that are directly related to your business are now tax writeoffs. Does that change your perspective?
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Flanice Lewis is a DC-based financial literacy advocate, blogger, traveler and breast cancer survivor. In addition to having bought her first house at 23, she is a graduate of Howard University and The University of Virginia. You can follow her on Instagram or read her work here on critical financial.
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