How Much Does It Cost to Start a Business?
Starting a business can cost as little as $35 for a state LLC filing fee alone, though most owners spend several hundred to a few thousand dollars once licenses, insurance, and equipment are added. The SBA splits startup costs into one-time expenses, like filing fees and equipment, and ongoing monthly costs, like rent and salaries. State formation fees alone range from $35 in Montana to $500 in Massachusetts, and an EIN from the IRS is always free.
By LLC Register · Last reviewed October 1, 2026
Comprehensive Guide
One-Time Startup Costs
The SBA groups startup costs into one-time expenses and ongoing monthly costs. One-time expenses typically include the state formation filing fee, initial licenses and permits, equipment or supplies needed before opening, signage, website development, and any legal or accounting setup work. The SBA recommends researching real numbers for each category rather than guessing, by "looking online and talking directly to mentors, vendors, and service providers to see what similar companies pay for expenses."
State Filing Fees
If you are forming an LLC or corporation, the state filing fee is usually the first hard cost. These fees are set by each Secretary of State and vary significantly: Montana charges $35, Kentucky charges $40, and several states charge around $50, while Massachusetts charges $500 and Texas and Tennessee charge $300. Expedited processing, if you need your filing back faster, is usually an extra fee on top of the base amount. Check your own state's current fee before budgeting, since these are set by statute and can change.
Licenses, Permits, and Professional Services
Depending on the industry and location, a business may need a general business license from the city or county, a seller's permit for sales tax, health or safety permits, or a professional license tied to the owner's field. The SBA also lists legal and accounting services, insurance, and market research as common early costs that are easy to underestimate. None of these are optional extras; they are usually required before a business can legally operate, so confirm requirements with your local city or county clerk and your state's licensing boards.
Ongoing Costs After Formation
After formation, most states require an annual or biennial report to keep the business in good standing, with fees ranging from $0 in states like Arizona and Delaware to $500 a year in Massachusetts. Many states also require a registered agent, a person or company available at a physical address during business hours to receive legal and state mail, which is either handled by an owner personally or paid for as a service. The SBA's monthly operating cost categories, rent, utilities, salaries, and insurance, continue indefinitely and should be tracked separately from the one-time setup costs.
How to Estimate Your Own Costs
The SBA's calculator approach is to list every one-time expense and every expected monthly expense, estimate at least twelve months of monthly costs (five years if you plan to seek a loan), and then add roughly 10% as a buffer for the unexpected. Separating the list this way makes it clear how much cash is needed just to open the doors versus how much revenue is needed each month to stay open. Lenders reviewing a loan application compare this same breakdown against your revenue projections, so a clear, itemized cost list also helps if financing is part of the plan.
Ways to Keep Costs Down
A sole proprietorship or single-member LLC has lower setup costs than a corporation, since it skips bylaws, a board of directors, and stock issuance. Filing your own Articles of Organization directly with the state avoids a formation service's markup, though many owners still pay for a registered agent service or compliance reminders to avoid missing a deadline. LLC Register's $99-a-year registered agent service includes LLC formation in year one and annual report filing, with state fees passed through at cost, which is one way to bundle the state filing and ongoing compliance pieces into a single predictable cost. Whatever you choose, confirm what is included before paying, since some of the largest ongoing costs, like the annual report fee, are set by the state and cannot be discounted by any service.
Practical Considerations
Costs Differ a Lot by Industry
A service business run from home has very different startup costs than a retail store needing inventory and a lease, or a restaurant needing health permits and kitchen equipment. Use the SBA's category list as a starting checklist, then price out only the categories that actually apply to your business.
Don't Forget Sales Tax and Employer Registrations
If the business sells taxable goods or services, most states require a separate seller's permit or sales tax registration, often at no cost but with its own filing. If the business will have employees, state unemployment insurance registration and workers' compensation insurance are typically required and add an ongoing cost beyond the federal payroll taxes the IRS collects.
Compare the State Fee to Any Service You Use
If you use a formation service or registered agent, check that its price clearly separates the state's own filing fee from the service's own charge. The state fee is fixed regardless of who files it, so a service's price above that fee is what you are actually paying for convenience.
Budget for Renewal, Not Just Formation
It is easy to budget the one-time formation cost and forget that annual report fees, registered agent subscriptions, and license renewals repeat every year. Build the ongoing annual cost into your budget from day one rather than being surprised at renewal time.
This Is Not Tax or Legal Advice
Which licenses, permits, and insurance a specific business needs depends on its location, industry, and structure. Confirm requirements with your state and local licensing agencies, and talk to a tax professional about which costs are deductible as startup expenses.
Track Costs Separately From Day One
Keeping a simple spreadsheet of one-time costs versus monthly costs from the beginning makes it much easier to see, a few months in, whether actual spending is tracking to plan. It also gives you the documentation a tax professional will want when it is time to file, since startup expenses are often treated differently than ongoing operating expenses.
Sources
The official sources used for this article.
SBA: Calculate your startup costs | sba.gov/business-guide/plan-your-business/calculate-your-startup-costs |
|---|---|
SBA: Apply for licenses and permits | sba.gov/business-guide/launch-your-business/apply-licenses-permits |
IRS: Apply for an EIN online | irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online |
Montana Secretary of State: Business filing fees | sosmt.gov/business/fees |
Massachusetts Secretary of the Commonwealth: Corporations Division fee schedule | sec.state.ma.us/divisions/corporations/download/Fee_Schedule.pdf |
Created by: LLC RegisterLast reviewed October 1, 2026
Updated: October 1, 2026
Frequently Asked Questions
What is the cheapest state to form an LLC in?
Montana has the lowest LLC filing fee among the states reviewed, at $35, followed by Kentucky at $40. Filing in a state where you don't actually do business usually still requires registering as a foreign LLC in your home state, which adds a second fee, so the lowest state filing fee is not always the lowest overall cost.
Is getting an EIN free?
Yes. The IRS states you never have to pay a fee for an Employer Identification Number; it is free to apply directly at irs.gov. Be cautious of third-party sites that charge for this free service.
Do I need a lawyer to start a business?
Not generally. Most states let you file Articles of Organization or Incorporation yourself without an attorney. A lawyer becomes more valuable if you have multiple owners, outside investors, or a complex industry with heavy regulation, where a tax professional or attorney can help you avoid costly mistakes.
What ongoing costs come after I form the business?
Most states require an annual or biennial report, with fees from $0 to $500 a year depending on the state, and many require a registered agent at a physical address, either handled yourself or paid for as a service. Industry licenses and business insurance typically also renew annually.
Form your business with LLC Register
$99 a year for a registered agent, with LLC formation in year one and annual report filing included. State fees are passed through at cost.
