How Much Does It Cost to Start a Business?

It depends far more on the type of business and the city than on any national average. A home-based service can open with little more than a state filing fee, a license and insurance, while a restaurant or a gym needs a lease deposit, build-out and equipment before the first sale. The SBA sorts startup expenses into the same buckets we use: space, equipment and supplies, licenses and permits, insurance, legal and accounting, inventory, payroll, marketing and website. For a line-by-line estimate for your industry and city, use our free startup cost calculator, then keep a cash reserve for the months before revenue covers expenses.

Most founders combine personal savings with one outside source. SBA-backed loans are made by partner lenders, not by the SBA itself. The main program, 7(a), goes up to $5 million. Microloans go up to $50,000, and the SBA puts the average microloan at about $13,000. 504 loans provide long-term, fixed-rate financing through Certified Development Companies, mostly for real estate and major equipment. Outside the SBA, the usual options are bank lines of credit, friends and family, crowdfunding, and angel or venture capital, the last two only for businesses built to scale fast.

A sole proprietorship needs no formation filing but offers no liability protection, and net earnings of $400 or more are subject to 15.3% self-employment tax (12.4% Social Security, 2.9% Medicare); the Social Security part stops at the wage base, $184,500 for 2026. An LLC separates business and personal liability; by default the IRS treats a single-member LLC as a disregarded entity and a multi-member LLC as a partnership. An S corporation is a tax election made on Form 2553, limited to 100 shareholders. A C corporation pays a flat 21% federal tax on its profits.

The SBA describes two formats. A traditional plan goes into detail and can run dozens of pages: executive summary, company description, market analysis, organization and management, products or services, marketing and sales, funding request and financial projections. A lean startup plan fits on one page, can take about an hour, and keeps only the key points, which suits a founder still testing an idea. Whichever you pick, the startup cost section is where most plans are weakest: build it from local figures for your industry and city, not from a national average.

It depends on your entity. Sole proprietors and single-member LLC owners do not draw a salary: they take owner draws, and the business’s net profit is taxed on their personal return whatever they withdraw. In an S corporation, the IRS requires that an owner who works in the business receive reasonable compensation before any non-wage distribution; wages carry payroll taxes, distributions do not. In the first years, a fixed, modest draw you can sustain, separate business and personal accounts, and money set aside for estimated taxes matter more than the exact figure.