Each business has its own unique expenses. A mechanic has expenses that an online administrative assistant doesn’t have. The IRS states that a business’s expenses must be reasonable and required to get the work completed.
When starting a new business venture, whether you have already begun or are just getting started, here are a few things to consider when managing these initial expenses:
1) Business Insurance
General liability, errors and omissions, and workers’ compensation are three kinds of business insurance that may be required. General liability will save you hundreds if not millions if someone gets hurt while visiting your office, retail, or service space. You are personally responsible as an owner and the best way to prevent litigation from affecting your assets is to make sure you have insurance adequate to cover the potential damages.
2) Utility and Rental Deposits
If you are renting an office space, work bay, or any other structure from which to work you may need to provide the utility and landlord a deposit. For leases, it is generally one month’s rent. For utilities, it varies per provider.
3) Professional Fees
Legal or accounting may be necessary prior to your start-up or shortly after you begin, including but not limited to operating agreements, incorporation, or formation fees to the state.
4) Startup Fees and Licenses
There may be local or state-required fees and licenses associated with starting a business, so be sure to keep these costs in mind when budgeting initial expenses.
This is by no means an exhaustive list of start-up expenses you may encounter, but these are the expenses that are often forgotten in the process.