Business startup costs include all of the one-time expenses you’ll incur before you’re technically open for business. The great thing is that these start up business costs can be tax deductible. But how much do you need and what else should you consider? Learn what you need to know about calculating startup costs for your new Michigan or Indiana business.
How Much Does It Cost to Start a Business?
The cost to start a business will vary based on a number of factors including the type of business you are in, the area you’ll be operating this business, and what you need to get started. The SBA estimates that most home-based businesses only need to invest about $3,000 to get started. Other business models can require upwards of a million dollars, so understanding these costs is a vital part of your business plan.
Typical Startup Business Costs & Tax Deductions
A list of examples of your business startup costs might include:
- Market research to determine if you should buy or create this new business
- Licenses, permits, legal fees
- Building, facility or land
- Employees or labor
- Rent and utilities
- Furniture, supplies, equipment
- Marketing expenses like signs, flyers, website, agency or freelance costs
- Technology needs including laptops, phones, tablets, credit card payment processing systems, software like customer relationship management systems, inventory programs and more
It’s important to keep track of all of your startup expenses because you’ll need this information when filing your taxes. The IRS defines business start-up and organization costs as capital expenditures. They allow business owners to deduct up to $5,000 of business start-up and $5,000 of organization costs incurred after 10/22/2004. According to the IRS, startup costs include expenses that went into investigating the creation or acquisition of a business and creating an active trade or business. Organizational costs include expenses related to creating a corporation or partnership.
Depending on the type of expense, you may be able to deduct or amortize costs for the one-time business startup costs. Use the Small Business Administration’s startup costs worksheet to keep track of your specific start up expenses. It is always smart to talk to your tax professional or CPA for more information and specific guidance relevant to your business.
Starting a Business in Indiana or Michigan
In both Indiana and Michigan, there are several helpful resources to help you get your new business off the ground. Visit the IRS Small business page for Michigan for small business and taxation links. Indiana has a similar IRS small business page set up, as well as additional resources here.
Funding Your Business Startup Costs
If you’d like to seek business financing to cover your business startup costs, a great first step is to develop a strong business plan. Investors and lenders like Teachers Credit Union want to understand your estimated startup costs, whether your business idea is viable, how it will be operated, your marketing strategy, and projected business expenses and revenue. Business counselors can advise you on how to outline these essential components in your business plan so that you maximize your ability to secure start up business financing.
Check out these small business resources in Indiana:
And small business resources in Michigan:
We love helping entrepreneurs get started at Teachers Credit Union, for more help contact our Business Services Team.
Our business loans can help you turn your business idea into a reality. As a preferred SBA lender, we can help you navigate government programs to get the financing you need to manage cash flow, purchase inventory or fixed assets, buy equipment or buildings and more. If you’d like to talk to a local business lending specialist in Indiana or Michigan, please reach out to our Business Lending Team to set up an appointment.
Disclosure: This article is for educational purposes only and doesn’t constitute tax, legal or accounting advice. Please consult with an attorney or tax professional for guidance.