Ready to start a business in Texas? As an entrepreneur, you’ll want to make sure your business will yield a profit, which is why it’s wise to first understand how much it costs to start the business and what it will take to keep it going. 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 Texas business.
How Much Does It Cost to Start a Business?
The cost to start a business will vary based on several factors including the type of business you’re 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 $2,000 - $5,000 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 start-up costs might include:
- Market research to determine if you should buy or create this new business
- Licenses, permits, legal fees
- Building, facility or land
- Inventory
- Employees or labor
- Rent and utilities
- Furniture, supplies, equipment
- Insurance
- 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 SCORE’s startup expenses worksheet to keep track of your specific start-up costs. 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 Texas
In Texas, there are several helpful resources to help you get your new business off the ground.
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 SouthWest Bank, 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 Texas:
- Northwest Texas Small Business Development Center ~ UTPB
- Northwest Texas Small Business Development Center ~ Texas Tech University
- Enter your zip code here to find a state resource closest to you
We love helping entrepreneurs get started at SouthWest Bank, and have several business tools and banking resources to help you get started including:
- Treasury Management
- Positive Pay
- Merchant Services
- Business Credit Cards
- Payroll Cards
- Remote Deposit Capture
- And more!
Our business loans can help 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 specialist in Texas, please contact us or visit one of our locations.
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.