Types Of Costs For Startups
Marketing costs are often tax-deductible. These charges may fluctuate from one month to the next or occur on a regular basis. The following are examples of marketing costs:
- Posts on social media or marketing campaigns
- Redesigning or creating a new website
- Designing a logo
- Advertisements in newspapers and magazines
- Cards for business
- Blogs and articles
- Operating a podcast
Meals for business
Some businesses have recurring meal expenditures. Taking a customer out to lunch or offering a special meal or workplace snacks. These may change from month to month, but they might be useful to factor into your budget
Fees for maintenance and other services
Depending on your industry and location, you may have additional costs connected with your business. Some businesses, for example, pay for regular landscaping or snow removal services. Any miscellaneous costs can be added to a budgeting or accounting category.
Machinery, furniture & equipment
You’ll need furnishings for your office space and may also need to invest in equipment and machinery, depending on the nature of your business.
For example, if you own a transportation company, you’ll require commercial trucks. If you own a restaurant, you’ll need to invest in high-quality burners, ovens, and culinary tools.
Expenses associated with starting a business
Businesses that are newly established may be eligible to deduct additional funds in starting costs. Marketing and staff training are two examples.
Earned money from abroad
If you own a business in another country, you may be allowed to deduct any overseas earnings from your tax return. Typically known as the foreign earned income exclusion program. You must fulfill specific criteria, such as earning less than a particular amount of money for example. In addition, if you have employees abroad, you will need to include a budget for hiring an employer of record to handle their local employment documentation, taxes, payroll, and benefits
Intangible assets like trademarks, patents, copyrights, franchises, brands, and so on are considered company assets that need substantial investments. Because these are non-physical they are classified as capital expenditures.
Furthermore, you will need to hire a legal adviser or attorney to deal with trademarks and patents, which will add to the costs of running a business.
Cost of Inventory
Inventory expenditures are the next major items on this startup business expenses checklist. Inventory expenses are often one of the most significant financial assets on your company’s balance sheet. It is, nonetheless, one of the most significant running costs.
Gifts to employees
If you provide staff gifts for promotions, bonuses, or special occasions, you can budget for the cost of the products as a gift expense. These are frequently tax deductible up to a specific limit.
You might well be allowed to spread the cost of office furniture or corporate vehicles and real estate across the number of years that you will utilize them. Depreciation is the term used by accountants to describe this process. Depending on your organization and situation, you may be able to deduct certain depreciation charges. Some assets are entitled to faster depreciation and more tax breaks in the early years than others.
Employee education is something that a company might offer from time to time. When education brings value to your business, you may be eligible to deduct these costs. This might involve the following:
- Seminars, webinars, and conferences.
- Workshops and classes to develop and improve a skill
- Subscriptions to industry-specific media
- Books about your line of work
Fees for legal and professional services
An accountant and law firm are typically retained or hired. These expenses are sometimes tax-deductible and should be factored into your budget. Some costs, such as those paid to an accountant every quarter, could be predictable and budget-friendly.
If you work from home on a regular basis, you might be eligible to deduct the cost of your home office. A home office should be only used for business purposes, such as a separate room or a dedicated office area, in order to qualify.
Repayment of the loan and interest payments
You can deduct loan payments from your income if you have any loans, credit card firms, banks, or vendors. You can use this amount to help you figure out your net income or construct a budget. If you pay interest on any loans, credit cards, or any other form of credit, then you may also be able to deduct this.
There will also be miscellaneous charges not included in the above categories. It might be something related to your business, and you’ll want to budget for it if it’s a recurring expense.
More categories can be added. Some might not apply to all businesses, while others have additional costs and fees to take into consideration.
Budgeting your operational funds is the key to managing a business’s finances. It’s easy to overspend when you have a lot of monthly costs. Knowing your expected costs can help ensure you plan to have enough money coming in, or are more disciplined on the bills and the debt you take on. Accuracy here can help raise enough money at each round of fundraising, and avoid running out of cash.
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab which is one of the largest communities of founders online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding where he was involved in one of the biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.