If you are starting a business, you probably already know about some of the expenses that are going to have to come out of your bank account. For example, you may need to pay for a location for your company unless you'll be working out of your home. And you might need to buy inventory if you're selling products, or get equipment to perform services.
But, there could be some other costs that might not come to mind immediately that you'll also have to pay. And it's important to plan for them so you don't end up short of money and having to reach for your credit card to cover them.
Here are some of the common business expenses that are important to pay -- but easily overlooked.
You are most likely going to need to purchase some additional insurance for your business once you get the company started. The specifics are going to vary depending on the type of company you're running, but you may need:
- Property insurance if your business is renting or buying a space.
- Liability insurance to protect against claims if someone gets hurt due to your business operations
- Business interruption insurance to protect you in case of a temporary loss of business income due to a covered event
If you previously had health insurance through an employer, you may need to take on the cost of this coverage yourself now that you are your own boss. And, if you are going to hire employees, you'll need workers' compensation insurance as well.
The cost of these policies can add up, and you need to be prepared to pay for them to get the right protections in place.
If you are hiring workers to help run your business, you won't just have to pay for their salary and any company benefits you are providing.
You also have to pay a portion of their Social Security and Medicare taxes. Specifically, employers pay 6.2% of each employees' wages for Social Security and 1.45% for Medicare. Employees also have the same amount withheld from their paychecks, which employers are responsible for facilitating.
Before you move forward with hiring, you need to take this crucial expense into account as you could face a lot of trouble with the IRS if you don't properly pay your portion of these taxes.
And if you aren't hiring employees but are earning income yourself, keep in mind you must pay both your personal and employer's portion of these taxes on income from your company that you declare on your personal tax returns.
A payroll service
It can be pretty complicated to keep track of all of your tax withholding obligations as an employer. You'll likely need a payroll service to help you pay your staff members or even to pay yourself if you're running your business as a corporation and taking a salary.
Payroll services will take care of withholding the appropriate funds for the IRS and sending pay to your staff members. But, this comes at a cost.
Finally, your taxes may become a lot more complicated once you own a company of your own. You may need to hire an accountant to help you file business tax returns or even personal returns depending on how your company is structured, how you pay yourself, and how much you make.
It's important to take all of these expenses into account as they can add up to thousands of dollars each year, so you'll want to make sure your business is earning enough to cover them.
This article was written by Christy Bieber from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to firstname.lastname@example.org.