You’ve been toying with the idea of freelancing for a while now, but one question keeps coming to mind: How much does it cost to start a freelance business?
Fortunately, service-based businesses can keep costs relatively low when getting off the ground. Since there aren’t any products or goods involved, there aren’t many upfront costs. And if you’re a solo freelancer, you don’t have to worry about paying employees. But for freelancers, there are still operating costs to be aware of.
Here are all of the costs to consider when starting your freelance business, organized by function.
Forming a business entity
Creating a business entity is not *entirely* necessary for independents, but it’s highly recommended.
A business entity is put in place to protect your freelance business both legally and financially, so it’s important to research which one option is right for you before you choose.
A single-member LLC is a common option for freelancers; sole proprietorship is also a popular set-up. Consult with a professional if you need help deciding which is best for your business, and check your state’s requirements to estimate the exact cost it will be to form whichever business entity you choose.
Opening a business bank account
Creating a business bank account is essential for managing and tracking all of your financials as a solo freelancer.
But the costs of opening a business bank account vary. Some banks require a minimum opening balance ranging anywhere from $50 to $2,000, while others charge a monthly fee. All of this can be daunting for a freelancer who’s just getting their business off the ground.
The best option when starting your freelance business? Opt for a free business bank account. This eliminates the need to have a ton of money saved up beforehand and reduces any unnecessary fees so you can simply get started.
Set aside a budget for any tools or subscriptions you use to do your job. The costs of these tools vary wildly and are dependent on what your service is. For example, if you’re a designer you’ll need to pay for Adobe; if you’re an SEO strategist, you’ll likely need to use Ahrefs or a similar tool.
Other tools you may need include tools for accounting, time tracking, client communication, and invoicing, all of which may come with a monthly cost.
However, many business tools offer free versions which is a great way to reduce costs when you’re getting started.
Office set up
If you’re working remotely, you’ll need a workspace or home office. Consider the costs of purchasing a desk, office chair, desktop computer or laptop, and any other accessories that can help you do your job.
Or you could opt for a co-working space which typically charge a monthly fee to use.
Pro tip: Keep costs low by taking note of these WFH tax deductions.
When you’re getting your freelance business started, you’ll need a website to show off your work and services. If you don’t already have one, you’ll need to buy the domain which can cost anywhere from $2 to $20 per year, according to GoDaddy.
You may also need to hire someone to design it or purchase a website template if you want something beyond a simple portfolio website.
The good news? Promoting yourself and your business online is free. The not so great news is that social media is increasingly becoming a pay-to-play space, so you may need to set aside money to run paid ads every now and then as an extra boost for your business.
If you plan to send out email newsletters to a list of subscribers, you’ll need an email platform. Many are free up to a certain number of subscribers, so this may not be a cost to factor into your marketing budget until later down the road.
Money Management Costs
Every freelancer must pay quarterly estimated taxes. While this isn’t a cost you necessarily need to have *before* launching your freelance business, it’s important to keep taxes in mind as you plan your budget and projected monthly income. You’ll need to set aside money each month to go toward your estimated taxes each quarter.
Paying for services
As mentioned earlier, there may be some elements of your business that you need to hire other people for, including a website designer, an accountant, or even a virtual assistant, to name a few.
If you can be scrappy, keep costs low by handling these business tasks on your own as you’re getting started. But if you’d rather outsource these types of things, research pricing before starting your business and prepare to set aside money accordingly.
As a freelancer, there’s a good chance that you’ll be the sole person handling all of the work that comes your way. But as you grow, there’s also a chance that you may want to subcontract some of that work or team up with fellow independents for bigger projects. Keep this in mind as an added cost of doing business as you grow.
These are just a handful of the costs to consider when starting your freelance business. The costs you need to get started vary depending on what your service is, but this list should hopefully give you an idea of how much you should save up or budget for before you take the leap.