By Sylvie Tremblay
Starting a business requires more than just big investments like buying equipment and paying your staff, small-business owners also face less obvious expenses to keep the business running and help it grow.
Surprising Cost No. 1: Business Insurance
Starting your own business can be risky. Business insurance protects you, and all the money and time you invested, against lawsuits and financial liabilities.
The cost of business insurance depends on your coverage, industry and the assets you’re protecting, so your best bet is to call an insurer for an individual quote.
However, Insureon, an insurance company that services small businesses, reports that small-business owners pay an average of $741 annually for general liability insurance.
Signing up for general liability insurance protects you from liability claims, negligence and property damage, as well as lawsuits if one of your employees is injured on the job. You’ll also want to take out property insurance for any property you own, as well as vehicle insurance for business vehicles.
Surprising Cost No. 2: Self-Employment Taxes
Being your own boss has some serious perks, you can delegate tasks however you’d like and guide the trajectory of your business without having to answer to upper management. However, you’ll have to pay a little bit extra at tax time for self-employment taxes.
The self-employment tax covers Social Security contributions and payment for Medicare. Normally, employers pay a portion of these contributions for you, but as your own boss, you’ll pay them yourself.
According to the IRS, the self-employment tax is 15.3 percent if you make $127,200 or less. The Social Security portion of the tax is 12.4 percent of your income, and the Medicare portion is 2.9 percent. So if you earn $70,000 per year, you’ll pay $10,710 in self-employment tax. Any net income in excess of $127,200 is taxed at 2.9 percent.