What is a startup cost?

A startup cost refers to the one-time expenses that a business incurs during its initial setup phase. These costs are crucial for getting a business off the ground and may include expenses such as equipment purchases, legal fees for establishing the business entity, initial inventory, licenses, and permits, as well as costs related to branding and designing a company’s website.

Identifying startup costs is essential for entrepreneurs as they pave the way for the business's operational framework and provide a clear understanding of the needed financial commitment before launching. In contrast, ongoing operational expenses, recurring costs, and marketing costs post-establishment are not classified as startup costs because they pertain to the routine functioning and growth activities of an already established business, rather than initiating the business itself.