Ten Cities with the Highest Startup Costs

We live and work in New York City, one of the most expensive cities in America, so we are extra sensitive to the high costs to start a new business or expand an existing business and when are working with clients on small business lending solutions we see how challenging it can be to compete in a high-cost market. Between rent, legal fees, utilities and labor costs, the differences between major cities can be striking. Last month, we looked at ten of the least expensive cities to start a new business.  This month we highlight the cities with the highest startup costs analyzed according to the below parameters:

• Filings fees – This is the average cost of licensing fees for LLCs and corporations. The data was compiled from bizfilings.com.
• Office space – This is the average cost of leasing a 1,000-square foot office. The data was compiled from REIS Inc.
• Utilities – This is the expected cost of electricity and gas for a 1,000-square-foot office according to local rates. The data was compiled from the Energy Information Administration.
• Legal and accounting fees – On a national level, startups spend $1,000 in accounting fees and $3,500 in legal fees in their first year. We assessed the number of hours of work these sums would equal for the average accountant and lawyer on a national level. We then arrived at our local costs by multiplying those hours worked by median local hourly pay for accountants and lawyers (based on 2016 Bureau of Labor Statistics data).
• Payroll – This is the cost of hiring five full-time employees at the median annual salary. The data was compiled from the Bureau of Labor Statistics.

The following are the top ten cities with the highest start-up expenses (Note: the following are the expected costs for a start-up in its first year of business).

In San Jose, California, filing fees are expected to be approximately $100, office space at $37,580, utilities at $3,107, legal & accounting fees at $6,255, and payroll at $394,992. These costs amount to a total of $442,034.

In San Francisco, California, filing fees are expected to be approximately $100, office space at $50,430, utilities at $3,107, legal & accounting fees at $5,771, and payroll at $380,744. These costs amount to a total of $440,152.

In Washington, DC, filing fees are expected to be approximately $220, office space at $53,290, utilities at $2,045, legal & accounting fees at $5,536, and payroll at $344,448. These costs amount to a total of $405,539.

In New York City, filing fees are expected to be approximately $238, office space at $69,310, utilities at $3,267, legal & accounting fees at $5,671, and payroll at $316,576. These costs amount to a total of $395,061.

In Boston, Massachusetts, filing fees are expected to be approximately $450, office space at $41,170, utilities at $2,351, legal & accounting fees at $5,382, and payroll at $339,664. These costs amount to a total of $389,017.

In Bridgeport, Connecticut, filing fees are expected to be approximately $293, office space at $35,540, utilities at $2,385, legal & accounting fees at $5,803, and payroll at $323,960. These costs amount to a total of $367,980.

In Seattle, Washington, filing fees are expected to be approximately $180, office space at $34,280, utilities at $1,654, legal & accounting fees at $4,437, and payroll at $316,472. These costs amount to a total of $357,023.

In Oakland, California, filing fees are expected to be approximately $100, office space at $29,330, utilities at $3,107, legal & accounting fees at $5,073, and payroll at $313,768. These costs amount to a total of $351,379.

In Trenton, New Jersey, filing fees are expected to be approximately $130, office space at $24,770, utilities at $2,776, legal & accounting fees at $4,268, and payroll at $310,752. These costs amount to a total of $342,695.

In Newark, New Jersey, filing fees are expected to be approximately $130, office space at $28,910, utilities at $2,776, legal & accounting fees at $4,975, and payroll at $299,416. These costs amount to a total of $336,207.