How Much Does It Cost to Run a Business? Freelance and Small Business Expenses in 2026

Running a Business — What Does Being Your Own Boss Really Cost?

Whether you're a freelancer, solopreneur, or small business owner, "being your own boss" comes with a price tag beyond what you earn. Taxes, insurance, software, accounting — the overhead adds up fast.

Setting Up

The good news — starting is relatively cheap:

• Sole proprietorship / LLC registration — $50–$500 (varies by state/country)
• LLC operating agreement — $0 (DIY) to $1,500 (attorney)
• Business bank account — $0 (many banks offer free business checking)
• EIN (Employer Identification Number) — $0 (free from the IRS)
• Business license — $50–$400 (varies by locality)

Taxes — the Biggest Variable

Self-Employment Tax (US)

• Social Security + Medicare — 15.3% of net earnings (up to the SS cap of ~$168,600, then 2.9% above)
• This replaces the employer's share of payroll taxes — it's the biggest shock for new freelancers

Income Tax

For a freelancer earning $120,000 net:

• Self-employment tax — ~$17,000
• Federal income tax — ~$18,000–$22,000 (depending on deductions)
• State tax — $0–$12,000 (varies wildly)

Quarterly Estimated Payments

Self-employed people must pay taxes quarterly (April, June, September, January). Underpaying triggers penalties.

Health Insurance

The cost most employees take for granted:

• Marketplace plan (Silver, individual) — $400–$800/month
• Marketplace plan (family) — $1,200–$2,500/month
• Health sharing ministry — $200–$500/month
• Short-term plan — $100–$300/month (limited coverage)

Subsidies available based on income through Healthcare.gov.

Accounting and Bookkeeping

• DIY software (QuickBooks Self-Employed, Wave) — $0–$30/month
• Bookkeeper — $200–$500/month
• CPA (tax prep only) — $300–$1,000/year
• CPA (ongoing advisory) — $200–$500/month
• Full accounting (small company) — $500–$2,000/month

Banking and Payments

• Business checking — $0–$30/month
• Payment processor (Stripe, Square) — 2.6–2.9% + $0.30/transaction
• Invoicing software — $0–$30/month
• Merchant account — $10–$30/month + per-transaction fees

Office and Tools

• Virtual address / registered agent — $10–$50/month
• Coworking space — $150–$500/month
• Traditional office — $500–$2,000+/month
• Domain + hosting — $50–$200/year
• Software stack (Google Workspace, Slack, project management) — $30–$100/month
• Phone plan — $30–$60/month

Insurance

• General liability — $300–$1,000/year
• Professional liability (E&O) — $500–$2,000/year
• Business property — $200–$500/year
• Workers' comp (if you hire) — varies

Summary — Monthly Business Costs

Solo Freelancer (Remote)

Small Company (2–3 people)

How to Reduce Business Costs

1. Maximize deductions — home office, equipment, internet, phone, education
2. Consider an S-Corp election — can save thousands in self-employment tax at higher incomes
3. Use free/cheap tools — Wave for accounting, Notion for project management
4. Work from home — save on office costs
5. Batch quarterly tasks — do taxes and bookkeeping in dedicated sessions, not daily

How Freenance Can Help

Running a business means managing two budgets — personal and business. Freenance helps you separate personal finances from business expenses, track income and outflows, and plan a financial cushion for taxes and slow months.

With automatic categorization, you see what your business really costs — and what's left for you.

👉 Get your business and personal finances sorted with Freenance