To find the cities with the lowest startup costs, SmartAsset collected data on the typical costs of starting and running a business in 81 of the largest cities in the country. They calculated the total expected startup costs over the first year of operation for a company in each of these cities, factoring in the following expenses:
- Office space. They assumed the startup would lease a 1,000 square foot office. Using data from Reis, Inc., a company that analyzes the commercial real estate market, they calculated the cost of leasing an office of that size in every city.
- Utilities. Using data from the Energy Information Administration, they calculated the cost of gas and electricity for a 1,000 square foot office based on state energy prices and regional commercial usage rates.
- Filing fees. With data from bizfilings.com, they incorporated the cost of filing fees for either incorporation or filing as an LLC. (They took the average of these two types of filing fees.)
- Legal and Accounting. They assumed that a typical business would face average first-year legal and accounting costs of $3,500 and $1,000 respectively. Using data from the Bureau of Labor Statistics, they adjusted those amounts upwards or downwards based on local average rates for attorneys and accountants.
- Payroll. To calculate the typical first-year payroll of a startup in each city, they assumed the business would have five full-time employees, earning the city's median annual salary according to the Bureau of Labor Statistics.
Little Rock is ranked number seven on the list. Startups in the Arkansas capital save on costs in a number of ways. Arkansas has the lowest business filing fees of any state in the U.S. It costs just $45 to submit the necessary paperwork to become an LLC in Arkansas.
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