What a handmade shop costs to set up and run

A sole proprietor's legal setup costs little or nothing

A handmade sole proprietor can be fully registered for very little: the EIN and a California seller's permit are free, and the main outlay is a county fictitious name filing if you use a brand name.

That is worth stating plainly because the setup cost usually quoted for a new shop includes an LLC, and the LLC is most of it. Strip the entity out and the government side of starting a small shop is close to zero. The bigger early costs are materials, packaging and the marketplace's own fees, none of which change with your structure.

The table below shows the California version. County fictitious name fees and local business license fees vary, so check your county clerk and city for your exact figures.

$0The IRS issues an EIN at no charge and says you never have to pay a fee for one. — Internal Revenue Service, retrieved 2026-09-27

$0CDTFA does not charge for a California seller's permit. — California Department of Tax and Fee Administration, retrieved 2026-09-27

California's small business office says fictitious business name fees and documentation requirements are set by the county or city. — California Office of the Small Business Advocate, retrieved 2026-09-27

What adding a California LLC costs in its first year

Forming a California LLC adds a $70 filing fee, a $20 statement of information, and the $800 annual tax, so the first year's state cost is at least $890 before any service fee.

The $800 is the part that decides the timing. It is owed because the LLC exists, not because it earned anything. A shop that forms in the spring and then has a quiet year still owes it. A formation service can add its own fee on top, though filing yourself on bizfile Online costs only the state's fee.

If you plan to form eventually, the cheapest moment is when a real trigger arrives. Forming a year early costs a year of the annual tax for protection you may not have needed.

$70 and $20The California Secretary of State charges $70 to file Articles of Organization (Form LLC-1) and $20 for an LLC statement of information (Form LLC-12). — California Secretary of State fee schedule, retrieved 2026-09-27

California's annual LLC tax applies to an LLC that has filed articles of organization, whether or not it is doing business. — California Revenue and Taxation Code section 17941, retrieved 2026-09-27

$800The minimum franchise tax that sets the annual LLC tax is $800. — California Revenue and Taxation Code section 23153, retrieved 2026-09-27

The recurring costs that keep coming every year

Year after year, a California LLC owes $800 in annual tax and $20 every second year for the statement of information. A sole proprietor owes neither.

Over five years, that is at least $4,000 in annual tax plus the statements, for an entity whose single-member version is taxed federally exactly like the sole proprietorship it replaced. Those five years of fixed cost are the real price of forming early, and they are almost never shown next to the formation fee.

Once California income from the LLC reaches $250,000, a separate LLC fee is added on top of the annual tax. Few handmade shops get there, but the tier table is on the California LLC tax page.

California LLCs must file a statement of information biennially after the initial filing. — California Corporations Code section 17702.09, retrieved 2026-09-27

$900California adds an LLC fee of $900 once total income from California reaches $250,000. — California Revenue and Taxation Code section 17942, retrieved 2026-09-27

Federal tax costs are the same with or without an LLC

Federal self-employment tax at 15.3 percent and income tax on shop profit are the same for a sole proprietor and a single-member LLC, so they belong in your budget either way.

These are usually the largest government costs a profitable shop pays, and forming an LLC does not reduce them by itself. What changes the self-employment tax is an S corporation election, which brings its own payroll and filing costs, as the entity comparison explains.

Budget for them by setting aside a share of each payout. Pay it quarterly on the four IRS due dates rather than in one lump in April.

15.3%The self-employment tax rate is 15.3 percent, combining 12.4 percent for Social Security and 2.9 percent for Medicare. — Internal Revenue Service, retrieved 2026-09-27

A single-member LLC is disregarded from its owner for income tax purposes unless it elects to be treated as a corporation. — Internal Revenue Service, retrieved 2026-09-27

Costs that depend on what you make, not how you are set up

Insurance and product testing can cost more than any registration, and they are driven by the product. A toy maker and a print seller face very different bills at the same revenue.

Products designed mainly for children 12 or younger need third-party lab testing to support a Children's Product Certificate. Registered small batch manufacturers get relief from some tests but never from the core ones, such as lead in paint and small parts. Testing is a per-product cost that a sticker shop never pays.

Liability insurance premiums also track product risk. The policy types are explained on the insurance page. Neither cost changes with an LLC, so price them before deciding which products to sell.

CPSC says registered small batch manufacturers are always required to third-party test for the children's product safety rules in Group A. — U.S. Consumer Product Safety Commission, retrieved 2026-09-27

Build the budget from the channels you actually use

Add up only what applies to you: the registrations your sales channels require, the taxes your profit will carry, and the product costs your line demands. Leave the LLC out until a trigger puts it in.

Write the recurring items on the calendar, with the amount beside each date. For most small shops that is a short list: sales tax returns if you hold a permit, four estimated payments, the fictitious name renewal, and any local license. The setup guide puts them in order, and whether you need an LLC yet covers when the LLC line joins the list.

4 paymentsThe IRS lists estimated tax due dates of April 15, June 15, September 15 and January 15 of the following year. — Internal Revenue Service, retrieved 2026-09-27

Questions