How to Start a Coworking Space Business

Start a coworking space business by following these 10 steps:

1. Plan your Coworking Space Business
2. Form your Coworking Space Business into a Legal Entity
3. Register your Coworking Space Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Coworking Space Business
6. Get the Necessary Permits & Licenses for your Coworking Space Business
7. Get Coworking Space Business Insurance
8. Define your Coworking Space Business Brand
9. Create your Coworking Space Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your coworking space business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Coworking Space Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a coworking space business?

The startup costs associated with opening a coworking space business are manageable. The primary costs include leasing a commercial space and purchasing:

• furniture
• networking equipment
• decorations
• miscellaneous items (e.g. trash bags and toilet paper)
• insurance

For a modest coworking space, these expenses can be kept under $20,000 (and sometimes under $10,00). Alex Hillman started a coworking space with 1,800 square feet and about 20 members for $6,000. He opened a second location that was nearly triple the size and had more extensive networking equipment for $18,000.

The best way to keep costs manageable is by starting with a relatively small space (e.g. 1,800 square feet instead of 4,500 square feet). This will help keep costs low while still allowing business owners to find a prime location, use state-of-the-art equipment and have nice decor. These latter items shouldn’t be skimped on because they’ll significantly impact how many people consider using the coworking space.

What are the ongoing expenses for a coworking space business?

The ongoing expenses for a coworking space generally run several thousand dollars a month. They include lease payments, employee salaries, high-speed internet costs, utility costs and equipment maintenance fees.

Who is the target market?

The target market for a coworking space business is business owners and professionals in the area. Some larger coworking spaces cater to large corporations with traveling employees, but most new spaces focus on serving entrepreneurs, solopreneurs and small business owners in the local community.

How does a coworking space business make money?

A coworking space business’ primary source of revenue is subscription fees, which clients pay in exchange for being able to use the space. Many coworking space businesses rent meeting rooms, offer classes and hold events for additional sources of revenue.

How much can you charge customers?

Because coworking space businesses provide flexible office solutions, they frequently have multiple subscription options. For instance, clients may pay by the day, week or month. The average cost for a monthly membership is $195. Many spaces charge more for a dedicated desk, an office or a locker. Some spaces charge for use of a meeting room, while others including meeting room use in their standard fee.

How much profit can a coworking space business make?

A coworking space business can generate a solid profit, and it can do so quickly. Alex’s space was breaking even within three months and returned his personal investment of $10,000 within 15 months. Once established, a space that has just 100 members could bring in around $20,000 per month (based on average monthly membership fees of $195).

How can you make your business more profitable?

Classes can serve as an important side revenue. Matt explains that the Skillery’s well-attended classes sell between 20 and 30 tickets, with half of the proceeds going to the class instructor. These tickets generate some revenue, and they also provide leads for potential new clients.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your coworking space business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a coworking space business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Certificate of Occupancy

A coworking space business is generally run out of an office space or lounge type space. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

• If you plan to lease a location:
• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a coworking space business.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

• If you plan to purchase or build a location:
• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for your business’ location to ensure your coworking space business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

Anyone who enjoys interacting with people and is passionate about entrepreneurship might like running a coworking space business. People skills are essential, as this business model is largely built on networking and developing a community. A passion for new businesses helps business owners better connect with many of their clients, who will tend to be entrepreneurs or work for startups.

What happens during a typical day at a coworking space business?

A typical day at a coworking space business is full of hustle and bustle.

The essential work of the business is making sure the lights are on -- quite literally. Clients use coworking spaces as offices, and they expect the lights to be functioning, roof to not be leaking and internet access to be connected. Should any utility or maintenance issue present itself, resources must be immediately devoted to resolving the problem as quickly as possible.

Assuming there is no imminent building crisis, running a coworking space involves keeping the area clean, socializing with clients and meeting potential clients. Of course, there are bills to pay and administrative matters to see to. Also, business owners might be teaching a class or hosting some other event on any given day.

All of this is surrounded by the activity of the clients who are using the coworking space as an office. The cumulative activity is one of the main draws of this business, as it helps everyone present stay motivated and focused.

What are some skills and experiences that will help you build a successful coworking space business?

While coworking space business owners should be familiar with the basic principles of running a business, networking is the most essential skill that business owners must have. Business owners need to be well-connected with both fellow entrepreneurs and local service people. Knowing entrepreneurs is how business owners will find clients, and knowing service professionals will ensure any problems that arise can be addressed quickly.

Networking is a skill that almost every business owner can further develop, and there are many ways to work on this skill. There are books on the topic, such as Networking for People Who Hate Networking and Networking Like a Pro. Platforms like Future Learn and Udemy have online networking courses. Most importantly, there’s no substitute for attending local networking events held by other businesses or organizations.

What is the growth potential for a coworking space business?

A coworking space business may have a single location or it can grow to be an international company. Workantile in Ann Arbor, Michigan is an example of a coworking space that has one location. WeWork is one of the largest coworking space businesses in the world, with dozens of locations spread across many countries.

When a successful coworking space is ready to expand, opening an additional location is usually better than expanding a current location. Adding a location, either in the same city or another city, helps the coworking space reach more potential clients in different neighborhoods or metropolises.