Start a coworking space business by following these 10 steps:
- Plan your Coworking Space Business
- Form your Coworking Space Business into a Legal Entity
- Register your Coworking Space Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Coworking Space Business
- Get the Necessary Permits & Licenses for your Coworking Space Business
- Get Coworking Space Business Insurance
- Define your Coworking Space Business Brand
- Create your Coworking Space Business Website
- Set up your Business Phone System
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. 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.
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 are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
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:
- networking equipment
- miscellaneous items (e.g. trash bags and toilet paper)
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.
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
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.
STEP 2: Form a legal entity
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.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
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!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment 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.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
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.
Learn more about General Liability Insurance.
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.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a coworking space business
Many coworking space businesses offer trial memberships, and this is where Matt and team found marketing success. They charge $50 for a weekly membership, which is credited on client’s first invoice if they sign up. The fee is nominal so potential clients’ risk is low, but it’s not free. Not being free is key, as it shows that the service has a value.
How to keep customers coming back
A coworking space business’ long-term success depends on its ability to built a community of clients. Publishing a newsletter, having photo boards and hosting regular events help everyone get to know each other and benefit from the groups cumulative knowledge.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Nextiva
Nextiva is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start A Coworking Space Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
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.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
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. Dallas Fort Work in Dallas, Texas, and Workantile in Ann Arbor, Michigan are two examples of coworking spaces that have 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.
TRUiC's YouTube Channel
For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe below to view later.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a coworking space business?
The startup funds required for opening a networking space can be raised before actually opening a coworking space by selling discounted memberships in advance. Alex did this (raising around $4,000), as did Matt Dudley and team at the Skillery. Matt and his team managed to raise $9,471 before opening day by selling prepaid memberships, and they collected another $10,000 through a unique lifetime membership offer.
How and when to build a team
A coworking space business requires a small team of members from the outset. Spaces are usually open around-the-clock, so someone always needs to be on call for emergencies.