Your article in the December 7th Lincoln Journal Star mentioned the sometimes-advantage to incorporating a small business, but didn’t mention any disadvantage. Is there any? – Lincoln, NE
It seems cost is always a disadvantage, at least that is the most common statement from new business owners.
The Secretary of State of Nebraska website does a good in explaining the differences between the various forms of incorporation and the process to apply. Nevertheless, the terms and language can become complicated, especially when you don’t have experience in the business field. Filing on your own may require some intense reading and many new business owners find themselves gravitating toward professionals such as attorneys or accountants for the initial filing. There is no standard “application” or form to fill out. The State of Nebraska just requires specific information concerning the business, its agent, and location depending on the type of incorporation. Some find this process discouraging and then approach an attorney, accountant, or various online services and may pay a fee upwards of nearly $500 or more to file for incorporation.
Also, there seems to be some confusion around tax time. Many business owners approach their tax advisor and become highly confused when filing as an LLC or S Corp concerning tax liability, FICA, employees, and owner’s compensation. Depending on the business and how it is intended to function, a clear understanding on the impact of incorporation can be a disadvantage concerning correctly filing the business’s tax obligation.