Launching a business can be an exciting venture, but it’s no small task. Nebraska consistently ranks as one of the best states in which to start a business thanks to its strong economy primed for growth, educated workforce, abundant business resources, and tax incentives.
If you plan to start a business in Nebraska, the first step you must take involves choosing your business structure. By forming an S corporation (S corp) in Nebraska, you can save money and reduce your stress come tax season. This guide will walk you through the steps required to form your Nebraska S corp and provide tips to help you keep it in good standing with the state.
Want to form an S corp elsewhere? Check out our other How to Start an S Corp guides to learn more.
We recommend using a professional formation service like Tailor Brands to get your S corp up and running in no time.
Factors to Consider Before Starting an S Corp in Nebraska
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a Nebraska S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
How to Form a Nebraska S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the Internal Revenue Service (IRS) when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in Nebraska
Starting a Nebraska LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Tailor Brands to guide you through this process.
There are six basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Certificate of Organization
Step 4: Complete Publication Requirements
Step 5: Create an Operating Agreement
Step 6: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in Nebraska.
Be sure to choose a name that complies with Nebraska naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Nebraska LLC:
- Your name must include the phrase “limited liability company” or “limited company” or one of their abbreviations (LLC, L.L.C., LC, or L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Certain restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
- Your name must not be the same as or deceptively similar to any existing business in the state. This includes Nebraska reserved names.
You can also read the Nebraska state statute about LLC naming guidelines for more information.
2. Is the name available in Nebraska? You can use the corporate and business search on the Nebraska Secretary of State website to see if your desired LLC name is available.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Find a Domain Now
Step 2: Choose Your Nebraska Registered Agent
You must elect a registered agent for your Nebraska LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Certificate of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the Nebraska LLC Certificate of Organization
The Nebraska Certificate of Organization is used to officially register an LLC.
OPTION 1: Upload PDF to Nebraska’s Corporate Document eDelivery Website
- OR -
OPTION 2: File Form by Mail
State Filing Cost: $100 online or $110 by mail, payable to the Secretary of State (Nonrefundable)
Nebraska Secretary of State
P.O. Box 94608
Lincoln, NE 68509-4608
Upload Instructions: Select "forming a new entity/qualifying a foreign entity," then select "Domestic Limited Liability Company."
Step 4: Complete Publication Requirements
All new LLCs in Nebraska must publish a Notice of Organization to a newspaper in general circulation. The newspaper must be in the county where the LLC’s principal office is located, and the Notice of Organization must be published for three consecutive weeks.
Your Notice of Organization must include:
- The name of the LLC
- The street address of the designated office
- The nature of the LLC’s business
After you have published your Notice of Organization for three consecutive weeks, you will receive an affidavit of publication from the newspaper that you can file with the Secretary of State. To file an affidavit of publication, use the form below.
File an Affidavit of Publication
File Affidavit Online With the State of Nebraska
Fee: Fees vary depending on the newspaper you publish with.
Instructions: Select "File for an Existing Entity," enter the Account Number from your LLC's Certificate of Organization. Complete the form and upload your affidavit.
Step 5: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our Nebraska LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 6: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Ready to start saving on your taxes?
We recommend using a formation service to start your Nebraska S corp for you, so you can focus on the things that matter most — growing your business.
Keep Your Nebraska S Corp Compliant
After forming your business, it’s important to follow state and local laws to keep it operating in good standing. To remain compliant, Nebraska businesses must file a biennial report and pay state taxes.
Nebraska S Corp Biennial Report
While your Nebraska LLC may be taxed as an S corp, you’ll still need to file a biennial report like any other Nebraska LLC. You must submit this report every other year to the Nebraska Secretary of State. Biennial reports allow you to provide the state with updated information about your business and help Nebraska track tax payments.
You need to file a biennial report by April 1 of odd-numbered years — even if your business doesn’t make a profit. If you don’t file a biennial report, you risk losing your LLC status.
For step-by-step instructions, visit our Nebraska Biennial Report guide.
Nebraska S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Nebraska S corp owners will need to pay various taxes.
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
Nebraska Income Taxes
Nebraska has a graduated state income tax rate, ranging from 2.46% to 6.84%. Similar to federal income taxes, this means your specific Nebraska income tax rate will depend on your income bracket.
When compared to other states, Nebraska has a fairly average income tax rate. Some states have no income tax while others can impose income tax rates higher than 10%.
File Nebraska S Corporation Income Tax Return Form 1120-SN
All Nebraska S corps must file Form 1120-SN with the Nebraska Department of Revenue. This form reports state income taxes and is similar to the federal government’s Form 1120S.
Form 1120-SN is due each year before the 15th day of the third month following the close of a business’s fiscal year. If your business’s fiscal year ends in December, for example, you must file this form before March 15.
Nebraska Business Tax Registration
Anyone starting a new business in Nebraska must register with the Nebraska Department of Revenue if they have employees, will make retail sales, lease Nebraska property, or will provide services subject to taxes.
This means many Nebraska LLCs must register for business taxes, which should happen before they start business operations. However, companies without employees who simply provide a service may not need to register. For more information, visit the Nebraska Department of Revenue website.
Nebraska Sales and Use Tax
If your business sells products and services that require the collection of sales tax, you’ll need to pay Nebraska sales and use tax. Nebraska’s statewide sales tax rate is 5.50%, but many local jurisdictions also impose their own sales tax in addition to the state rate. Nebraska caps these local sales tax rates at 2.50%.
Visit the Nebraska Department of Revenue website to learn more.
Additional State Taxes
The Nebraska Department of Revenue provides information on a range of state-specific business taxes. Depending on your S corp’s industry, location within the state, and number of employees, you may need to pay additional state taxes and fees.
Here are some examples of taxes and fees business owners may have to pay in Nebraska:
- Charitable Gaming Tax
- Cigarette Tax
- Litter Fee
- Motor Fuels Tax
- Waste Reduction and Recycling Fee
Visit the Nebraska Department of Revenue website for additional information.
Nebraska Local Taxes and Laws
The laws governing Omaha differ from those in Lincoln. Your business taxes, permits, and ordinances may vary based on your local jurisdiction. For this reason, all Nebraska business owners should research how their local jurisdiction may impact their business’s operations.
Start a Nebraska S Corp FAQ
What is an S corp?
An S corporation (S corp) is a tax designation that an LLC or a corporation can elect.
Are taxes for LLCs and S corps the same?
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
What is a reasonable salary for an S corp?
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
What is a distribution?
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
Can I still use my DBA name if I elect to be an S corp?
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.
Can I change from an LLC to an S corp in Nebraska?
If you already set your business up as an LLC, you can still elect the S corp tax designation. The process is simple; you only need to file Form 2553 with the IRS.
Is Nebraska a good state in which to form an S corp?
There’s no one-size-fits-all, perfect location for starting your business. You should form your new venture in the state where you plan to conduct business. With its supportive small business landscape, affordable taxes, and plenty of resources, Nebraska is a great place to start an S corp.