How to Start an S-Corporation in Nebraska (2024 Guide)

Start an S-Corporation in Nebraska

If you want to start an LLC in Nebraska, there are things that you should consider. Nebraska is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in Nebraska, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in Nebraska if qualified for the limitations and requirements.

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How to Form an S-Corporation in Nebraska?

To create S-Corp in Nebraska, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Certificate of Organization, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in Nebraska

After you have decided on the idea to start an S-Corp in Nebraska, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on Nebraska Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Nebraska.
  • Limit of restricted words that need a license in Nebraska
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Registered Agent

The next step in starting an S-corp in Nebraska is hiring a Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Registered Agent in Nebraska.

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Step 3: File For Certificate of Organization

The Certificate of Organization is an important document to start your limited liability company (LLC). Nebraska Certificate of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Certificate of Organization to be filed in NV Secretary of State, you need to pay a filing fee of $105. In Nebraska, the filing fee of forming an LLC is $110 (by mail and $100 online).

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Step 4: Creating an Operating Agreement

After you have filed your Certificate of Organization, the next step is to create an operating agreement in Nebraska. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Nebraska can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Certificate of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In Nebraska, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in Nebraska, including:

  1. Filing Fees: When forming a corporation in Nebraska, you must file Articles of Incorporation with the Nebraska Secretary of State and pay a filing fee of $30 for in office filing and $25 for online filing.
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in Nebraska are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as Nebraska General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in Nebraska are subject to the annual franchise tax, which can financially burden some businesses.

In an Nebraska S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with Nebraska franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

What is an S-corporation?
An S-corporation is a type of corporation that elects to pass income, losses, deductions, and credits through to its shareholders for federal tax purposes.
Can I form an S-corporation in Nebraska?
Yes, you can form an S-corporation in Nebraska.
Is there a minimum number of shareholders required to form an S-corporation in Nebraska?
Yes, there must be at least one shareholder in a Nebraska S-corporation.
What is the process for forming an S-corporation in Nebraska?
The process for forming an S-corporation in Nebraska includes filing the articles of incorporation with the Nebraska Secretary of State, obtaining an employer identification number (EIN) from the IRS, and meeting any other requirements set forth by the state or local government.
How much does it cost to form an S-corporation in Nebraska?
The cost of forming an S-corporation in Nebraska varies, but typically ranges from $100-$250 to file the articles of incorporation with the Nebraska Secretary of State, plus any additional fees that may be required.
What are the benefits of forming an S-corporation in Nebraska?
Some of the benefits of forming an S-corporation in Nebraska include pass-through taxation, limited liability protection, and the ability to raise capital from shareholders.
What are the requirements for forming an S-corporation in Nebraska?
Some of the requirements for forming an S-corporation in Nebraska include having an existing corporation or forming a new corporation, filing the articles of incorporation with the Nebraska Secretary of State, and meeting any annual reporting requirements.
Can a foreign corporation form an S-corporation in Nebraska?
Yes, a foreign corporation can form an S-corporation in Nebraska as long as it meets the state’s requirements.
How does a Nebraska S-corporation differ from a C-corporation?
One of the main differences between a Nebraska S-corporation and a C-corporation is that S-corporations have pass-through taxation, while C-corporations are subject to double taxation.
Can an S-corporation in Nebraska have more than 100 shareholders?
No, an S-corporation in Nebraska cannot have more than 100 shareholders.
What is the Nebraska income tax rate for an S-corporation?
The Nebraska income tax rate for an S-corporation is based on the amount of income earned in the state and can vary.
What is the Nebraska franchise tax rate for an S-corporation?
The Nebraska franchise tax rate for an S-corporation is 0.5% of the value of the corporation’s authorized capital.
Are Nebraska S-corporations exempt from the state’s corporate income tax?
Yes, Nebraska S-corporations are exempt from the state’s corporate income tax.
Is an S-corporation required to pay state unemployment insurance taxes in Nebraska?
Yes, an S-corporation is required to pay state unemployment insurance taxes in Nebraska.
Is an S-corporation required to pay sales tax in Nebraska?
Whether or not an S-corporation is required to pay sales tax in Nebraska depends on the type of business conducted.
Is an S-corporation required to file a Nebraska state tax return?
Yes, an S-corporation is required to file a Nebraska state tax return.
Can an S-corporation in Nebraska have employees?
Yes, an S-corporation in Nebraska can have employees.
Does an S-corporation in Nebraska need to have a board of directors?
No, an S-corporation in Nebraska is not required to have a board of directors.
Can a Nebraska S-corporation convert to a C-corporation?
Yes, a Nebraska S-corporation can convert to a C-corporation.
Can a C-corporation convert to an S-corporation in Nebraska?
Yes, a C-corporation in Nebraska can convert to an S-corporation.
Is there a minimum amount of capital that must be invested in a Nebraska S-corporation?
No, there is no minimum amount of capital that must be invested in a Nebraska S-corporation.
What types of businesses are not eligible to form an S-corporation in Nebraska?
Some types of businesses that are not eligible to form an S-corporation in Nebraska include banks, insurance companies, and certain types of trusts.
What is the Nebraska sales tax rate?
The Nebraska sales tax rate varies by county and can range from 5.5% to 7.5%.
Can a Nebraska S-corporation have different classes of stock?
No, a Nebraska S-corporation cannot have different classes of stock.
How often is an S-corporation in Nebraska required to hold shareholder meetings?
An S-corporation in Nebraska is not required to hold shareholder meetings.
What is the penalty for late filing of annual reports in Nebraska?
The penalty for late filing of annual reports in Nebraska is $50.
What is the Nebraska inheritance tax rate?
The Nebraska inheritance tax rate varies based on the amount of the inheritance and the relationship between the deceased and the heir.
What is the Nebraska personal property tax rate?
The Nebraska personal property tax rate varies depending on the value of the property.
Is Nebraska a good state to start an S-corporation?
Nebraska is a business-friendly state with a strong entrepreneurial spirit, making it attractive for starting an S-corporation.
What is the process for incorporating as an S-corporation in Nebraska?
To incorporate as an S-corporation in Nebraska, you will need to file Articles of Incorporation with the Nebraska Secretary of State.
What is required to be eligible to be an S-corporation in Nebraska?
In Nebraska, to be eligible for S-corporation status, your corporation must meet certain IRS requirements, including having no more than 100 shareholders.
What are the benefits of incorporating as an S-corporation in Nebraska?
Incorporating as an S-corporation in Nebraska can provide tax advantages, help to protect personal assets, and make it easier to raise capital.
Are there any drawbacks to incorporating as an S-corporation in Nebraska?
One potential downside of incorporating as an S-corporation in Nebraska is that you will need to navigate different tax rules than those applicable to C-corporations.
How long does the process take to incorporate as an S-corporation in Nebraska?
The length of the incorporation process can vary depending on a number of factors, but in general, it can be completed in a matter of weeks.
How much does it cost to incorporate as an S-corporation in Nebraska?
The cost of incorporating as an S-corporation in Nebraska will depend on the services you use and other factors, but generally ranges from a few hundred to a few thousand dollars.
Can anyone form an S-corporation in Nebraska?
Generally speaking, anyone can form an S-corporation in Nebraska, provided they meet the eligibility requirements.
How do I choose a name for my Nebraska-based S-corporation?
When choosing a name for your S-corporation, you will need to make sure it is unique and compliant with Nebraska naming rules.
Do I need to obtain any licenses or permits to open an S-corporation in Nebraska?
Depending on your specific business and location, you may need to obtain certain licenses and permits to operate your S-corporation in Nebraska.
How many shareholders can an S-corporation have in Nebraska?
An S-corporation in Nebraska can have no more than 100 shareholders.
Do all S-corporations automatically qualify for pass-through taxation in Nebraska?
No, it is important to meet certain criteria in order to qualify for pass-through taxation in Nebraska.
Do I need to file an annual report for my S-corporation in Nebraska?
Yes, S-corporations in Nebraska are required to file an annual report with the Secretary of State.
What is the process to elect S-corporation status in Nebraska?
To elect to be an S-corporation in Nebraska, you will need to file IRS Form 2553 with the IRS.
What taxes will my Nebraska-based S-corporation be responsible for paying?
Your Nebraska-based S-corporation may be responsible for paying a number of taxes, including income taxes and payroll taxes.
Can a non-US citizen start an S-corporation in Nebraska?
Yes, a non-US citizen can start an S-corporation in Nebraska.
What are some of the deductions that Nebraska-based S-corporations can claim on their taxes?
Nebraska-based S-corporations can claim deductions for a variety of expenses, including office rent, salaries and wages, and supplies.
Is it necessary to have an operating agreement for my Nebraska-based S-corporation?
While not always required by law, operating agreements are strongly recommended for Nebraska-based S-corporations.
What are some of the limitations on shareholder rights in Nebraska-based S-corporations?
In Nebraska-based S-corporations, shareholder rights may be limited in a number of ways, including in relation to voting and participation in company decisions.
How can I find a qualified accountant to help me manage my Nebraska-based S-corporation’s finances?
There are a number of professional organizations that can help you find a qualified accountant in Nebraska.
How can I stay compliant with Nebraska state tax regulations as an S-corporation owner?
To stay compliant with Nebraska state tax regulations, it is important to stay up to date on the latest tax code changes, and work closely with a qualified tax professional.
Is there financial assistance provided for starting an S-corporation in Nebraska?
Nebraska provides a variety of programs and incentives aimed at helping new businesses get started.
How can I market my Nebraska-based S-corporation?
There are a number of marketing strategies you can employ to promote your Nebraska-based S-corporation, including social media, search engine optimization, print advertising, and more.
What are the key differences between Nebraska-based S-corporations and C-corporations?
One key difference between Nebraska-based S-corporations and C-corporations is the way they are taxed.
Can a corporation in Nebraska switch from being a C-corporation to an S-corporation?
Yes, corporations in Nebraska can switch from being C-corporations to S-corporations, provided they meet the necessary eligibility requirements.
How many years do I need to keep business records for my Nebraska-based S-corporation?
It is typically recommended that you keep records related to your Nebraska-based S-corporation for a minimum of seven years.
Are there any special rules regarding worker’s compensation for Nebraska-based S-corporations?
Nebraska-based S-corporations are typically required to have worker’s compensation insurance, depending on the size of the company and other factors.
What is required to dissolve an S-corporation in Nebraska?
To dissolve an S-corporation in Nebraska, you will need to meet certain legal requirements and file the necessary paperwork with the state.

Also Read

Why You Should Start Nebraska S Corp

First and foremost, the S Corporation structure offers pass-through taxation, which can be a huge benefit for owners in terms of federal and state tax obligations. Unlike a traditional C Corporation, where profits are taxed at the corporate level before being distributed as dividends to shareholders who are then taxed again on their individual tax returns, S Corps allow profits and losses to be passed on to shareholders and reported on their personal tax returns. This can result in significant tax savings for owners, making it an attractive option for those looking to minimize their tax liabilities.

Another advantage of forming an S Corporation in Nebraska is the limited liability protection that it offers to shareholders. By separating the business assets from personal assets, shareholders are shielded from being personally liable for the debts and obligations of the company. This means that in the event of a lawsuit or bankruptcy, shareholders’ personal assets such as homes and cars are protected from being seized to satisfy business debts. This added layer of protection can give owners peace of mind knowing that their personal wealth is safeguarded.

Furthermore, S Corps in Nebraska have the flexibility to issue different classes of stock, which can be beneficial for attracting investment from outside sources. By offering different classes of stock with varying rights and privileges, owners can tailor investment opportunities to suit the needs and preferences of different investors. This can be especially advantageous for startups and growing companies looking to attract venture capital or angel investors who may have specific requirements for their investment.

Moreover, S Corporations in Nebraska have the ability to provide fringe benefits to employees, such as health insurance, retirement plans, and education assistance, that are tax-deductible for the company and tax-free for employees. This can be a valuable tool for attracting and retaining top talent, as well as promoting employee satisfaction and loyalty. Additionally, S Corps can take advantage of various deductions and credits that are available to small businesses in Nebraska, further reducing their tax burden and increasing their bottom line.

In conclusion, starting an S Corp in Nebraska can offer a multitude of benefits to entrepreneurs looking to establish their business in the state. From pass-through taxation and limited liability protection to stock flexibility and employee benefits, the S Corporation structure provides a versatile and advantageous option for business owners. By carefully considering the benefits and advantages of forming an S Corp, entrepreneurs in Nebraska can take full advantage of the opportunities available to them and set their companies up for long-term success and growth.

Conclusion

Forming an S-Corporation in Nebraska can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

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