How to Start an LLC in Nebraska? (11 Steps to Success)

Nebraska state law allows limited liability companies to be formed under the Nebraska Limited Liability Company Act.

If you're looking to start an LLC in Nebraska but are unsure of where to begin or what the process entails, this blog post will walk you through the process and answer all of your questions.

I've spent the last ten years in the world of business formation.  Along with my colleagues, I have assembled a collection of tried-and-true approaches with the help of a hand-selected team of legal experts and attorneys to make sure your journey is as easy as possible.

In addition, a Nebraska professional LLC service can assist in starting an LLC for you.

Quick Summary

How to Form an LLC in Nebraska

To form an LLC in Nebraska, it is essential to select the appropriate LLC type, ensure your chosen name is unique and complies with state regulations, appoint a reliable registered agent, and file the Certificate of Organization with the Nebraska Secretary of State.

1. Choose the Type of Your LLC (Mandatory)

Drawing from my experience, choosing the right type of LLC in Nebraska is crucial for business success. I've helped diverse businesses weigh their options, from Single-Member to Manager-Managed LLCs, each tailored to their unique needs and goals.

1. Single-Member LLC:
2. • Advantages: Simplicity in management and operations, fewer formalities, and direct control by the owner.
   • Disadvantages: Limited growth potential and personal asset vulnerability in some legal scenarios.
3. Multi-Member LLC:
   • Advantages: Shared responsibility, potential for more resources and ideas, and improved management.
   • Disadvantages: Potential for conflicts, more complex decision-making, and profit sharing.
4. Manager-Managed LLC:
   • Advantages: Professional management, ideal for passive investors, and efficient for larger LLCs.
   • Disadvantages: Less control by members and potential for manager-member conflicts.
5. Member-Managed LLC:
   • Advantages: Direct control by members, more engagement in daily operations, and straightforward decision-making.
   • Disadvantages: Can be inefficient with many members and may lack professional management skills.

Each structure offers different benefits and drawbacks, so it’s essential to consider your specific business needs and goals when choosing.

2. Choose a Name for Your LLC (Mandatory)

An LLC must have a unique name that is not currently in use by any other business registered in the state. The name you choose for your LLC must also comply with Nebraska's naming requirements.

An LLC name must include the words "limited liability company" or the abbreviation "LLC."

The LLC name can't contain words that could mislead the public into thinking the company is authorized to provide professional service; it's not.

Any words that are linked to a government agency or department cannot be used in an LLC name either.

To make sure your Nebraska LLC name is available, you can search the state's business database. If the business name you want to use is already taken, you'll need to choose a different one [1].

It is essential to check LLC availability in Nebraska before filing any other documents. If your desired name turns out to be taken, your application will be rejected.

You can also reserve a business name by filing a reservation form with the Nebraska Secretary of State Corporate Division.

This will reserve your LLC's name for up to 120 days. The form must be filed by mail or fax, and the filing fee is \$15.

Reserving an LLC name does not create the business; it only prevents another company from using the name.

3. Select a Registered Agent (Mandatory)

As a business consultant, I stress the importance of choosing a reliable registered agent in Nebraska. My experience involves guiding clients to select professional services that align with their business needs and legal compliance.

They are professional services responsible for receiving and handling legal, and tax notices on behalf of the company and forwarding them to the appropriate individuals.

By using a professional registered agent service, your company can save time and money by not worrying about confusing legal notices or falling behind with LLC annual reports and other legal requirements.

Registered agent services in Nebraska can also be a valuable asset for business owners who are not located in the state of Nebraska, as they will have someone on-call to handle any legal issues that may come up with your LLC.

Your agent must be a permanent resident of Nebraska, be available during regular business hours, have a physical street address in the state, and be authorized to do business in Nebraska.

4. File Nebraska Articles of Organization (Mandatory)

Before you can conduct professional services legally, you have to file the Nebraska LLC Certificate of Organization with the Nebraska Secretary of State. This document is also known as the Articles of Organization or Certificate of Formation.

The Nebraska Certificate of Organization must include:

• Your company's name and business address
• The purpose of your business (e.g., to engage in retail sales, real estate investment, etc.)
• Names and addresses of initial managers and members
• Effective date (must be at least 30 days after the certificate has been filed)
• Registered agent information

The filing fee for the Certificate of Organization online applications is \$100. You can pay by credit card, check, or cashier's check payable to the "Nebraska Secretary of State."

If you want to file by mail, the filing fee is \$110.

Although most states offer a downloadable form for the certificate, Nebraska does not.

That means business owners will have to create their own Certificate of Organization according to the instructions specified in Nebraska Statute 21-117 [2].

Steps to Take After Forming an LLC in Nebraska

5. Create an LLC Operating Agreement (Optional, but Recommended)

Drafting an LLC operating agreement is a process I often facilitate, emphasizing its importance in defining business structure and member responsibilities. My approach tailors these agreements to each LLC's unique operational needs.

It applies, especially when your LLC provides professional services.

LLC operating agreements can vary widely in terms of length and detail, depending on the preferences of the owners. However, it is recommended that every new member receive a copy of the operating agreement.

An LLC operating agreement should include the following:

• The rights and responsibilities of each member (owner)
• How decisions will be made in terms of management, voting rights, and day-to-day operation
• What happens if there is a dispute between members or owners
• The amount, if any, that each member must contribute to the LLC
• How profits and losses are allocated among members

Operating agreements don't have to be filed with the Nebraska Secretary of State, unlike the Certificate of Organization.

The operating agreement will serve as an internal agreement between the members of your LLC and is not open to public inspection.

However, it's a good idea to have all members sign the operating agreement so everyone is on the same page.

6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)

An employer identification number (IRS employer identification number) is also known as a federal tax identification number. It is used by the Internal Revenue Service (IRS) to identify taxpayers who are required to file various business tax returns.

You will need an EIN for an LLC if you have employees or plan to hire employees, operate as a partnership, are subject to backup withholding, have an estate or trust, and are required to file excise, employment, and alcohol, tobacco, and firearms tax returns.

You can apply for an EIN through the Internal Revenue Service website free of charge. This service is available Monday through Friday, and you will receive your EIN immediately after completing the application.

You can also apply by mailing or faxing Form SS-4 to the IRS. This method takes longer, with processing times of up to several weeks.

7. Open an LLC Bank Account (Optional, but Recommended)

A business bank account is a necessity for any business. It helps you keep your finances organized and makes it easy to track your expenses and income.

When you open an LLC business bank account, make sure to ask the bank about their merchant services.

This will allow you to process credit card payments from customers.

LLC owners should separate their personal and business expenses.

This will help maintain a corporate veil and avoid the commingling of funds. Keep in mind that you should never use your business credit card to pay for your personal bills.

When choosing a bank for your business bank account, make sure to compare interest rates and fees. You also want to find a bank that offers business checking and savings accounts with no minimum balance requirements and no monthly service fees.

Before you can open a business bank account, you will have to obtain a federal tax identification number (employer identification number).

8. File Your Nebraska LLC Annual Report (Mandatory)

Filing an annual report with the secretary of state maintains your LLC's good standing and compliance with Nebraska state law. The report is due annually, typically on the anniversary of your LLC's formation date.

The filing process is generally straightforward, often completed online through the Nebraska Secretary of State's website.

This report requires you to update the state with your LLC’s latest information, such as the current names and addresses of managers or members, your registered agent's details, and the principal office address.

There's a fee associated with filing the Annual Report in Nebraska. It's important to be aware of the current fee amount and ensure it is included with your submission.

Not filing your annual report can have serious implications, including penalties and the risk of your LLC being dissolved by the state.

Therefore, it's crucial to adhere to this requirement diligently to maintain the legal and operational status of your LLC in Nebraska.

9. Obtain Business Licenses and Permits

The sales tax permit, also called a seller's permit, is the only state-level authorization or license in Nebraska that is required for LLCs.

The permit allows the sale of tangible personal property and some services in Nebraska.

To obtain a permit, an LLC must complete an application form and submit it to the Nebraska Department of Revenue.

There is no fee associated with obtaining or renewing this permit.

Other business licenses and permits may vary depending on the type of your limited liability company, especially if you plan to provide professional service.

For instance, if your LLC was organized to provide accounting or tax services, you would also need to obtain a public accountant's certificate.

Before beginning the process of obtaining business licenses and permits in Nebraska for an LLC, all necessary forms must be complete with accurate information.

This will ensure the approval process moves more smoothly through Nebraska state agencies. It will also provide greater protection from possible financial liabilities and legal issues in the future.

10. Publish a Notice of Organization (Mandatory)

Every LLC must publish a Notice of Organization after filing the LLC's Certificate of Organization for three weeks in a row.

The LLC Act does not specify where this notice must be published, but it is common for companies to place their notices in major newspapers with wide circulation in the municipality or county where the LLC's principal office is.

This notice simply announces that your LLC now exists as an official business entity and provides a place for LLC members to sign the notice.

The next step is to wait until you receive an affidavit of publication from the newspaper. Once you receive the affidavit, file it with the Nebraska Secretary of State. The cost of an affidavit varies depending on the newspaper you choose.

11. Choose Your Tax Structure

In Nebraska, businesses can choose between different tax structures, each with distinct pros and cons. A single-member LLC is taxed as a sole proprietorship by default, where the owner reports business income and expenses on their federal tax return.

This structure offers simplicity but also combines personal and business liabilities. Multi-member LLCs are treated as partnerships, where each member reports their income share and is responsible for self-employment taxes proportionate to their LLC profits.

An LLC can also elect to be taxed as an S or C Corporation, which may offer benefits like lower tax rates and enhanced credibility. However, this can lead to more complex tax filings and regulations.

Nebraska LLCs must file a Certificate of Organization and adhere to state-specific requirements like collecting and remitting sales tax, currently at six percent, with certain exemptions.

Changing your tax structure involves a process that should be planned in advance, often at the end of the fiscal year, to ease the transition. It's crucial to consult a tax professional, especially when considering a switch, due to the complexities involved.

I favor the simplicity of a sole proprietorship for single-member LLCs, particularly for new or small businesses, due to its straightforward tax reporting and lower overhead. As the business grows, transitioning to a corporation may be beneficial for tax and legal advantages.

For practical steps, the timeframe for changing your tax structure can vary. It’s essential to start the process well before the end of the fiscal year and be aware of specific deadlines, such as the end of the calendar year, for some tax elections.

Related Articles:

• How to Close an LLC in Nebraska
• Premium LLC Filing Services in Nebraska
• How Long Does It Take to Register an LLC in Nebraska

Benefits and Drawbacks of an LLC in Nebraska

Benefits:

• Limited Liability Protection: Like in other states, LLCs in Nebraska provide their owners with limited liability protection. This means the personal assets of the LLC members are typically not at risk if the LLC faces bankruptcy or lawsuits.
• Flexibility in Taxation: LLCs in Nebraska have the benefit of choosing how they are taxed. They can be taxed as a sole proprietorship, partnership, S corporation, or C corporation, providing flexibility and potential tax advantages.
• Ease of Formation and Maintenance: Forming and maintaining an LLC in Nebraska is straightforward and involves fewer formalities than corporations, along with simpler ongoing requirements such as annual reports. Notably, Nebraska's economic landscape is particularly conducive to small and emerging businesses, with 181,742 small businesses comprising 99.1% of the state's enterprises, as reported by the U.S. Small Business Economic Profile [3].
• Management Flexibility: LLCs in Nebraska have no restrictions on the number or type of owners and offer flexibility in their management structure, unlike corporations, which have more rigid structures.

"Forming either an LLC or a corporation in Nebraska offers the advantage of accessing diverse tax incentives within the state. The Nebraska Microenterprise Tax Credit and the Nebraska Angel Investment Tax Credit stand out as the most advantageous programs for businesses."

-Jon Morgan, Co-Founder & Chief-Editor of Venture Smarter

Drawbacks:

• Self-Employment Taxes: Members of an LLC in Nebraska may have to pay self-employment taxes on their earnings, which could be higher than the taxes paid by employees in a corporation.
• Limited Growth Potential: Unlike corporations, LLCs in Nebraska cannot issue shares of stock, which may limit their growth potential and ability to raise capital.
• State Fees and Regulations: Setting up and sustaining an LLC in Nebraska comes with certain fees and regulatory requirements that can pose financial and administrative challenges for small business owners. Moreover, small business employees represent 48.3% of Nebraska's workforce, underscoring the vital role these businesses play in the state's employment ecosystem, according to U.S. Business Statistics [4].

DIY vs. Professional LLC Formation

DIY LLC Formation

Pros:

• Cost-Effective: DIY formation is generally less expensive as it eliminates professional service fees.
• Personal Learning Experience: Handling the process yourself can provide a deeper understanding of the legal and administrative aspects of your business.
• Control and Customization: DIY allows for direct control over the formation process, enabling customization according to your specific needs.

Cons:

• Time-Consuming: It requires a significant time investment to research and understand the process.
• Risk of Errors: Without professional guidance, there's a higher risk of making mistakes in filing and compliance, which can lead to legal or financial issues down the line.
• Limited Legal Knowledge: If you lack legal expertise, you might miss important legal considerations or state-specific regulations.

Professional LLC Formation

Pros:

• Expertise and Experience: Professionals bring expertise and experience, ensuring accuracy and compliance with state laws and regulations.
• Time-Saving: Outsourcing this task saves you time, allowing you to focus on other aspects of your business.
• Peace of Mind: Professional services often offer ongoing support and peace of mind, knowing your LLC has been set up correctly.

Cons:

• Higher Cost: Professional services come with fees, making them more expensive than the DIY approach.
• Less Hands-On Experience: Relying on professionals means you might not learn the process in detail, which could be a disadvantage in understanding certain aspects of your business.

The choice between DIY and professional LLC formation depends on your specific circumstances. If you have the time and willingness to learn and your LLC formation is straightforward, DIY might be a viable option.

However, if your situation is more complex or you prefer the assurance that everything is handled correctly, professional services might be more suitable.

FAQs

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References:

1. https://sos.nebraska.gov/business-services/name-procedures
2. https://sos.nebraska.gov/business-services/select-limited-liability-company-statutes
3. https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-NE.pdf
4. https://www.census.gov/programs-surveys/susb.html