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.
We'll explore what an LLC is and why it might be a good option for your business. We'll also cover the different types of businesses that can benefit from setting up as an LLC.
What is a Nebraska LLC?
A Nebraska LLC is an entity that gives limited liability protection to the owners, also called the members. This means that if your business is sued or files for bankruptcy, creditors cannot come after you personally to recover their losses.
A Nebraska LLC must have at least one member. If there are two members in an LLC, it is automatically classified as a partnership, and this entity is called a multi-member LLC.
The personal and business assets of the LLC members are separate from one another.
Personal assets of the members are protected from business debts, and any assets of the LLC are separate from those of the members.
The owners of an LLC can be individuals, partnerships, or other corporations.
There are a few different types of businesses that can benefit from setting up as an LLC:
- Professional service, including doctors and lawyers.
- Financial institutions.
- Real estate investment trusts (REITs) or real estate development companies.
- Businesses that deal in a lot of inventory, such as manufacturers or wholesalers.
- Any business that wants to limit their personal liability exposure.
Steps to Forming an LLC in Nebraska
Before your Nebraska LLC can be recognized as a legal business entity, there are a few steps you have to take to transact business in the state.
Step 1: Choose a Nebraska LLC name
A Nebraska 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.
It is essential to check LLC name availability 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 name for up to 120 days. The form must be filed by mail or fax, and the filing fee is $15.
Reserving a Nebraska LLC name does not actually create the business; it only prevents another company from using the name. You still have to complete all other forms required for LLC formation in Nebraska before you can transact business under that name.
Step 2: Hire a Nebraska Registered Agent
Registered agent service is required in Nebraska to keep your LLC in good standing.
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.
Many business owners choose a registered agent service because it can be difficult to stay up-to-date on Nebraska law and regulations. It includes helping with various legal documents like the operating agreement. This responsibility extends to foreign LLC businesses.
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 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.
Step 3: File Nebraska LLC Certificate of Organization
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 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 "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.
Step 4: Draft Your LLC Operating Agreement
Operating agreements are important for all types of businesses, but they are an essential legal document if you choose to make your business a limited liability company. 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 receives a copy of the operating agreement.
A Nebraska 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 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.
Step 5: Publish a Notice of Organization
Every Nebraska LLC must publish a Notice of Organization after filing the LLC's Certificate of Organization for three weeks in a row. The Nebraska 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 Secretary of State. The cost of an affidavit varies depending on the newspaper you choose.
Step 6: Open a Business Bank Account
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 a 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 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, 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. Some banks also offer free online banking and bill pay services.
Before you can open a bank account, you will have to obtain a federal tax identification number (employer identification number).
Step 7: Obtain an EIN
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 if you have employees or plan to hire employees, operate as a partnership, are subject to backup withholding, have an estate or trust, 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.
Step 8: 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.
In order 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, it is important that all necessary forms are 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.
What Are the Benefits of Nebraska LLCs?
An Nebraska LLC offers a variety of benefits, including:
- Limited liability protection for the business owners
- Ease of formation and operation
- Flexibility in management and ownership structures
- Tax advantages (if operated correctly)
- Business expenses are paid with pre-tax dollars
However, it is important to note that not all these benefits are guaranteed. This requires the LLC owners and managers to take special precautions in order for them to be effective. For example, suppose you fail to keep your business expenses separate from personal ones or pay yourself a salary on par with what an average worker would receive in exchange for your labor. In that case, you may lose the ability to claim tax deductions.
Under business law, an LLC is a separate legal entity from its owners.
This means that the business's debts and liabilities are not the responsibility of the individual members. In addition, LLCs offer limited liability protection to their owners in case the company is sued. This protection extends to the personal assets of the owners, such as their home, car, and bank accounts.
What Are the Downsides of Nebraska LLCs?
Most businesses choose to form an LLC because of the many benefits it offers. However, there are a few downsides to consider before making your decision.
The main downside of forming an LLC is the cost. There is a filing fee of $100, and you will also need to pay annual taxes. In addition, you must maintain a registered agent in the state.
If you are not familiar with business law, it is important to consult with an attorney before forming an LLC in Nebraska. Certain requirements must be met before your LLC becomes valid, and failure to comply can result in serious consequences.
It is also important to note that forming an LLC is not the same as registering your business name. You must register your company with the Secretary of State, and it will be included on public registries for anyone looking to check out its status.
Nebraska LLC Tax Filing Requirements
A single-member LLC has a default tax status of a sole proprietorship. That means the LLC owner reports business income and expenses on their personal federal tax return. The LLC owner is also responsible for federal self-employment taxes.
A multi-member LLC has a default tax status of a partnership.
That means the LLC owners report their share of the business income and expenses on their personal federal tax returns. Each member is also responsible for federal self-employment taxes based on their share of the LLC profits.
On top of that, an LLC can choose to be taxed as a corporation (S or C corp).
This decision is made when the LLC files its Certificate of Organization with the Nebraska Secretary of State. The tax consequences for each option are complex and beyond the scope of this article. So, if you're interested in learning more about Nebraska LLC taxes, please consult tax professional services.
Federal taxes are just the beginning. LLCs doing business in Nebraska must also collect tax on all taxable sales made within the state. The amount of tax collected is based on the rate set by the state legislature. For most items, the statewide rate is currently six percent.
Nebraska sales tax is imposed on the seller of the taxable item. This means that the LLC must charge tax to its customers and then remit the proceeds to the state Department of Revenue.
There are some items that are exempt from Nebraska sales taxes, including most food items and prescription drugs. For a complete list of exemptions, see Sales Tax Exemptions.
The LLC is also responsible for paying any applicable local taxes. These taxes are set by the individual cities and counties and can vary quite a bit from place to place. For more information, consult your local tax authority.
Nebraska LLC FAQs
How Much Does It Cost to Register an LLC in Nebraska?
The cost of LLC formation in Nebraska is $100, which covers the filing fee with the Nebraska Secretary of State. There is no extra fee for expedited filings. However, if you calculate the costs of hiring a registered agent and obtaining required licenses and permits, the cost of forming an LLC will be higher. The upside is you have a professional service to help with legal documents like the operating agreement.
How Long Does It Take to Register an LLC in Nebraska?
The processing time for the Certificate of Organization is a few business days, usually no more than 4. The processing time will also vary depending on how you file. Generally, online filings take no more than two days, while mail filings take up to five days.
How Do I Find Out if a Business Name Is Taken in Nebraska?
Name availability is determined by the Nebraska Secretary of State. The Business Services Division provides a business name availability search on their website. You can also call or email them for more information.
How do I add a DBA to an LLC in Nebraska?
DBAs (doing business as) are added to an LLC in Nebraska by filing a DBA registration form with the Nebraska Secretary of State Corporate Document eDelivery website. The form can be found on the Nebraska SOS website.
The DBA will be registered in the name of the LLC but will have its own separate entity number and file stamp. The LLC remains responsible for any contracts or legal agreements entered into in the name of the DBA.
The DBA can be used for any purpose, including conducting business under a different name than the LLC. There is a $10 filing fee to add a DBA to an LLC.
How Do I Register a Foreign LLC in Nebraska?
In Nebraska, a foreign LLC must file the Application for Certificate of Authority Foreign Limited Liability Company form. The application must be notarized and filed with the Nebraska Secretary of State. There is a $120 filing fee.
The LLC will also need to appoint a registered agent for service of process in Nebraska. The registered agent can be an individual or business entity authorized to do business in Nebraska. All the other procedures for domestic LLCs apply to foreign entities too.
What Is a Biennial Report for an LLC in Nebraska?
A biennial report is an overview of the company's activity for a period of two years.
The biennial report is due on or before June 1st every other year. The first odd-numbered year following the year in which your LLC was formed is the due date for your LLC's initial Biennial Report. After that, the due date is every other year on or before June 1st.
If you fail to submit the biennial report by this date, your LLC will be suspended, and you will not be able to do business in the state of Nebraska until it gets reinstated.
Does Nebraska Require an Operating Agreement LLC?
No. However, an operating agreement is always a good idea. It can help to avoid disagreements between LLC members.
An operating agreement might not be necessary for every state, such as Nebraska. However, it is beneficial and puts everyone on the same page about how your business runs.
Can I Be My Own Registered Agent in Nebraska?
Yes, a business owner/member can act as their registered agent in Nebraska. There is no specific form or document required to appoint yourself as a registered agent, but you must file a Statement of Agent with the Nebraska Secretary of State (SOS).
The agent can be anyone who is of legal age and a resident of Nebraska. However, keep in mind that the responsibilities of a registered agent are serious. You are required to accept service of process on behalf of the LLC, provide notice to members upon changing your address, and file annual reports with the Nebraska Secretary of State each year.
A business owner usually does not want to deal with these requirements alone. This is why many business owners prefer that the LLC employs a commercial registered agent service.
What Kind of Business Insurance Does a Nebraska LLC Need?
Regardless of your business structure, an LLC will likely need general liability insurance. This ensures that the LLC will be protected if a customer or client is injured while using your products or services. If your LLC provides professional service of any kind, you will also need professional liability insurance.
In Nebraska, an LLC may be held liable for negligence or wrongful acts committed by its owner(s), officer(s), and manager(s). To protect your assets, in this case, it's recommended to own a separate policy specifically tailored to the needs of business owners.
Starting an LLC in Nebraska is a straightforward process, but it can seem overwhelming to business owners who are new to this type of structure.
To be sure you're making the right decision for your company and that you've done all the necessary research beforehand, consult with a tax professional and business accountant before moving forward.