How to Start a Business in Nebraska
If you’re thinking about how to start a business in Nebraska, now is the time. With tax incentive programs such as the ImagiNE Act, Nebraska is a prime state to start any small or large business. But, you might have a few questions. How do taxes work in Nebraska? Do I need a business license? And, more importantly, how do I protect my personal assets? In this guide, you’ll learn how to start a business in Nebraska.
Ready to Start a Business in Nebraska?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Nebraska Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File a Biennial Report
Apply for Trademarks
1. Pick a Business Structure
If you drill down to the basics, there are two types of entities: The ones that protect your personal assets and the ones that don’t. A general partnership or sole proprietorship won’t protect your assets—such as your home or car. If you want liability protection, you’ll need to form an LLC or corporation.
LLCs and corporations are good at protecting personal assets because they build a shield of sorts between your business life and personal life. With a corporation or LLC, your business is a separate entity from you, the business owner. So, if your business were to face legal action, your personal assets would be protected.
Nebraska Limited Liability Company (LLC)
LLCs (limited liability companies) offer management flexibility and, most notably, some tax advantages. For example, members can choose to run the business themselves, appoint someone within the business, or hire a third party manager. To form an LLC, you’ll need to submit a Certificate of Organization with Nebraska Secretary of State.
A corporation has a more formal management structure than an LLC, as shareholders are required to appoint a board of directors, who then hire officers to run the business. To start a corporation, you’ll need to file Articles of Incorporation with the Nebraska Secretary of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single Member LLCs.
What about a Nebraska nonprofit?
You may start a nonprofit if your business purpose is to benefit the public or serve the needs of a specific group.
Nebraska nonprofit incorporation requires you to file Articles of Incorporation with the Secretary of State and pay a $25 fee if you’re submitting the form online, or $30 if you’re sending it by mail or submitting in-person.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Naming a sole proprietor or general partnership is pretty simple. Your business name will be your human name, unless you obtain a DBA.
When you start an LLC or corporation, there are certain rules for naming a business you’ll need to follow:
- Must be “distinguishable” from other Nebraska businesses
- must include business identifiers such as “LLC” for limited liability companies or “Inc.” for corporations.
- Can’t imply your business is a different type of entity—meaning, an LLC can’t have words such as “corporation” or “limited liability partnership.”
Find out if your desired name is available in Nebraska by searching the Nebraska Business Database.
Can I reserve a business name in Nebraska?
Yes. If you have a business name in mind, but you’re not ready to file paperwork to form your business, you can reserve it in Nebraska for up to 120 days by filing an Application for Reservation. You’ll also need to pay a $30 filing fee.
What is a DBA?
A DBA is any name your business uses besides its legal name. In Nebraska, DBAs are known as “trade names.”
DBAs can be helpful in a few ways. For example, if you’re a sole proprietor, your business name will automatically be your human name—unless you get a DBA. LLCs and corporations often use a DBA when expanding their product line or moving to a new state where their legal name is already taken.
To register a DBA, you must an Application for Registration of Trade Name with the Secretary of State. In addition, you must publish (in your local newspaper) a notice of intent to conduct business under a DBA.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you’re a sole proprietor or part of a general partnership, you don’t need to file formation paperwork with the Secretary of State, because you’re not creating a separate business entity.
But to start a Nebraska LLC or corporation, you’ll need to file paperwork with the Nebraska Secretary of State’s office.
- To form a Nebraska LLC, file a Certificate of Organization.
- To start a Nebraska corporation, file Articles of Incorporation .
To fill out these forms, you’ll need to list a Nebraska registered agent to handle your state and legal mail. Once you’ve completed the form, you’ll need to send it to the Secretary of State. You can submit it online, by mail, or in-person at the Secretary of State’s office.
Note: The information you list on this form will become part of the public record. This means that the general public could access your business’s information.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Nebraska Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Nebraska LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Nebraska LLC Operating Agreement template that you can use as a solid foundation.
Nebraska Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Nebraska (see NE Revised Stat § 21.224).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Nebraska Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Nebraska nonprofit bylaws.
5. Get Nebraska Business Licenses
Whether you’ll need a business license depends in large part on what type of business you’re running. If you’re planning to open a cozy neighborhood cafe, for instance, you’ll need to get a food establishment permit from the state to operate legally. Some other cities and towns will also have their own licensing requirements.
Nebraska Professional Business Licenses
Your business will need a professional business license if your business provides specialized services such as massage therapy, optometry, or nursing. For a complete list, you can check Nebraska’s Professionals and Occupations Licensing page.
Local Business Licenses
Some local jurisdictions have their own licensing requirements, although it once again depends on what kind of business you’re running.
Let’s use Omaha, the state’s biggest city, as an example. They have licensing requirements for plumbers, electricians, builders, and others. A bonded master electrician must also have a license from the state of Nebraska before they can get a permit from the City of Omaha.
How do I get a Nebraska business license?
Obtaining a Nebraska business license requires a bit more paperwork. You’ll fill out an application that requests basic information about your business. You can submit the Nebraska business license application online, by mail, or in-person.
How much does it cost to get a Nebraska state business license?
The cost for a Nebraska business license will vary depending on the type of license you’re seeking. For instance, a body art professional’s license costs $95 initially and $118 to renew (body art professionals are responsible for things like piercings and tattoos). Luckily, the Nebraska Department of Health and Human Services has a comprehensive fee schedule for professional and occupational licenses.
How do I get a professional license in Nebraska?
The process for applying for a license will vary depending on your profession. So, someone planning to open a crematorium would go through the Department of Health and Human Services, while someone seeking to open a microdistillery would go through the state’s Liquor Control Commission.
How do I get a local business license?
Every city has slightly different requirements. For instance, an electrician in Omaha needs to fill out an application and return it to the City of Omaha’s Electrical Department.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you’re planning to hire employees or independent contractors for your Nebraska business, you need to set up payroll. So, you’ll need to take the following steps:
- get an EIN
- apply for a Nebraska Withholding Certificate and state ID number by filling out and submitting Nebraska Tax Application (Form 20)
- file Form 501N—If you’re withholding income tax on a monthly basis
- register with the Nebraska Department of Labor and figure out your unemployment insurance tax liability
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
Setting up payroll in Nebraska is complicated, but a solid payroll service or software will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What's the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
Workers’ Compensation Insurance
Under NE Stat § 48.115, most employers are required to carry workers’ compensation insurance. However, independent contractors and federal employers are not required to have worker’s compensation insurance. Required employers who do not carry workers’ compensation insurance can be fined, prohibited from doing in business in the state, or even jailed. And if they get sued by an injured employee, an employer without insurance will lose its common law defenses in civil court.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in Nebraska?
The legal requirement for workers’ compensation insurance applies to most employees. It does not apply to independent contractors or necessarily to business owners. However, workers’ compensation insurance rules do apply to executive officers who own less than 25% in stock of a for-profit corporation, as well as to nonprofit executive officers who receive more than $1,000 in annual compensation.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Nebraska levies both a personal income tax and a sales tax. The state income tax rate starts at 2.46% and tops out at 6.84%.The state sales and use tax is 5.5%. There’s also a corporate tax rate of either 5.58% or 7.81%—depending on what your total revenue. Finally, don’t forget that you’ll need to pay federal taxes, and in some cases, cities and municipalities can also levy additional taxes.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. You’ll need to pay a 15.3% federal tax rate for being self-employed. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-corp instead.
- Corporations. Corporations are taxed as C-corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Nebraska corporate tax rate. The rate for that ranges from 5.58 to 7.81%.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I'm self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-corps, but LLCs can also apply for C-corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Nebraska, the corporate tax rate ranges from 5.58 to 7.81%—depending on your annual revenue). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-corp tax election.
Local Nebraska Business Taxes
We wish we could say that’s all you need to know about taxes when starting in a business in Nebraska, but it’s not. You may also need to pay a local business tax in your municipality.
Let’s take a look at Lincoln, the state capital. It levies an additional 1.75% sales and use tax, making the overall tax rate in the city 7.25%. In Omaha, you’ll pay a little less, as that city levies an additional 1.5% sales tax, making its overall sales tax rate 7%.
You’ll need to contact local officials to ask what sort of tax obligations you’re facing when you open a business in your city or town.
9. Build Your Business Website
If you want Nebraskans to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“firstname.lastname@example.org”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File a Biennial Report
Nebraska requires LLCs and corporations to file a biennial report. In addition, corporations must file a biennial occupation tax report. LLCs must file every odd numbered year by April 1. Corporations must file every even numbered year by March 1.
Read more about how to file a Nebraska Biennial Report.
What if I don't file a biennial report in Nebraska?
The Secretary of State’s Business Division doesn’t asses late fees; however, your business could be administratively dissolved if you fail to file your biennial report on time.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Nebraska or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Nebraska is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Nebraska.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Nebraska?
To register a trademark in Nebraska, you’ll need to submit a Trademark or Service Mark application and pay the $110 filing fee. Your application should include a description of the mark as well as the manner in which it’s being used.
Registering your trademark with the Nebraska Secretary of State only protects your trademark in Nebraska. It does nothing on the federal level.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.