A professional corporation (PC) is a type of business organization that is owned and operated by licensed professionals. In fact, only those who perform services that require a state license may form a PC in Nebraska.
Don’t know where to begin? ZenBusiness is here to help. Read on to learn how to start a professional corporation in Nebraska.
Determine whether a Nebraska professional corporation structure is the right fit for you
There are a number of formal entity structures you might consider forming for your business organization. Below are some examples of common business entity types:
- Limited partnership
- Limited liability company (LLC)
In certain situations, however, a professional corporation might be a great fit for your business’s needs. But exactly what is a professional corporation in Nebraska?
According to the Nebraska Professional Corporation Act, a professional corporation is one that is organized for “the specific purpose of rendering professional service and which has as its shareholders only individuals who themselves are duly licensed or otherwise legally authorized within this state to render the same professional service as the corporation.”
Put simply, a Nebraska PC is a corporation that is organized by professionals to provide a professional service. According to Nebraska law, such professional services include those rendered by:
- Certified public accountants (CPA)
- Public accountants
- Osteopathic physicians
- Real estate brokers
- Associate real estate brokers
- Real estate salespersons
If you’re licensed to practice in any of these professions, you can form a Nebraska professional corporation.
Professional Corporation vs. Professional Limited Liability Company (PLLC)
Some states permit the formation of professional limited liability companies (PLLCs).
Nebraska isn’t one of those states, but a group of licensed professionals may also form a standard LLC to provide professional services. However, it’s important to note that while standard LLCs may be easier to form, they don’t offer the same high-level liability protection that a PC might.
To learn more about whether an LLC might be the right entity choice for your business, check out our Nebraska LLC page today.
How will ownership be divided?
In an LLC, the owners of the entity are referred to as “members.” In a Nebraska PC, however, the owners of the professional corporation are known as “shareholders.”
The PC may issue shares of its capital stock to individuals who will thereby become owners of the PC. Ownership is divided according to each owner’s respective percentage ownership of the overall number of issued shares. However, it’s important to note that the PC may only issue shares to people who are duly registered in the State of Nebraska to render professional services on behalf of the PC.
How will the professional corporation be managed?
There are several ways in which you can set up your Nebraska professional corporation to be managed.
Articles of Incorporation can set forth the management of the business and regulation of the affairs of the PC. They can define, limit, and regulate the powers of the PC, its board of directors, and its shareholders. However, most of this information should be covered in your corporate bylaws, and there’s no need to include it in your Articles of Incorporation.
Choose a name for your Nebraska professional corporation
Once you’ve determined that a professional corporation is the right entity type for your Nebraska business, you’re ready to choose a name. But doing so may not be as simple as you might think.
Importantly, there are certain naming restrictions to be aware of for Nebraska professional corporations. Specifically, your business name must include either the words “professional corporation” or the abbreviation “P.C.”
In fact, using any of the following words in naming your Nebraska professional corporation is strictly prohibited:
Thus, check that you comply with these specific naming requirements and use either “professional corporation” or “P.C.” in connection with your Nebraska PC.
Check whether your preferred name is available
Some business owners have a business name in mind before they even take steps to formally create their Nebraska professional corporation. Sometimes, however, another Nebraska business entity may already be using the same name or a name similar to the one you have in mind.
Accordingly, before getting too far down the road, verify whether your preferred PC name is available. You can do so using the Nebraska Secretary of State Corporate & Business Search database.
Reserve a name and domain
ZenBusiness can help you verify that your preferred name is available, reserve your business name, and register a domain. By doing so, you can see that no one else takes your business or domain name while you finish the PC formation process.
Select a Nebraska registered agent
Next, you’ll want to select a Nebraska registered agent for your professional corporation.
According to Nebraska law, each corporation, including professional corporations, must at all times maintain a registered agent with a business office within the state. This registered agent is the person you designate for your Nebraska professional corporation to receive service of process of legal documents and certain official government communications.
If you’re wondering who to use as a registered agent for your Nebraska professional corporation, let us help. With ZenBusiness’s registered agent services, you can rest easier knowing that you have secured the best registered agent service online to help your business meet its legal obligations.
Complete your Nebraska Articles of Incorporation
To formally incorporate your Nebraska professional corporation, you must first file your Articles of Incorporation.
The Articles of Incorporation must include the following information:
- A corporate name
- The number of shares the corporation is authorized to issue
- The street address of the corporation’s initial registered office and the name of its initial registered agent at that office
- The name and address of each incorporator
Again, however, only one who is licensed or otherwise legally authorized to render the requisite professional services may be an incorporator for a Nebraska PC.
Next, you must also comply with the state’s publication requirements.
Specifically, Nebraska law requires all corporations, including professional corporations, to publish a notice of incorporation for three successive weeks in some legal newspaper of general circulation. Such notice of incorporation must be published either in the county in which the corporation’s principal office is located, or, if there is no principal office in the state, in the county in which the registered office is located.
The notice of incorporation must include the:
- Name of the corporation
- Number of shares the corporation is authorized to issue
- Street address of the corporation’s initial registered office and initial registered agent
- Name and street address of each incorporation
Importantly, proof of publication of the notice of incorporation must also be filed with the Nebraska Secretary of State.
Establish a corporate record in Nebraska
It’s also important to note that Nebraska law requires all corporations to establish and maintain a corporate record. Specifically, a Nebraska professional corporation must maintain records such as:
- Minutes of all meetings of its shareholders and board of directors
- Accounting records
- List and addresses of its shareholders, directors, and officers
- Bylaws and any amendments
- Its most recent biennial report
It’s important to keep a copy of all corporate records at your principal office location. However, in most cases, it’s also a good idea to keep a copy stored electronically.
Designate a Nebraska professional corporation board of directors
Designating a board of directors for your Nebraska professional corporation is crucial. This board of directors will play an important role in your new business.
The board of directors has the authority to hold meetings, appoint officers, provide oversight, and exercise other powers as enumerated in the Articles of Incorporation.
Create Nebraska corporate bylaws
Don’t forget to draft corporate bylaws for your Nebraska PC. These bylaws will set forth the official rules and procedures regarding the operation of the professional corporation.
Bylaws for a Nebraska professional corporation will typically address topics such as:
- How often the board of directors will meet
- Increasing quorum or voting requirements for the board
- Shareholder voting procedures
- The number of directors that will be elected
- Dispute resolution procedures
While creating bylaws for your Nebraska professional corporation may seem tedious, they’re nevertheless crucial to the successful running of your business.
Hold your first board meeting
After you have designated a board of directors and drafted your corporate bylaws, you’re now ready to hold your first board meeting.
At this initial board meeting, the board of directors will:
- Review and ratify the corporate bylaws
- Designate officers to manage day-to-day operations
- Discuss issuance of stock shares
- Discuss desired tax status for the corporation
Don’t forget to keep detailed minutes for this first board meeting and all those thereafter. Doing so is crucial to keeping an accurate corporate record for the PC.
Handle your Nebraska tax obligations
It’s important to review and understand your business’s tax obligations. Failure to do so can result in serious legal repercussions.
At the federal level, your PC will be taxed either as a C corporation or an S corporation. By default, your corporation will be taxed as a C corporation. C corporations are taxed twice — once at the corporate level and another time at the individual shareholder level. S corporations have more restrictions, but, if you qualify, your corporation would enjoy pass-through taxation, meaning the income isn’t taxed at the business level, only the individual shareholder level.
Regardless of which type you choose, let ZenBusiness help you get started by securing your employer identification number (EIN) from the IRS. This number acts as an identifier for your business when you file your taxes.
However, don’t forget that your Nebraska PC will also have tax obligations at the state and local levels as well.
Obtain Nebraska business licenses and permits
Nebraska professional corporations may be formed only by professionals providing professional services in the state. Thus, it’s imperative that you obtain all requisite Nebraska business licenses and permits before providing any services. This includes any necessary general state and local business licenses as well as any industry-specific regulatory or professional licenses needed for your particular profession.
Unfortunately, there is no central authority where you can verify what particular licenses or permits you need for your PC, as most requirements vary by industry and may even vary at the federal, state, and local levels. Thus, it’s ultimately your responsibility to obtain all licenses and permits needed to operate your Nebraska professional corporation.
ZenBusiness can provide you with a report listing the licenses and permits your business will need to operate based on your activities, industry, and location.
Acquire insurance for your Nebraska professional corporation
Most businesses with employees need to carry workers’ compensation insurance in Nebraska.
The State of Nebraska doesn’t require any specific liability insurance coverage for professional corporations. However, obtaining insurance for your Nebraska PC is almost always recommended.
Examples of insurance you might consider for your Nebraska professional corporation include:
- General business insurance
- Professional malpractice insurance
- Any other industry-specific insurance that may be applicable
Obtaining insurance is an important step to take to better protect your business from potential legal liability and financial losses.
Open a business bank account
Lastly, don’t forget to open a business bank account. This business account needs to be in the name of the PC and completely separate from any personal accounts you may have.
While you might not think this is necessary, keeping separate business and personal bank accounts is crucial. Failure to do so can raise issues and potential legal disputes in the future.
Ready to form your Nebraska professional corporation?
Once you’ve formed your PC, ZenBusiness can help you run and grow your business and assist with staying legally compliant moving forward. At ZenBusiness, we pride ourselves on supporting new and growing businesses throughout the business lifecycle. Take a closer look at the services we provide to see how we can help your business today.
Nebraska Professional Corporation FAQ
What are the filing fees for a Nebraska professional corporation?
Filing fees are subject to change and can vary widely depending on a number of factors. Check the Nebraska Secretary of State website periodically for the most up-to-date information on filing fees.
Do I need a lawyer to form a Nebraska professional corporation?
While you don’t need a lawyer to help you form a Nebraska professional corporation, it never hurts to seek advice and consultation from a legal professional.
Does Nebraska have other professional entity types?
While some states permit the formation of professional limited liability companies (PLLCs) in addition to professional corporations, Nebraska doesn’t. However, a group of professionals may still form a standard LLC if they so desire.
Can professionals from different fields form a Nebraska professional corporation together?
No, professionals from different fields cannot form a Nebraska professional corporation together. Nebraska law specifies that a professional corporation may render only one type of professional service and “shall not engage in any other profession.”
Will I be taxed as an S corporation or C corporation in Nebraska?
The short answer is that it depends. The default for Nebraska corporations is incorporation as a C corporation. However, you may elect to be taxed as an S corporation instead if you meet the IRS’s requirements.