Start a Nebraska S Corp

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Start Your S Corporation in Nebraska

How to Start an S-Corp in Nebraska

You have many choices to make when you start your own business. Typically, you’ll start by choosing your business structure. You might have heard of the benefits of forming an S Corp in Nebraska but aren’t sure yet if it’s right for your business.

That’s where we come in. The S Corp isn’t a separate business structure. Instead, it’s an election for pass-through tax treatment. We understand the challenges you face as a new business owner. We built our products and services to support business owners like you throughout the lifetime of your business.

Starting a Nebraska S Corporation begins with the choice of entity structure, most often a corporation or limited liability company (LLC). Let us help you form a Nebraska LLC or Nebraska corporation, and we’ll be here to ensure you complete all the important details. 

How to Create an S Corporation in Nebraska

When you form a business in Nebraska, the state’s Department of Revenue charges income taxes to the business according to the definitions in the federal Internal Revenue Code. Therefore, you must first register your business in Nebraska and then elect federal S Corp tax treatment to form a Nebraska S Corp. Once the IRS accepts your S Corp status, Nebraska will tax your business as an S Corp. 

Here are the steps you need to take to form your Nebraska S Corporation:

1. Choose a name 

The first step to starting your S Corp is to choose a name. The name should reflect the underlying structure of the business. If you’re forming a Nebraska corporation, include “corporation,” “incorporated,” “company,” “limited,” or an abbreviation of these words. LLCs should include the words “limited liability company,” “limited company,” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.”

Once you’ve selected a unique name, you can reserve it with the Nebraska Secretary of State for 120 days. When you use our Name Reservation Service, we’ll search to ensure your name is available and file the paperwork for you.

2. Choose a registered agent

Whether you’re starting a Nebraska corporation or an LLC, all businesses need to choose a registered agent who will receive service of process and other legal notices on behalf of the business. You may choose yourself, another individual, or a business set up for this purpose. Whoever you choose must have an address to receive mail in Nebraska. Your registered agent must also be available to receive service of process during normal business hours.

3. Choose a director or managers 

A corporation’s directors and an LLC’s managers (or members, if member-managed) make governing decisions about the business. 

4. File Articles of Incorporation or Certificate Organization with the Nebraska Secretary of State

Before you can conduct business in Nebraska, your business must register with the Nebraska Secretary of State. Filing your formation documents will officially form your business in the state. Nebraska corporations file Articles of Incorporation and LLCs file a Certificate of Organization.

5. Publish Articles of Incorporation/Organization

Nebraska requires new LLCs and non-profit corporations to publish a notice of their formation in a local newspaper for three consecutive weeks. Once you complete the publication requirement, you should notify the Secretary of State of your compliance. To help you meet all other state compliance requirements, use our Worry-Free Compliance Service, and we’ll send you a reminder for the important deadlines.

6. File Form 2553 to turn your business into an S Corporation

Whether you choose the structure of an LLC or a Nebraska corporation, the final step to forming an S Corp is to file Form 2553 with the Internal Revenue Service (IRS). Nebraska has no further S Corporation filing requirements. It will recognize your S Corp election when the IRS accepts your election. Before your LLC can complete Form 2553, you must first elect to be taxed as a corporation. Then, you can complete your S Corp election.

Note: In order to file Form 2553, you’ll first need an employer identification number (EIN). You’ll also need an EIN to do certain things like open a business bank account. Luckily, our EIN service can handle this part for you.

Requirements and Limitations for S Corporations

Before you can form an S Corporation, your business must meet certain requirements. It must:

  • Be a domestic Nebraska corporation
  • Have only allowable corporation shareholders (individuals, certain trusts, and estates but not partnerships, corporations, or non-resident alien shareholders)
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e., certain financial institutions, insurance companies, and domestic, international sales corporations).

Your business must maintain these requirements to continue its S Corp status. You should file Form 2553 within two months and 15 days of the start of the tax year or any time in the year before you want to be taxed as an S Corp. 

Weighing the pros and cons of creating an S Corporation

When choosing a business structure or tax treatment, you have many options. It’s important to think about how you want your income to be taxed. Also, consider how flexible you want your business ownership to be.

Pros of creating a Nebraska S Corp

Compared to unincorporated entities like the sole proprietorship or the general partnership, the S Corp provides more protection for your personal assets. Another pro of the S Corp is the pass-through taxation and tax-favorable characterization of business income. Finally, the S Corp allows for the cash method of accounting.

Cons of creating a Nebraska S Corp

The biggest con of the S Corp is the formation and maintenance expenses. Compared to the basic corporation or LLC, you have more paperwork to do. You’ll also face tighter tax qualification obligations and stock ownership restrictions. In addition, the IRS will likely subject your business to closer IRS scrutiny. Finally, the S Corp offers less flexibility in allocating income and losses.

What to know before creating an S Corporation in Nebraska

The first thing you should know is that the S Corp isn’t a business structure but rather a tax treatment. The second thing is that the IRS assigns a default tax treatment to each type of business entity, unless and until you file a non-default election such as S Corp status.

What is an S Corporation?

The S Corporation is a business that has elected S Corp taxation. S Corps use “pass-through” taxation. Rather than paying corporate income taxes, the business owners will only pay federal income tax on their individual returns. Unlike traditional “pass-through” entities like LLCs, partnerships, or sole proprietorships, the owners of S Corps pay employment taxes on their salary instead of the self-employment tax.

What’s the difference between an S Corporation and a C Corporation?

The default tax treatment for a Nebraska corporation is that of a C Corp, which involves double taxation. Double taxation means the corporation pays the corporate income tax and withholds employment taxes from its employees’ wages. If your corporation elects S Corp treatment instead, the business retains the same structure (shareholders, Board of Directors), but it no longer pays income taxes at the corporate level. Instead, the shareholders pay income and employment taxes on their individual returns based on their share of the corporation’s profits or losses. 

What are the requirements to create an S Corporation?

 
To create an S Corporation, you first need to register a business falling within the limitations identified above. Then, you have to file Form 2553 with the IRS within the appropriate timeframes. 

Can LLCs choose an S Corporation election?

Yes, LLCs can make an S Corp election. Making the S Corp election doesn’t change your business structure. Usually, the members of an LLC will make the S Corp election for tax purposes. An LLC isn’t ordinarily subject to corporate income tax. As a “pass-through entity,” the members of the LLC pay income taxes at the individual rate on business profits and losses.

However, they must also pay self-employment taxes on their income from the business. Instead, when an LLC’s members elect S Corp status, they must pay themselves a reasonable salary, and the S Corp (LLC) will collect employment taxes on that salary. If you have questions about taxes for LLCs, our business experts have written a page just for you. 

How we can help

If you’ve decided that the S Corp is right for your business, we can help. See if our S Corp formation service is right for you. When you form your business with us, our business experts will be here to support you from formation to compliance. We’ll ensure you get all the paperwork and can even remind you of important deadlines.

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Nebraska S Corp FAQs

  • Creating an S Corporation means your business will get pass-through tax treatment. This means it won’t pay income taxes at the corporate level, but you still get to choose your business structure (LLC or corporation).

  • Because the S Corp election doesn’t change your business structure, you should name your business according to its underlying structure. An LLC should include the words limited liability company or limited company or the abbreviation L.L.C., LLC, L.C., or LC. A corporation’s name should include the word corporation, incorporated, company, or limited, or the abbreviation Corp., Inc., Co., or Ltd.

  • No, continue identifying your LLC with the words “limited liability company” to alert consumers to the type of liability its owners can be held responsible for. S Corp status is only a form of tax treatment and doesn’t need to be reflected in your name.

  • The S Corporation will complete a Schedule K-1 that informs shareholders or members of their share of its profits and losses. You will then pay income taxes at the individual rate on that share.