LLC vs S-Corp in Nebraska

Nebraska has a state personal income tax and a state corporate income tax, which affects the LLC vs S-corp math. The Nebraska Secretary of State handles entity formation under the Nebraska Uniform Limited Liability Company Act (Nebraska Revised Statutes Chapter 21, Article 1). The IRS handles tax classification via Form 8832 and Form 2553. A federal S corp election is recognized for Nebraska income-tax purposes. Nebraska LLC basics. - Certificate of Organization filed with the Nebraska Secretary of State under Nebraska Revised Statutes section 21-117. - Filing fee: $100 online or $110 by mail. Source: Nebraska Secretary of State — Forms and Fee Information (https://sos.nebraska.gov/business-services/forms-and-fee-information). - Biennial report required. - Nebraska requires a notice of publication of organization for LLCs in a newspaper of general circulation once each week for three successive weeks under Nebraska Revised Statutes section 21-193 (a feature unique to a handful of states and an often-overlooked step). - Single-member LLCs default to disregarded entity for federal and Nebraska tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with Form 2553. Nebraska S corp basics. - A federal S corp election is recognized by Nebraska. The S corp files Nebraska Form 1120-SN, and shareholders report their share of income on their Nebraska individual returns. - Nebraska personal income tax is progressive. Under recent reform (LB 754, 2023), the top marginal rate is scheduled to step down to 3.99% by tax year 2027. For tax year 2026 the top rate is approximately 4.55% (confirm with the Nebraska Department of Revenue). - Nebraska corporate income tax is also being reduced under LB 754 and is scheduled to reach 3.99% at the top bracket by 2027. S corp income generally flows through to shareholders rather than paying the corporate tax. - Payroll. An S corp must pay its owner-employee a reasonable W-2 salary. Nebraska has unemployment insurance through the Department of Labor and withholding through the Department of Revenue. Why a Nebraska trades shop might still elect S corp. The primary reason is federal self-employment tax savings. A disregarded-entity LLC owner pays self-employment tax on the full net profit. An S corp owner-employee pays payroll tax on wages only; the distribution portion avoids self-employment tax. Nebraska's state-side impact is modest, so the election is mostly a federal decision. Rule of thumb. Start as a Nebraska LLC (and complete the newspaper publication under section 21-193). When annual profit after a reasonable owner wage is high enough that payroll-tax savings clear the payroll, retirement-plan, and accounting costs, elect S corp. A CPA with Nebraska construction clients can run the breakeven for your numbers and confirm the current state rates, which are being phased down through 2027.