There are numerous different ways an individual can set up their business, for example, as a corporation or a sole proprietorship. LLCs provide the owners with protections from liabilities for the company, similar to a corporation, but without as many formalities.
One of the disadvantages of a corporation is referred to as double taxation. This means that the corporate profits are taxed to the corporation as they are earned.
Then, those profits are also taxed to the shareholders as capital gains income when those shareholders receive dividends. Limited liability companies offer the advantages of a corporation in that the individual assets of the owners are shielded from legal claims made against the LLC and creditors.
In addition, an LLC, like a partnership, is not taxed at the entity level. This means that, in contrast to corporations, the LLC does not pay taxes as an LLC.
Taxes are only paid by the individual members who have earned a profit. It is important to note, however, that there are downsides to organizing as an LLC.
For example, the LLC structure is such that an owner can be sued for their own negligence.
How Is a Limited Liability Company Different from Other Business Forms?
An LLC is different from other common forms of business entities. Unlike a corporation, as noted above, the income of an LLC is only taxed once.
In other words, the LLC income passes through the LLC and is taxed only at the individual member level. There are also other business structures that have the same taxation structure, including:
Limited liability companies are also different from corporations in terms of their ownership structure. An LLC is owned by an individual or individuals, while a corporation is owned by its shareholders.
An LLC also differs from both sole proprietorships and partnerships in terms of liability. The partners in a partnership will be held personally liable for the debts that are incurred by the partnership.
This includes debts that are incurred by one of the other partners. This means that if the partnership owes money to a creditor, that creditor may seek to obtain the individual’s own real and personal property in order to satisfy the debt.
The owner or owners of an LLC, in general, will not be held personally liable for liabilities or debts that are incurred by the LLC. This allows the owners of the LLC to manage the business without having to worry about losing their own assets.
Who Should Form a Limited Liability Company?
An individual who wants to own a small business should consider forming an LLC. If an individual forms an LLC, it can protect their individual assets and limit the liability to the resources of the LLC.
By forming an LLC, the small business owner, if they are sued, would not have to pay out of their personal assets. An individual who is interested in forming a business using minimal paperwork and costs should also consider forming an LLC.
In order to form an LLC, the owner will be required to file a document entitled the articles of organization with the state as well as pay a fee to the state. Typically, this fee is less than the fee required to form a corporation.
Formation of an LLC typically requires less paperwork to be filed with the state than for the formation of a corporation. Additionally, keeping track of income and expenses for an LLC can be relatively easy.
With an LLC, a separate tax return filing is not required. Instead, the members and managers will report their income and expenses on their individual tax returns.
Management of an LLC can also be fairly simple. An LLC that has two or more individuals may develop an operating agreement. In this operating agreement, the members will include details regarding how the LLC will be governed, including how the profits will be allocated and what members’ votes are needed for certain actions.
In addition, the operating agreement may address how the LLC may be shut down, or dissolved. An operating agreement can also outline rules for how disputes among members of the LLC should be resolved.
Operating agreements may also address what will happen if a member of the LLC becomes incapacitated or passes away.
What Are the Requirements for an LLC in Nebraska?
An individual can form an LLC in Nebraska by filing the necessary paperwork with the Nebraska Secretary of State. It is important to note, however, that an individual must first choose a name of their LLC that is not already in use.
An individual can check to see if their desired LLC name is available by contacting the Office of the Secretary of State and, if that name is available, they can reserve the name. Then, the individual must choose a registered agent who is available for service of process or official government notices.
A registered agent may be a company that does business in Nebraska or an actual individual who lives in the state.
What Paperwork Do I Need to Form an LLC in Nebraska?
The Nebraska Secretary of State has two different sets of paperwork for forming domestic and foreign LLCs. An individual can have their company registered as a domestic LLC by completing the Certificate of Organization and filing it online.
Foreign LLCs can be established by completing a Certificate of Authority and filing it online or through the mail. Both of these forms require the individual to list the name of the company and the name and address of the registered agent.
With the Certificate of Authority, an individual will also need to include:
- The office address;
- The date and location where the LLC was originally founded; and
- The purpose of the business.
What Benefits Does Nebraska Give to an LLC?
In Nebraska, one of the largest benefits provided to an LLC is that it protects the personal assets of the owner by seriously limiting their personal liability for company matters. If there is a lawsuit or debt related to the LLC, only the property and income of the LLC can be used to pay that off.
The individual’s personal income cannot be used to cover issues with the LLC.
What Disadvantages Does Nebraska Give to an LLC?
In Nebraska, all LLCs are required to file biennial occupation tax reports in odd numbered years. If an individual does not pay their tax or fee and file their report on time, their LLC will be administratively dissolved.
Once the LLC has been administratively dissolved, the only thing that it is permitted is to wind up the business. The only way to avoid a dissolution after failing to file a report or paying the correct fees is to pay the required reinstatement fee.
What Does the LLC Protect or Not Protect?
Although the LLC formation protects the personal assets of members from a lawsuit, this is different if the lawsuit involves a claim of member negligence. If the court determines that a member of the LLC acted negligence, that member may be held individually liable for their negligence.
In addition, LLC members are typically individually liable for intentional torts. For example, if one LLC member commits a battery during negotiations with another business, that LLC member is individually liable for the battery they committed.
Where Can I Find the Right Lawyer?
If you are interested in forming an LLC in Nebraska, it is in your best interests to consult with a Nebraska corporate lawyer. Your lawyer can assist you with all aspects of forming your business, including ensuring that you file all of the necessary paperwork properly.
Your attorney can also provide you information regarding any tax and insurance requirements that may apply to the LLC. Should any legal issues arise related to your LLC, your attorney can represent you in court.
