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How To Start A Nebraska Sole Proprietorship

How To Start A Nebraska Sole Proprietorship

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How To Start A Nebraska Sole Proprietorship

Starting your own business in Nebraska is an important step, filled with both opportunities and challenges. Among the challenges is deciding on a business structure, which is how the business is legally set up to operate. There are four main options you can choose from – sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

In Nebraska, sole proprietorships are a popular choice for entrepreneurs, and in this guide, we’ll explore what a sole proprietorship is, including its advantages and disadvantages. We’ll also provide you with a step-by-step guide on how to get registered in Nebraska, ensuring you have all the information you need to make an informed decision about whether this business structure is right for you.

Related: How to start a business in Nebraska

What is a Sole Proprietorship?

A sole proprietorship is the simplest and most common structure for small business owners. It is an unincorporated business owned and run by one individual, and there is no legal distinction between the business and the owner.

As a business owner, knowing about these different structures is important. General partnerships are businesses with two or more owners who share profits and losses. Corporations are separate entities that can be owned by many people, whereas LLCs offer owners protection from personal liability for business debts, much like corporations, with the tax benefits and simplicity of a sole proprietorship or partnership.

Sole Proprietorship Advantages

Lowest startup costs: This is one of the biggest advantages of the sole proprietorship, as there are no state filing fees or legal costs like there are with an LLC or corporation.

Tax simplicity: Sole proprietorships are considered pass-through entities for tax purposes. This means the business itself does not pay income taxes. Instead, the owner reports business income or losses on their personal tax return. Taxes are the most straightforward for sole proprietors.

Complete control: As the sole owner, you have complete decision-making power over your business. You do not share control with partners or board members as other structures require.

Sole Proprietorship Disadvantages

Unlimited personal liability: The main downside of a sole proprietorship is the owner is personally responsible for all business debts and liabilities. If the business cannot pay a creditor or loses a lawsuit, the owner’s personal assets are at risk.

Less business continuity: The existence of a sole proprietorship is tied directly to the owner. If the owner retires or passes away, the business may not easily continue, which is important if there are contracts that wouldn’t transfer to a new owner.

Difficulty raising capital: With a sole proprietorship, you don’t have shares to sell to investors, which can make it harder to raise money.

While sole proprietorships offer simplicity and control, they also come with risks, particularly in personal liability. If liability protection is a significant concern, forming a Limited Liability Company (LLC) might be a better choice.

Related: How to form a Nebraska LLC

Steps to Start a Sole Proprietorship in Nebraska

While starting a sole proprietorship in Nebraska is a straightforward process, there are a few steps to cover to make sure the business is legally set up.

Step 1: Choose a Business Name

As a sole proprietor in Nebraska, the owner can operate their business under either their full first and last name. But if they want to operate under a specific business name, registration is required.

For example, John Smith is starting a landscaping business in Omaha. Instead of having to do business under his full name, John Smith, he’d like to do business under the name “Green Thumb Landscaping.” In this case, he’ll need to register his DBA name, “Green Thumb Landscaping,” with the Nebraska Secretary of State.

Step 2: Verify Name Availability

In order to operate under a specific business name, it has to be unique or not too similar to other names registered with the Secretary of State. Before finalizing a name, a Nebraska Trade Name search is necessary to verify that the name you want to use is available.

Related: How to do a Nebraska Trade Name search

Step 3: File the Trade Name Registration

With the name verified, the next step is to register with the Nebraska Secretary of State, by filing the Trade Name Form. Be aware that registering an assumed name in Nebraska won’t prevent another business from using it. For stronger name rights, consider applying for a federal trademark through the U.S. Patent & Trademark Office (USPTO).

Related: How to register a Nebraska trade name

Step 4: Research Business License Requirements

Regardless of your business structure, you may need business licenses. These vary depending on your business activities and location. Here are some licenses you might need:

Local business license: While there is no state business license, some local jurisdictions may require a business license. Check with your city officials or economic development office for information.

Nebraska Tax Identification Number: All businesses must register for a Nebraska Tax Identification Number with the Nebraska Department of Revenue. This is a combined registration for a sales tax permit, income tax withholding, and other miscellaneous taxes.

Professional license: Certain professions in Nebraska require licensing before offering particular services. Examples include food establishments, architects, acupuncturists, barbers, contractors, and childcare facilities.

Employer Identification Number (EIN): The EIN is a unique number required by the IRS for businesses for tax reporting. As a sole proprietor, you’ll need an EIN if you’re hiring employees. While not always necessary, some banks may require an EIN to open a business bank account. Otherwise, you can use your social security number.

Wrapping Up

A sole proprietorship in Nebraska offers a simple approach to starting a business, with potential benefits like low start-up costs and straightforward taxation, but at the same time, there are risks, such as the liability for business debts. Whichever legal structure you choose, it’s a decision that can shape your business’s future and success.

We hope that this guide has clarified the steps to start a Nebraska sole proprietorship and helped you navigate through the process with ease. Now it’s your turn. Do you plan on setting up a sole proprietorship, or are you considering another structure, and why? Don’t hesitate to raise any questions you might have. Let’s keep this conversation going in the comments section as you take the next steps towards getting your business started.


  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Nebraska Sole Proprietorship

How To Start A Nebraska Sole Proprietorship

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