If you’re currently self-employed in the state of Nebraska, or if you’re looking to enter the world of one-person business ownership, you’ve probably looked into becoming a sole proprietor.
The sole proprietorship is the simplest business ‘format’ in America, but that doesn’t mean that there aren’t rules and regulations to follow when you operate one. In addition, there are some limits to the functionality of a sole proprietorship.
In this guide, we’ll help you determine whether or not the sole proprietorship is a good choice for your business.
What Is a Nebraska Sole Proprietor?
As opposed to a corporation or limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.
Here are the three main things you need to know:
Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.
Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.
The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.
How to Become a Nebraska Sole Proprietor
When it comes to being a sole proprietor in the state of Nebraska, there is no formal setup process. There are also no fees involved with forming or maintaining this business type. If you want to operate a Nebraska sole proprietorship, all you need to do is start working.
However, just because it’s so easy to get started doesn’t mean there aren’t some additional steps you should take along the way. While these parts of the process aren’t strictly required, many sole proprietors find that they are in their best interests.
A doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.
That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.
In Nebraska, DBAs are sometimes referred to as “Trade Names” and are processed by the Nebraska Secretary of State. To acquire one, you must first consult the state Business Search database and find a suitable name that is available.
For more information on how to file for a trade name, we suggest you consult our full guide.
Determine Taxation Requirements
Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.
Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.
In Nebraska, the type of business your sole proprietorship engages in will ultimately determine which taxes it will be required to pay at the end of the year. A few of the most common taxes come in the form of sales tax and use tax, though there is a wide amount of variation. In order to discover which taxes are applicable to your business, you’ll need to register your sole proprietorship with the Nebraska One-Stop Business Registration.
Obtain Business Licenses and Permits
There isn’t a requirement in Nebraska for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.
Like most states, Nebraska has a huge range of licenses that are specific to business types, local regulations, and what type of products or services your entity sells. To discover which state licenses will be necessary for your Nebraska sole proprietorship, you’ll need to use the Nebraska Department of Labor’s licensing platform, NebraskaAccess.
Other specific licenses and permits may be required in accordance with local regulations, building permits, zoning clearances, and other such restrictions.
In addition, you should check to see if your business needs any licenses or permits on the local level.
While some cities will have no additional permits necessary, some will require additional, specific certifications. To be sure your sole proprietorship meets all requirements, consult the government website of the city or county in which you plan to operate business and ask what local licensing requirements may be applicable.
While the sole proprietor is such a simple business classification that Nebraska doesn’t even require a business registration process or any type of fees, depending on how you use your sole proprietorship and what industry you operate in, you still might have some important steps that need to be taken.
When it comes to issues of taxation, licenses and permits, or even the name you want to call your sole proprietorship, you do need to be vigilant to make sure you’re not overlooking anything.
We hope this guide helped you answer any questions you had for sole proprietorships in Nebraska, and we wish you success with your business!