How to start an S corporation in Nebraska

An S corporation is a federal tax status, not a separate kind of company. The business doesn't pay federal income tax itself. Its profits and losses pass through to the owners, who report their share on their personal returns. The company files an informational return, Form 1120-S, and gives each owner a Schedule K-1.

The draw for small business owners is self-employment tax. In an LLC taxed the default way, all of an active owner's profit is subject to self-employment tax. In an S corporation, owners who work in the business are paid a reasonable salary through payroll, and only that salary carries payroll taxes. Profit paid out beyond the salary as distributions doesn't.

The trade-off is cost and paperwork: running payroll, filing payroll returns and preparing a separate business tax return every year.

The IRS allows the election only if the business:

• is a domestic corporation, or an LLC eligible to be taxed as one
• has no more than 100 shareholders (family members can count as one)
• has only eligible shareholders: individuals who are U.S. citizens or residents, certain trusts and estates, and certain tax-exempt organizations. Partnerships, corporations and nonresident aliens can't own shares
• has only one class of stock (differences in voting rights alone are allowed)
• isn't an ineligible corporation, such as certain banks and insurance companies

The savings come from profit you take beyond a reasonable salary, so the election usually pays off only once the business earns comfortably more than a fair wage for the work you do. Below that point, the added payroll and tax-prep costs can outweigh the tax saved.

What counts as reasonable depends on your role, hours and industry; the IRS looks at what similar businesses pay for similar services. Our article on when to elect S corp status walks through the math, and it's worth running your numbers with a CPA.

You need a business entity before you can elect S status. In Nebraska, you have two options:

Many small businesses choose the LLC route: it's simpler to run, and it can make the S election once the numbers justify it. Step-by-step instructions: form an LLC in Nebraska or form a corporation in Nebraska.

The IRS needs the business's Employer Identification Number on Form 2553, and you'll need it to run payroll. It's free, and an online application gets you the number right away. See what an EIN is and how to get one.

Form 2553, Election by a Small Business Corporation, asks the IRS to tax the business as an S corporation. Every shareholder (or LLC member) must sign a consent on the form. The IRS charges no fee.

Timing matters. For the election to cover the current tax year, file no more than 2 months and 15 days after the year begins, or at any time during the year before. For a new business, the tax year begins on the date it first has shareholders, acquires assets or begins doing business, whichever comes first. For an existing calendar-year business, the deadline is March 15.

An LLC that files Form 2553 is treated as having elected to be taxed as a corporation, so it doesn't also need Form 8832. If you miss the deadline, the IRS grants late-election relief in many cases where there's reasonable cause, generally within 3 years and 75 days of the date you wanted the election to start.

Nebraska doesn't require a separate state election.

Nebraska follows the federal S election; a corporation with a valid Subchapter S election is not a corporate income taxpayer and files Form 1120-SN to report income passed through to shareholders.

Tax at the company level: The S corporation pays tax on behalf of nonresident individual shareholders who do not sign a Form 12N agreement, and it may elect the pass-through entity tax (4.55% for 2026).

Owners who work in the business must be paid wages through payroll before they take distributions. That means:

• withholding federal income tax, Social Security and Medicare from each paycheck
• filing federal payroll returns, such as the quarterly Form 941, and issuing W-2s each January
• registering with Nebraska for state unemployment insurance and, if Nebraska has a state income tax, for withholding

A payroll service makes this routine. Paying yourself too little invites IRS scrutiny, because it shifts income away from payroll taxes.

Each year, the S corporation files Form 1120-S by the 15th day of the third month after its tax year ends (March 15 for a calendar year) and sends every owner a Schedule K-1. Owners report their share of income on their personal returns.

Nebraska's business tax filings are due as well. The S corporation pays tax on behalf of nonresident individual shareholders who do not sign a Form 12N agreement, and it may elect the pass-through entity tax (4.55% for 2026).

The S election doesn't change your state filings. The entity you formed keeps its Nebraska obligations:

• LLC: Biennial Report, filed every two years ($25 fee). Due: January 1 to April 1 of each odd-numbered year, starting the odd year after formation; delinquent after June 16.
• Corporation: Biennial Report and Occupation Tax, filed every two years ($26 fee). Due: March 1 of each even-numbered year; delinquent after April 15.

Keep a registered agent on file, keep business and personal money separate, and put the Form 1120-S and payroll deadlines on your calendar. Worry-free compliance tracks state deadlines and files the reports for you.

State fees change from time to time. When you order through EZ Entity Setup, you see the exact state fee before you pay.