Setting Up a Business Partnership in Nebraska

In Nebraska, you can form several types of partnerships: 1) General Partnership (GP), where all partners share in management and have unlimited liability; 2) Limited Partnership (LP), which has both general partners who manage the business and limited partners who are typically investors with limited liability; 3) Limited Liability Partnership (LLP), which provides liability protection for all partners while allowing them to participate in management; and 4) Limited Liability Limited Partnership (LLLP), which combines features of LPs and LLPs. Each structure has different formation requirements, liability protections, and tax implications.

Unlike other business entities, a general partnership in Nebraska can be formed without filing any documents with the state. It's created automatically when two or more people agree to operate a business together for profit. However, while not legally required, it's highly recommended to create a written partnership agreement that outlines the rights and responsibilities of each partner. Additionally, you may need to file a trade name registration if you're doing business under a name other than the partners' surnames, and obtain any necessary business licenses or permits.

A comprehensive Nebraska partnership agreement should include: 1) Each partner's capital contributions; 2) Profit and loss allocation percentages; 3) Partner authority and decision-making processes; 4) Management responsibilities; 5) Procedures for admitting new partners; 6) Buyout provisions if a partner leaves; 7) Dispute resolution methods; 8) Dissolution procedures; 9) Non-compete clauses if applicable; and 10) Amendment procedures. While oral agreements are technically valid, a written agreement signed by all partners provides clarity and protection. Consider having an attorney review your agreement before finalizing.

Partnerships in Nebraska are generally considered 'pass-through' entities for tax purposes. This means the partnership itself doesn't pay income taxes; instead, profits and losses 'pass through' to the individual partners who report them on their personal tax returns. Partners pay self-employment taxes on their share of partnership income. In Nebraska, partnerships must file an informational return (Form 1065) with the IRS and provide each partner with a Schedule K-1 showing their share of income or losses. Additionally, partnerships may be subject to Nebraska's occupation taxes depending on the business activity.

Liability varies significantly across partnership types in Nebraska. In a General Partnership, all partners have unlimited personal liability for business debts and legal claims. In a Limited Partnership, general partners have unlimited liability while limited partners' liability is restricted to their investment. Limited Liability Partnerships (LLPs) provide all partners protection from the partnership's debts and the negligence of other partners, though partners remain liable for their own negligence. Limited Liability Limited Partnerships (LLLPs) combine these features, protecting limited partners' investments and providing general partners with liability protection. Understanding these differences is crucial when selecting the appropriate structure for your business.

To register an LP in Nebraska, file a Certificate of Limited Partnership with the Secretary of State along with the required filing fee (currently $200). For an LLP, file a Statement of Qualification with the same office and pay the filing fee (also $200). Both entities must maintain a registered agent in Nebraska for service of process. Forms are available on the Nebraska Secretary of State's website. LPs must include 'Limited Partnership' or 'LP' in their name, while LLPs must include 'Limited Liability Partnership,' 'LLP,' or similar designation. Annual reports must be filed to maintain good standing, with fees based on the entity type.

When a partner exits a Nebraska partnership, the process is governed by your partnership agreement or, if none exists, by the Nebraska Uniform Partnership Act. A well-drafted agreement should specify buyout procedures, valuation methods, and payment terms. Without such provisions, the default law may require dissolving the entire partnership unless remaining partners agree to continue. Partners can generally withdraw by giving notice, but may face liability for leaving in breach of the agreement. The departing partner's name should be removed from accounts, licenses, and marketing materials. Consider having a buy-sell agreement in place before issues arise to ensure a smooth transition.

Yes, partnerships in Nebraska need an Employer Identification Number (EIN) from the IRS, even if they don't have employees. The EIN functions as a tax ID for the partnership and is required for opening business bank accounts, filing partnership tax returns, and hiring employees. You can obtain an EIN for free by applying online through the IRS website, by mail, or by fax. Each partner will use this EIN when reporting their share of partnership income on their personal tax returns. Multi-member LLCs taxed as partnerships also require an EIN.

Nebraska partnerships have several ongoing compliance requirements. General Partnerships have minimal state filing requirements but must maintain proper business licenses and permits. Limited Partnerships, LLPs, and LLLPs must file biennial reports with the Secretary of State and pay the associated fees to maintain good standing. All partnerships must file annual informational tax returns. If you have employees, you must comply with employment laws, withhold payroll taxes, and carry workers' compensation insurance. Depending on your business activities, you may need to renew industry-specific licenses or permits. Maintaining accurate financial records is essential for all partnership types.