Choice of entity refers to choosing the legal form for operating your business. A business may be operated as (1) a corporation; (2) a general partnership or limited partnership; (3) a limited liability company (LLC); or (4) a sole proprietorship. Each state has its own laws for the formation, operation, and maintenance of these business entities.

The primary considerations in choosing the best form for operating your business are (1) protecting your personal assets from the liabilities of the company; (2) tax strategies designed to deduct early losses, avoid double taxation, and convert ordinary income into long term capital gain at a lower tax rate; (3) an entity that will be attractive to potential investors and lenders; (4) an entity that allows you to offer equity incentives to employees (stock options); and (5) the cost of forming the entity and properly maintaining it—including filing the required documents with state agencies.

In Nebraska, the choice of entity for operating a business is an important decision that affects legal liability, taxation, investment attractiveness, employee incentives, and administrative requirements. The state allows businesses to be structured as corporations, general partnerships, limited partnerships, limited liability companies (LLCs), or sole proprietorships. Corporations offer limited liability protection but may face double taxation, whereas LLCs provide limited liability without double taxation, making them a popular choice. General partnerships involve shared liability among partners, while limited partnerships offer limited partners protection from business debts. Sole proprietorships are the simplest form, with no distinction between personal and business assets, thus offering no liability protection. Nebraska has specific statutes governing the formation and operation of these entities, including the Nebraska Revised Statutes. The choice of entity should consider personal asset protection, tax implications, attractiveness to investors and lenders, the ability to offer equity incentives, and the costs of formation and maintenance, including state filing requirements. Consulting with an attorney and a tax advisor is recommended to determine the most suitable business structure based on individual circumstances.