If you’re thinking about starting your own business as an LLC, Tennessee may be the place to make it happen. Beyond the beautiful scenery and music, the Volunteer State has a solid reputation for being friendly to business. In fact, Tennessee ranked #5 in CNBC’s Top States for Business 2021.
And, just as Tennessee is a business-friendly state, a limited liability company (LLC) is a business-friendly concept. It’s a business entity type that allows its owners (called “members”) to have the personal limited liability protection of a corporation with the tax benefits and flexibility of a sole proprietorship.
LLCs avoid the “double taxation” of a typical corporation, in which profits are taxed both at the business level and again on the personal level. LLCs also bypass many of the structural and reporting requirements of a corporation while providing personal asset protection for the owners in the event the business is sued or goes into debt.
But even though setting up a Tennessee LLC is easier than forming a corporation, it still requires you to file the right paperwork in the right order. If you’ve never started a business before, it can feel like there are more piles of red tape than there are official Tennessee state songs.
Help is on the way. This article will show you the basic steps to create an LLC in Tennessee. We’ll also show you how our many business services can make the process easier so you can get to the enjoyable parts of your business more quickly.
First, you’ll need to find an available name for your LLC and appoint a registered agent. From there, you’ll be able to file Articles of Organization with the Tennessee Secretary of State. Next, you’ll likely want to create an operating agreement and get a federal tax identification number.
Note: These are the steps for creating a domestic LLC in Tennessee, meaning one that originates within the state. To create a foreign LLC – one that originated in another state but wants to do business in Tennessee – you would follow a different process. Forming a non-profit LLC or a professional LLC (PLLC) also requires different steps.
Okay, here’s our step-by-step guide for how to create an LLC in Tennessee.
Pick an available name for your LLC. Brainstorm some LLC names that are memorable and convey what your business sells. Beyond that, though, you need to follow Tennessee’s rules for naming LLCs.
Here are some important guidelines to follow:
For a complete list of LLC naming rules, see T.C.A. § 48-207-101 or T.C.A. § 48-249-106.
How do you know whether your desired business name has already been claimed by someone else? You start by using the business name search engine on the Tennessee Secretary of State website. Take a look at our guide to conducting a Tennessee business name search.
The website cautions you not to assume that a name is available until you get official approval from the Secretary of State, either by having your Articles of Organization approved or by reserving a business name.
If you aren’t planning to file your Articles of Organization right away, consider reserving your business name to keep anyone else from claiming it in the meantime and to get confirmation that the name is available. Tennessee allows potential business owners to submit a name reservation application to reserve an available name for up to four months.
Before you make a final decision on a name, though, you have a couple of additional considerations.
The Tennessee Secretary of State doesn’t check to see whether the name you want to use is trademarked. So, even if they approve your business name, someone else with a federal or state trademark may later challenge your right to use the name in court.
To truly check to see if your business name isn’t trademarked can be difficult because there’s no one central place to check. Some businesses even employ an attorney specializing in trademarks to see if they’re in the clear.
You can take some actions yourself, like searching the trademark database on the U.S. Patent and Trademark Office website. This can help you see if someone’s already claimed a federal trademark on the name you want.
State trademarks are applicable only within the borders of a state. The Tennessee Secretary of State has a trademark search engine on its website where you can see if anyone has a state trademark on your desired LLC name. If you want, you can also apply for your own state trademark on the site.
In addition to checking these databases, it’s wise to do an internet search for your business name, including checking domain names, social media sites, and even online phone directories.
Even if you don’t sell your products or services directly online, you’re going to want a presence on the web. At the very least, you want your company’s name, address, and contact info to pop up when potential clients search for it.
That’s why getting a good domain name that pairs well with your business name is so important. You’re likely going to be putting that URL on your business cards and other marketing materials, and you want people to be able to remember it and associate it with your business.
Some companies may want to use an assumed name for their Tennessee LLC. In other states, this is known as a “doing business as” (DBA) name. This allows your company to separate services under various titles or to advertise without the mandated “LLC” designator. Learn more about Tennessee DBAs.
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Name a registered agent for your LLC. A Tennessee registered agent is an individual or business entity that receives legal notices (like service of process) and official government correspondence involving your company.
Tennessee law requires all LLCs to have a registered agent with a registered office where they will be available to receive notices in person. The registered office may be the same as any of the LLC’s places of business, but it doesn’t have to be (T.C.A. § 48-249-109(a)(1)).
The registered agent may be:
Note that the registered office must be a physical street address, so you can’t use a P.O. box or something similar. The registered agent must also be available during regular business hours.
Some business owners prefer to be their own registered agent, but there are drawbacks. You must be available during normal business hours at that physical address, which isn’t always convenient or possible. It’s also embarrassing and bad for business to be served with a lawsuit in front of customers and employees.
This is where a registered agent service like ours can help. We can put you in contact with our commercial registered agent partners in Tennessee. This registered agent service allows you the peace of mind of knowing you are legally compliant while keeping certain matters discreet.
Being your own registered agent or appointing a friend or family member to be your agent might seem like an easy way to meet Tennessee’s registered agent requirement. But consider what could happen if a process server is unable to find you or your appointed agent.
This can occur if you or your appointee isn’t in the principal office (for example, they’re meeting a client, on vacation, sick, etc.) when someone needs to reach the agent. It can also happen if the registered agent moves or quits and you forget to update your paperwork with the state.
In addition to legal penalties for being out of compliance, failing to maintain a registered agent could mean that a process server can’t find you to notify you of a lawsuit. In that case, a legal action against you could go forward without your knowledge, meaning you wouldn’t even have a chance to defend yourself.
File your Tennessee Articles of Organization. Once approved, this will officially register your Tennessee LLC in the eyes of the state.
To file with the Tennessee Secretary of State, you’ll need to make key information about your business ready and available. Make sure your chosen name has been researched and cleared. Double-check that you have all the contact information for your members and registered agent handy. The Tennessee Secretary of State accepts filings online, by postal mail, and by hand delivery, along with the relevant filing fee.
The Tennessee Articles of Organization form asks for the following information. Be aware that this information becomes available to be searched in public records once submitted.
You can apply online via the Tennessee Secretary of State website or print the paper form and mail it to:
Department of State
312 Rosa L. Parks Ave.
6th Floor, William R. Snodgrass Tower
Nashville, TN 37243
If you’re having trouble doing this by yourself or don’t have the time, that’s okay! Filing official government documents to the Tennessee Secretary of State can be intimidating and complicated. With our business formation plans, we can handle it for you to make sure it’s done quickly and correctly.
Some entrepreneurs, especially if it’s near the end of the year, will delay their LLC filing date to January 1 of the coming year. This way, they can avoid the hassle and cost of having to pay taxes on an LLC in the current year. This is especially true if the future LLC owners don’t need to establish the company right away.
Ordinarily, the effective filing date would be at the time of filing. But you also have the option to tell the state that you want your effective date to be at a later time. You can choose to have your LLC’s effective date be up to 90 days past the date you submit the filing.
This is something else we can help you with. When you form your LLC with us, we give you the option of paying an extra fee to have your LLC’s effective date delayed. (This service is only offered from October to January.)
We can take care of filing your Articles of Organization with the Tennessee Secretary of State. Once your LLC is approved, your paperwork will be available from your ZenBusiness dashboard. You can keep it and other important paperwork digitally organized.
Keep your LLC’s documents, like operating agreements, legal documents, member certificates, contracts, compliance checklists, official court documents, transfer ledger, income tax forms, etc. in a safe location. We offer a customized business kit to help you keep these important documents organized and looking professional.
You should only need to file your Articles of Organization once. But if any of the original Articles of Organization information needs to be updated, altered, or expanded, your business is required to inform the state about the changes.
You would report these changes by filing Tennessee Articles of Amendment and paying a filing fee. If your Articles of Organization isn’t current, it could impact your ability to get a Tennessee Certificate of Existence (called a “Certificate of Good Standing” in most states). This document isn’t required to conduct business, but it can be important for business accounts, potential investors, and expanding your business to other states. Basically, failing to keep your business up to date with state requirements can limit your LLC’s potential future growth.
When you need help amending your Articles of Organization, we have an amendment filing service that can handle it for you. Our Worry-Free Compliance service also includes two amendment filings every year and informs you of upcoming filing deadlines.
Make an operating agreement for your LLC. While it’s not a legal requirement to have a Tennessee operating agreement, it’s very wise to have one.
An operating agreement (OA) clearly defines the terms of ownership and management for an LLC. And, without one, you’ll be subject to Tennessee’s default rules for LLCs, which might not reflect the wants of yourself and the other members.
Here are some of the benefits an OA offers to owners of an LLC:
Here are some basic items you may want to include in your OA:
Feeling unsure as to how to create a comprehensive operating agreement for your LLC? We offer a guided customizable template to help get you started. Our chatbot walks you through the process of making your agreement and allows for e-signature of the document.
It seems like most of the content in your operating agreement is intended to avoid disputes among the LLC members, so you might think you don’t need one if your LLC is just one person. But potential investors, future business partners, and others may want to see your operating agreement, anyway.
Your operating agreement can also explain in detail what you want to happen to the business and its assets if you die or become incapacitated.
One more thing to consider: Someone could take an LLC owner to court to try to show that the owner and the LLC are the same entity so that they can go after the owner’s assets and bypass the personal asset protection. If that happens, having an operating agreement in place is one more thing further demonstrating to the court that the business owner and the LLC truly are separate.
Apply for an Employer Identification Number (EIN) with the federal government. An EIN is a nine-digit number that acts like your business’s Social Security number. A federal EIN can be used to open a bank account, hire employees, and pay taxes.
You get a Federal EIN by applying with the IRS. You can do this online or by mailing in a form. Note that if you file online with the IRS, you must complete the process in one sitting. The IRS cautions that you can’t save the form and go back later. Make sure you have all your business’s information ready when you file to save time.
If you’d rather deal with the IRS as little as possible, we can get your Employer Identification Number for you. Our EIN service is quick and eliminates the hassle.
You’ll also have to register to pay state taxes. The Tennessee Department of Revenue has an online system called the Tennessee Taxpayer Access Point (TNTAP) in which you can register for the following taxes:
Not all Tennessee taxes can be registered online, such as the automobile rental surcharge tax, tire fee, and used motor oil taxes. See the Tennessee Department of Revenue website for instructions on how to register for these taxes with paper applications.
The LLC business structure gives you flexibility, and that extends to how you can choose to have your LLC taxed.
An LLC has pass-through taxation by default. This avoids “double taxation,” in which a corporation’s profits are taxed at the corporate level again when the business income is distributed to the individual owners. But some LLCs opt to be taxed as a C corporation or an S corporation because, in their case, it works to their advantage.
Being taxed as a C corporation does mean you get double taxation, but, for certain LLCs, the pros sometimes outweigh the cons. One benefit is that C corporations have the widest range of tax deductions, which could be an advantage in some scenarios, especially for more profitable LLCs. For instance, employee insurance premiums can be written off as a business expense.
S corp (short for “Subchapter S Corporation”) is a tax status intended for small businesses. Having your LLC taxed as an S corp has pass-through taxation like a standard LLC, but it has another potential advantage for some LLCs: It could reduce your self-employment taxes.
Self-employment taxes are the portion of your federal taxes that pay for Social Security and Medicare. In a typical LLC, you would pay these on all of your profits.
But filing as an S corp allows you to be an “employee-owner” and split your income into your salary and your share of the company’s profits. In this way, you pay employment taxes on your salary, but not self-employment taxes on your profits. (You’ll still pay the other applicable taxes on your LLC profits, of course.)
One drawback is that the Internal Revenue Service scrutinizes S corps more closely, meaning you’re more likely to get audited. S corps also have more restrictions for qualifying.
Though it’s possible that one of the above options could work better for your LLC, remember that business taxes are complicated. They’re also very specific to your situation. That’s why you may want to consult a tax professional to see which taxing method works best for your Tennessee business.
If you decide to form your LLC with an S corporation status, our S corp service can help you do that.
Once you have an EIN, you’ll be able to open a business bank account. Having separate accounts for your business and personal banking is crucial for sorting out your finances at tax time. It also helps ensure that you aren’t commingling funds. Mixing business and personal funds could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities.
We offer a discounted bank account for new businesses. It offers online banking, unlimited transactions, a debit card, and more. If you want to let others in the business use the account, then we offer a banking resolution template to make it easier. You might also want to think about getting a business credit card to start building a credit history.
For more help organizing your business’s finances, try ZenBusiness Money to create invoices, receive payments, transfer money, and manage clients all in one place.
By now you should know the basics of Tennessee LLC registration. But there’s still more to know than how to set up an LLC in Tennessee. You need to know about things like hiring employees, getting business licenses and permits, finding additional financing if you need it, how to make changes in your business, and how to stay in compliance with the government.
We offer many services beyond just helping you form your LLC. Our business experts can also give you long-term business support to help run and grow your company.
Tennessee has many business opportunities, but, if the paperwork of starting a business feels overwhelming, we can help. Let us take care of the Tennessee LLC formation process with our business formation service, compliance, and more. That way, you can get back to running your dream business, whether it’s a farmers’ market in Knoxville or a Moonpie stand in Memphis.
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Tennessee is unusual in that the filing fee depends on the number of members in the LLC. The filing fee for the Articles of Organization is $50.00 per member in existence on the date of the filing, with a minimum fee of $300.00 and a maximum fee of $3,000.00. Depending on your situation, you may have additional fees for things like business name reservation or fees for business licenses and permits.
Fees are always subject to change, so check the Tennessee Secretary of State’s website for the latest.
Tennessee’s business landscape is overwhelmingly composed of small businesses. This means that the state is particularly hospitable toward understanding the needs of new small business owners. To that end, the state has installed several key pieces of infrastructure to help new Tennessee LLCs get off the ground. A few of the major benefits of creating an LLC in Tennessee include:
Read more about the benefits of an LLC.
Responsibly forming an LLC in Tennessee means knowing what to expect in the tax department. On the federal level, LLCs can elect to be taxed as a sole proprietorship, a partnership, or a corporation. Most elect one of the pass-through taxation options of the former two, meaning that profits will only be federally taxed on the member’s individual tax returns. This is unlike most corporations, in which profits are taxed twice, first at the business level and again at the individual shareholder level.
LLCs can also choose to be taxed as a corporation instead. This is sometimes advantageous to larger LLCs with high profits. A tax professional can tell you whether this tax setup is right for your business.
Tennessee imposes a basic state business tax on all entities conducting business or incorporated in the state. Even out-of-state businesses will be subject to this tax if it is determined that they have a “substantial nexus” within the state lines of Tennessee.
Tennessee business tax consists of two separate taxes: the state business tax and the city business tax. Almost all businesses that sell goods or services must pay the state business tax. If you have a business location in a city that has enacted the business tax, then you’re required to pay the city business tax, too.
LLCs in Tennessee must also register for and pay franchise and excise taxes. The franchise tax is based on the net worth or the book value of real or tangible property owned or used in Tennessee, whichever is greater. The minimum franchise tax is $100. Excise tax is based on net earnings or income for the tax year.
Calculating business taxes in Tennessee can get complicated. See the Tennessee Department of Revenue and consult a qualified accountant for help.
The processing time will vary by factors like the time of year, but, generally speaking, filing online is much quicker than filing by postal mail. Many online filings are processed on the same day, while paper filings can take five to seven business days by mail, not counting the time in transit.
The Tennessee government doesn’t require a copy of an operating agreement for a new business entity to form. It’s an internal document for your LLC.
That’s going to depend on your individual circumstances and goals. Most LLCs elect pass-through taxation, where the LLC’s members are only taxed on their earnings at the individual level without first being taxed at the business level.
If you choose to be taxed as a C corporation (the default form of corporation), you’ll be taxed twice on your profits — once at the entity level and then at the individual level when you file your personal tax returns. Despite this double taxation, certain LLCs may benefit from this tax structure, as it has the most possible deductions.
Being taxed as an S corporation also has pass-through taxation, but it allows LLC members to earn money from the business both from its profits and by being paid a salary. In some instances, this could reduce the self-employment taxes members pay because they would pay the Social Security/Medicare portion of their taxes on their salary, but not their share of the LLC’s profits.
A series LLC is an LLC that is split into multiple compartments, each with its own protections against liabilities from the others. Not many states allow the formation of a series LLC, but Tennessee does. The rules and guidelines associated with forming a series LLC in TN stipulate different taxation and registration requirements that should be carefully considered.
Any business selling personal property or services in Tennessee must register for and pay the Tennessee business tax, the rates of which vary by the type of business activity. The business tax is based on gross receipts and is due annually. This business tax requires a small business license registration fee that must be paid to the county clerk and/or city clerk.
If your company has gross receipts of more than $3,000 but less than $10,000, you’ll have to get a minimal activity license from your county and/or municipal clerk. If your business has gross receipts of $10,000 or more, you’ll need a standard business license from your county and/or municipal clerk. You can’t operate your business until you’ve posted your required license at your business’s location.
Depending on factors like your industry, professional services you offer, and location, you may require other federal, state, and/or local business licenses and permits to operate. These could include things like professional licenses, building permits, health permits, signage permits, and other additional permits and licensing requirements. There’s no central place to check to see every license or permit you might need, so you’ll have to do some research.
If you don’t have the time or inclination to do all this research, or if you just want the peace of mind to know that you have all the business licenses and permits you’re legally required to have, our business license report service can do the work for you.
Before starting the dissolution process, the members of an LLC should consult the operating agreement and follow all established rules for dissolving the company. For the subsequent steps, please refer to our Tennessee business dissolution guide.
Transferring all or part of the ownership of an LLC can be a complex process because, unlike corporations, you can’t simply sell shares. First, consult any established rules for transferring ownership in your operating agreement. From there, you may want to consult an attorney for guidance. See our How to Transfer LLC Ownership in Tennessee guide for more information.
You can register a DBA, known as an “assumed name” in Tennessee, by completing the online registration process through the Secretary of State’s website. You can also complete an Application for Registration of Assumed Limited Liability Company Name and mail in the form. The state charges a small fee for registering an assumed name.
You’ll need to follow the rules for removing a member established by your operating agreement.
Yes, you need to file a Tennessee annual report each year. You file this annual report to keep your LLC current and in good standing with the Tennessee Secretary of State.
The state filing fee for the annual report works the same as the Articles of Organization filing fee. Although the minimum filing fee for LLCs is $300, those with more than six members must pay an additional $50 for each additional member. The maximum fee is $3,000. These fees will be ongoing annual costs for your LLC.
Our Annual Report Service can handle this process for you every year.
No. At this time, only a few states allow the creation of anonymous LLCs.
Having a business plan in place isn’t a legal requirement. However, it’s a really good idea to have one. Business plans help entrepreneurs develop strategies to set up new companies for success. Without a business plan, it might be hard for you to persuade others to invest in or join your business.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
Tennessee Business Resources
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