Should you form your corporation in Tennessee? We’ve collected the relevant information that will help you make this decision.
Pros
No state income tax
Reasonable cost of living
Views of the beautiful Smoky Mountains
Cons
High sales tax
Corporate income tax of 6.5%
High unemployment insurance taxes
Cost of doing business
$105 filing fee / $22.25 annual statement
Privacy
Disclosure of owners in original filing
Forming your corporation in Tennessee
The name
In order to communicate to the public that your new business is incorporated, its official name will need to end with one of the following signifiers (or a relevant abbreviation): “incorporated”, “Company”, or “corporation”. In addition, it is required that the name of your business is not intentionally misleading to consumers, for any reason. Your company’s new name must also be completely unique, and not deceptively similar to any other organizations name or trademarks. There are also certain restrictions placed on using some commonly used terms in the financial industry. Do a FREE name search now.
Ownership
Board of directors requirements
You will need to form an official board of directors when incorporating in Tennessee. Here are the states explicit regulations regarding these directors:
Required number of directors
Tennessee corporations must have at least one director listed in their incorporation documents.
Age restrictions
Directors of corporations located in Tennessee can be of any age.
Residence restrictions
There are no residence restrictions imposed on the directors of C corporations in Tennessee. However, S corporations are only allowed to have directors located in the United States.
What information needs to be included in the Charter?
Tennessee does require the names and addresses of directors to be disclosed in incorporation documents.
Requirements for the charter
The Charter is a document that must be filed during the incorporation process. Here is the information that must be included in this document when filing in Tennessee:
Stock information
Tennessee requires the number of initial shares outstanding, and their par value, to be disclosed during the incorporation process. The number of outstanding shares does not affect initial state filing fees.
Officer information
The state of Tennessee does not require officer information to be disclosed during the filing process.
Registered agent information
All Tennessee corporations must have a registered agent on file, and submit their name and address (which cannot be a PO box). This agent will be required to be accessible during standard business hours, and act as the state’s point of contact with the company. Learn more about registered agents.
Additional Tennessee filing requirements
Many states have steps in the incorporation process that are unique to that state. These can also vary at the municipality or county level as well. Here are the steps required throughout all of Tennessee:
County level filing
All corporations must file a copy of the Charter with the county in which their principal office is located, unless said office is out of state.
If your business is a professional practice
Professional service corporations are permitted to form under the professional corporation (PC) structure.
Corporate record keeping requirements
Corporations are required to keep formal documentation regarding several of their operations. These are the explicit record keeping formalities required by Tennessee:
A copy of the corporations charter, bylaws, and their amendments
Records that detail the owners and class of all outstanding stock shares
The business address and names of all officers and directors
Formal, in-depth documentation of all stock related resolutions
A permanent set of meeting minutes for all shareholder, director, and committee meetings
A copy of all written communications with shareholders within the previous three years
A copy of the corporation’s most recent annual report
Formal documentation of all director and shareholder decisions, regardless of if they were made during a meeting or not.
Tennessee corporate taxation and fee requirements
There are several tax and fee requirements that must be addressed by corporations in Tennessee. They are as follows:
Taxation
All states have complex taxation requirements. For more information regarding taxes in Tennessee, it is advised that you visit the state’s official business related website.
Annual report requirements
Corporations in Tennessee are required to file an annual report before the end of the eighth month of the fiscal year. There is a $20 fee related to this process. There is also a franchise tax due each year within 4 ½ months after the closing of each fiscal year. This tax is determined by the physical assets the company has within the state’s borders, but carries a $100 minimum. Learn more about annual reports.
Tax identification numbers
Tennessee requires an EIN (employee identification number) for all corporations that will have employees, and most banks will require one to open accounts. Tennessee does require corporations to obtain state tax ID numbers. Learn more about EINs.
Business license requirements
The business licenses and permits required in Tennessee vary wildly depending on the county or municipality in which your new corporation is located. If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
S corporation election
Tennessee does not recognize S corps, and as a result, treats all corporations a C corps for taxation purposes. However, S corps can exist in the state and are treated as such when filing federal taxes.
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