Follow our free guide to form an LLC in Tennessee
- Pros and Cons of Forming an LLC in Tennessee
- Starting Your Tennessee LLC
- Maintaining Your Tennessee LLC
- Additional Tennessee Resources
Starting an LLC in Tennessee includes several steps, but our comprehensive guide is specifically designed to help guide you through every part of the Tennessee LLC formation journey.
Pros and Cons of Forming an LLC in Tennessee
Privacy for Owners
Tennessee does not require the LLC members/manager to be listed in the Articles of Organization. An organizer (the party who prepares and files the paperwork) can submit the official documents on behalf of the owners.
No Income Tax on Wages
The Tennessee state income tax does not apply to regular salaries/wages, but rather, only income derived from stocks, bonds, and notes receivable.
Recent reports are showing steady growth for Tennessee’s economy — an upward movement for 27 quarters straight. The state saw a 14% increase in new business formations in 2018, with more than 10,000 new businesses setting up shop.
High Cost of Doing Business
Forming and maintaining an LLC in Tennessee can be very expensive, depending on the size of the business. The structure for both the filing fee and the annual report starts at $300 for an LLC with up to six members; however, there is an additional $50 charge for each additional member — a business with 8 members will pay a $400 filing fee. The fee structure for the annual report is the same
High Business Taxes
Tennessee has two taxes that businesses must pay, which can be quite a burden. The .25% franchise tax varies and is based on the company’s net worth, and the excise tax is an additional 6% charge against corporate income.
High Sales Tax
The combined state and local sales tax rates make Tennessee one of the more expensive states in the country with a 9.46% sales tax. Only Louisianna has a higher tax rate.
Cost of Doing Business
- Minimum $300 filing fee (total varies)
- Minimum $300 annual report (total varies)
- .25% Franchise Tax and 6% Excise Tax
Phase One: Starting Your Tennessee LLC
The first phase of forming an LLC in Tennessee involves the initial set-up process for your business. You can begin by following these six simple steps:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Tennessee LLC
Setting up your Tennessee LLC begins with naming your business. State and federal government guidelines exist that cover the use of certain words in business names.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
In addition to choosing a business name for your Tennessee LLC, you will also need a name for your company’s website. Look into domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are known as members and managers. Depending on the business’s management structure, some LLCs may not have a manager (all have members).
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
Tennessee LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in Tennessee.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization in place of the LLC members.
LLC members in Tennessee may be of any age.
There are no residency restrictions imposed on LLC members in Tennessee.
Step 3: Find a Registered Agent in Tennessee
Every Tennessee LLC must appoint a registered agent in order to adhere to state regulations. Your business is not official without a registered agent.
What is a registered agent?
A registered agent is a person or business who is authorized to receive official mail and legal notices for the LLC.
Why do you need a registered agent?
You are required by law to appoint a registered agent so that the government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in Tennessee?
- A state resident with a physical address in Tennessee
- An LLC or corporation that is licensed to conduct business in Tennessee
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You are legally allowed to be your own registered agent as long as you have a physical address in Tennessee.
Is being my own registered agent discouraged?
Business owners risk compromising their personal information if they choose to be their own registered agent.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Tennessee. Find more information here.
Step 4: File the Articles of Organization
Filing the Articles of Organization is the most vital step in starting your Tennessee LLC.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to legally form your LLC.
Why do I need the Articles of Organization?
Your LLC business in Tennessee will not be legally formed without filing this document.
What is the cost of filing the Articles of Organization?
The filing fee for Tennessee varies — the base fee is $300 for up to six members, with an additional $50 required for each additional member; the maximum fee is $3,000.
What information is included in the Articles of Organization?
- The name and address of the LLC
- The effective date of the paperwork
- The name and location of the registered agent
- The number of members
- The duration of the LLC (perpetual or not)
- The name of the organizer filing the paperwork
Additional Tennessee Filing Information — Professional LLCs
Tennessee also allows professional service businesses to form a specific type of LLC known as a Professional Limited Liability Company (PLLC).
Example professions that may form PLLCs:
- Physicians and Medical Professionals
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
It is important to have an Operating Agreement in place for your Tennessee LLC. Although not required, this document is still vital to the success of your business.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that defines both the responsibilities of the members/managers and the basic operating policies of the business.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary because it provides structure, protects assets, and reduces internal disputes and lawsuits.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
The majority of Operating Agreements include the following details:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
The majority of Tennessee businesses are required to register for an EIN — without it, your business will not be able to legally operate.
What is an EIN?
The EIN is a nine-digit identification number that is assigned to your business by the Internal Revenue Service (IRS).
What does EIN stand for?
EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
You are allowed to use your social security number; however, this information is publicly accessible.
Swyft Filings offers EIN services for small businesses in Tennessee. Find more information here.
Phase Two: Maintaining Your Tennessee LLC
The next part of the LLC formation process centers on making your business compliant with state and federal regulations. The next few steps are:
- Step 1: Register for Taxes in Tennessee
- Step 2: Apply for Permits and Licenses
- Step 3: File the Annual Report
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Tennessee State Taxes
All businesses in Tennessee (corporations and LLCs) are required to pay two types of taxes:
- Excise Tax = 6.5% on all taxable income.
- Franchise Tax = $0.25 per $100 of the net worth
Please Note: There is a minimum franchise tax fee of $100.
The franchise tax is based on the greater amount of either:
- The business’s net worth
- The book value of real and tangible property owned/used in TN.
State Income Taxes
The Tennessee income tax of 6% only applies income derived from stocks, bonds, and notes receivable.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 7%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Tennessee can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: 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.
Step 3: File an Annual Report
All Tennessee businesses must file an annual report with the Secretary of State.
What is an annual report?
An annual report is a legal form that is filed with the Secretary of State to verify that your business’s information is current.
What kind of information is in the annual report?
The information requested in the annual report is similar to what is in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The business’s EIN
Is the annual report part of public record?
The annual report filed on behalf of your LLC is a matter of public record.
Please Note: The fee structure for filing the annual report is the same as the initial filing.
Fees and Due Date
Fee: $300 (up to 6 members) + $50 for every additional member
Due Date: 1st day of the 4th month following the end of the fiscal year
Frequency: Every year
Implications of Late Filings: LLC dissolution after two months delinquent
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Request a Certificate of Good Standing
The last step to forming your Tennessee LLC is securing a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is a document that proves your business is properly formed and compliant with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
Request a Certificate of Good Standing from the Secretary of State after your LLC is formed.
Why do I need a Certificate of Good Standing?
Having a Certificate of Good Standing adds credibility to your new LLC. Banks, financial institutions, and other businesses may not agree to a business deal if your LLC does not have this certification.
Additionally, some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your Tennessee LLC. Click here for more information.