Starting a Business in Tennessee: 8 Essential Steps

The road to entrepreneurship is often filled with excitement and opportunities, and for those planning to start a business in Tennessee, the journey promises a vibrant economic landscape. In fact, according to the Small Business Administration, small businesses in Tennessee make up 99.5% of all businesses in the state.[1] 

By incorporating your small business in Tennessee, you’re stepping into independence, taking control of your career, and contributing to a thriving ecosystem that values and fosters entrepreneurial spirit. 

Start Operating in Tennessee: Key Points

1. Tennessee provides an encouraging business starting environment, with favorable tax laws and a robust business ecosystem. Still, startup costs may vary widely based on the type of business and its specific needs.

2. The legal requirements to start a business in Tennessee include choosing and registering a unique business name, selecting a suitable business structure, and filing necessary documents with the Tennessee Secretary of State’s office. Additionally, obtaining any required business licenses and permits and understanding the tax obligations is crucial.

3. Starting a business in Tennessee requires strategic planning. After identifying a viable business idea, subsequent steps include drafting a business plan, selecting a business name and structure, filing for registration, obtaining necessary licenses and permits, understanding tax obligations, setting up a business bank account, and potentially registering an EIN with the IRS.

Ready to Start a Tennessee Business?

Are you prepared to dive into entrepreneurship and start operating in Tennessee? It’s a refreshing endeavor that requires detailed planning and groundwork. The good news is setting up a business in Tennessee doesn’t have to be daunting, even for those making their first foray into entrepreneurship.  

Known as the Volunteer State, Tennessee fosters a conducive environment for small businesses, promoting creativity and expansion. However, being a successful business owner extends beyond just having an innovative idea — it also encompasses understanding procedures such as incorporation and obtaining the relevant permits and licenses. 

But there's no need to feel overwhelmed. This guide can walk you through the fundamental steps you'll need to undertake to begin your business journey in Tennessee. So, keep reading to take the plunge, equipped with all the necessary knowledge and tools. 

1. Choose a Business Idea

The path to successful entrepreneurship begins with an innovative business idea. While you might already have a concept, ensuring it’s viable and meets a particular market need is crucial. Perhaps you’ve pinpointed a niche or discovered an innovative way to approach a common problem.

Don’t be discouraged if you’re still brainstorming. Finding the right business idea involves a combination of introspection and research. Exploring different avenues for inspiration, diving into eco-friendly ventures, or creating services targeting recent college graduates could ignite the spark you need to form a lucrative and rewarding Tennessee business.

To help spark your creativity and guide you in discovering the perfect business concept for Tennessee, consider the following questions:

• What skills and expertise do you possess that could be turned into a business opportunity?

• Are there any challenges or problems in your community that you could solve with a unique product or service?

• How can you leverage your passions and interests to create a business that resonates with your target audience?

• What industries or niches are currently underserved in Tennessee, and how could you fill that gap with your business?

• Are there any emerging trends or technologies that you could incorporate into a new business venture?

2. Draft a Tennessee Business Plan

Taking the first steps to launch your new business in Tennessee necessitates drafting a comprehensive business plan. Such a plan lays out your strategic blueprint, ensuring you’ve thoroughly considered your business needs and set a course toward success. Launching a business without a plan can invite unforeseen obstacles. 

Here’s a basic outline to help you get started:

Industry Analysis: Familiarize Yourself with the Tennessee Market

Before diving headfirst into launching your new business in Tennessee, conducting a thorough industry analysis is essential. This process involves researching and understanding the current market landscape in the state. Identify the key players in your industry, study their strengths and weaknesses, and explore the trends and opportunities in Tennessee. 

By gaining insight into the local market, you can make informed decisions about your business’s positioning, target audience, and competitive advantage. A firm grasp of the Tennessee market can lay the groundwork for your business strategy and enable you to tackle the distinct challenges and opportunities effectively.

Business Objectives: Define Your Company's Purpose & Goals

Every successful business starts with a clear sense of purpose and well-defined objectives. Take the time to articulate your company’s mission, vision, and values. What problem do you aim to solve, or what value do you want to bring to Tennessee residents? With a strong sense of purpose, you can set specific and achievable business goals. 

Clear objectives serve as guideposts to keep you focused and motivated while building a thriving business. Whether your goal is to positively impact your community, revolutionize an industry, or provide exceptional products or services, defining your business objectives is a critical step in your entrepreneurial journey.

Financial Projections: Plan Your Earnings & Expenditures

A well-thought-out business plan also requires careful financial projections. This entails estimating your startup costs, projected revenue, and anticipated expenses. Conducting financial forecasting helps you understand the economic viability of your business idea and its potential for profitability. 

Create realistic financial projections considering sales forecasts, pricing strategies, production costs, and operating expenses. These projections will not only assist you in securing funding from investors or lenders but will also serve as a benchmark for measuring your business’s performance as you progress. 

Marketing Plan: Devise Strategies for Attracting and Retaining Customers

No matter how great your products or services are, your business won’t succeed without a solid marketing plan. Your marketing strategy is your roadmap for reaching and connecting with your target audience in Tennessee. To successfully promote your product or service, it is crucial to pinpoint your target audience and comprehend their specific wants and desires. 

Develop marketing tactics that effectively communicate your value proposition and differentiate your business from competitors. Consider both traditional and digital marketing channels, such as social media, content marketing, SEO, and local advertising. 

3. Select a Business Name

Choosing the right business name in Tennessee is a crucial step in your entrepreneurial journey. The right name can boost your brand's recognition and reputation. 

When choosing your name, try to follow these basic guidelines:

• Be unique: The name should stand out and represent what your business does.

• Easy to spell and remember: An overly complicated name might confuse potential customers.

• Reflects your business: Make sure the name represents your products or services.

After brainstorming your ideas, utilize the Tennessee Secretary of State’s business search tool to check whether your desired name is already used.[2] Once cleared, reserve it with the state to secure it for your enterprise. 

Swyft Filings’ Free Business Name Search tool is another excellent resource for finding a name not already in use. Plus, we have experts to help you reserve your desired business name before someone else registers it. 

4. Choose a Business Structure

Selecting a suitable business structure is another crucial step in establishing your new venture in Tennessee. Choosing the proper structure for your business is vital as it affects your tax payments, the management of your business, and the extent of your liability.

Here is a quick overview of the business structures you will have to select from when operating a small business in Tennessee: 

• Limited Liability Company (LLC): An LLC is known for its operational flexibility and limited liability protection, which keeps your personal assets separate from your business liabilities. They can be taxed as a corporation, sole proprietorship, or partnership.

• C Corporation: Ideal for larger businesses, a C Corporation allows unlimited shareholders, making it suitable for companies with significant growth ambitions.

• DBA ('Doing Business As'): While not a legal entity, a DBA allows you to conduct business under a chosen trade name, helping with branding and market recognition.

• Nonprofit: If your organization aims to provide a public benefit and achieve tax-exempt status, forming a nonprofit might be the right choice.

• S Corporation: Businesses that meet specific IRS requirements can choose this status to enjoy pass-through taxation benefits.

Though these structures each provide distinct benefits, entrepreneurs must conduct thorough research to decide which option aligns best with their business aspirations and operational needs in Tennessee. Here are a few tips to help you figure out what’s right for you and your business:

• Evaluate the level of personal liability associated with each business structure and choose one that provides adequate protection for your personal assets.

• Select a business structure that aligns with your growth plans and funding requirements, ensuring it is suitable for attracting investors and accommodating expansion.

Feeling confused or uncertain about the complex process of starting a business in Tennessee is entirely normal. Feel free to seek assistance and guidance from experts at Swyft Filings. We’re here to support you at every step, providing reliable resources and personalized solutions to make your entrepreneurial journey smoother and more successful. Reach out to us anytime.

5. File Business Formation Documents

Filing the correct business formation documents is crucial when starting a business in Tennessee. Depending on the chosen business structure, you might need to file a Certificate of Incorporation, Certificate of Formation, an Operating Agreement, or Bylaws. Missteps in this process can lead to severe consequences, including IRS or Secretary of State penalties. 

Collaborating with an organization like Swyft Filings ensures the accuracy and compliance of these filings, freeing you to focus on your business growth. Also, remember that a registered agent is required for most businesses in Tennessee — a service that Swyft Filings can conveniently provide.

Not sure where or how to file your business paperwork with the state of Tennessee? The Tennessee Secretary of State’s website is a valuable and reliable resource for entrepreneurs looking to start a business there.[3] Here, you can access a wealth of information, forms, and fee details related to business services.  

6. Apply for Tennessee Business Licenses & Permits

Running a business in Tennessee requires obtaining the correct business licenses and permits, which may be specific to your industry or general ones like a business tax license. 

Depending on your business type, you might need a health department permit to open a restaurant or a professional license for occupations such as real estate brokers or contractors. 

Not having the necessary licenses and permits can result in penalties or the closure of your business. To ease the process of identifying and applying for these crucial permits, consider leveraging Swyft Filings' Business Licenses and Research service. 

Regulations and licenses may differ based on your specific location and the nature of your business activities. Cities such as Nashville might even have particular permits required just for doing business in that city. 

For full compliance and to prevent any possible setbacks, seek guidance from your local county and city governments. These resources provide valuable information and advice on the types of licenses and permits needed to operate legally within your area.

7. File and Report Business Taxes

In Tennessee, businesses operating within any county or incorporated municipality and earning $100,000 or more must register for and remit business tax, consisting of the state business tax and city business tax.[4]

All businesses selling goods or services must pay the state business tax, and certain out-of-state companies must pay if they have substantial nexus with the state. Also, suppose your business is in a city with a business tax. In that case, you must also pay the city business tax. 

It’s essential to check the comprehensive list of cities with enacted business taxes and ensure compliance. If closing your business, a final business tax return must be filed within 15 days, and companies with minimal activity licenses should notify local officials or the Department of Revenue about closure.

Here are some steps to ensure you stay on top of your tax obligations:

• Understand your federal tax responsibilities: The IRS provides detailed resources to help businesses understand their tax obligations.

• Familiarize yourself with Tennessee-specific taxes: The state imposes a franchise tax and an excise tax on certain businesses.

• Keep track of all tax deadlines: Late payment can result in penalties.

• Maintain accurate records: Good record-keeping makes filing taxes and handling potential audits easier.

8. Open a Business Bank Account

Opening a dedicated business bank account comes with a myriad of advantages that can significantly benefit your business, including: 

• Financial Clarity: Separate business and personal finances for easy tracking.

• Professionalism: Instill confidence in customers and partners with a professional account.

• Legal Protection: Safeguard personal assets from business liabilities.

To open a business bank account in Tennessee, you'll typically need an Employer Identification Number (EIN) or Federal Employer Identification Number (FEIN) issued by the IRS.[5] This unique identifier is essential for tax reporting and business transactions. 

Swyft Filings provides a convenient service to help you obtain your EIN, ensuring you meet this requirement. 

Take Your First Steps Toward Small Business Ownership

As you dive deeper into the world of business ownership, you’ll encounter various legal and financial aspects that require attention and compliance. Our expert team at Swyft Filings can assist you in understanding and navigating the complexities of obtaining the proper licenses and permits for your specific business type. 

From state business taxes to industry-specific permits, we have the expertise to guide you through this process smoothly and efficiently.

With Swyft Filings, you can be confident that you’re in capable hands. Our user-friendly platform offers a wealth of information, forms, and fee details related to business services, making accessing the resources you need easy. We take pride in providing comprehensive help to startups and small businesses, ensuring you have all the support and guidance required to succeed in your entrepreneurial venture in Tennessee.

Get started with Swyft Filings today and take the first step toward making your entrepreneurial dreams a reality!

Frequently Asked Questions (FAQ): Starting a Business in Tennessee

Is Tennessee a good place to start a business?

Yes, Tennessee is an excellent place to start a business due to its vibrant economic landscape and robust small business ecosystem. Tennessee is recognized for its support of entrepreneurship and small businesses. 

The Small Business Administration reports that small businesses in the state constitute 99.5% of all companies, indicating a highly favorable business climate. Tennessee’s diverse economy offers flourishing manufacturing, healthcare, and entertainment sectors. This provides a range of opportunities for businesses to thrive.

In addition, the cost of doing business in Tennessee is relatively lower than in many other states. The state boasts a favorable tax climate, with no state income tax on wages and salaries. Furthermore, the cost of living is also lower than the national average, which could be a significant factor in attracting and retaining employees. 

The state’s strategic location, with easy access to most U.S. markets, further adds to its business-friendly appeal.

How much does it cost to start operating in Tennessee?

Starting a business in Tennessee can have varying expenses depending on numerous factors, including the type of business, its size, chosen structure, and industry niche. However, certain standard costs are associated with setting up a business in the state. For example, a filing fee exists to incorporate a business in Tennessee. 

There may be other costs related to obtaining necessary licenses and permits, securing office or retail space, procuring supplies and equipment, hiring employees, marketing and advertising, insurance, etc. 

Investigating ongoing costs such as lease or rental payments, utilities, salaries, taxes, and maintenance is also crucial. All these should be accounted for in your initial business plan to give you a realistic estimate of the startup costs.

Can I start a business in Tennessee without a business plan?

While technically, it’s possible to start a business in Tennessee without a formal business plan, it is highly discouraged. A business plan serves as a strategic blueprint for your business, laying out your business concept, goals, target market, competitive analysis, financial projections, and marketing strategies. It ensures you’ve thoroughly considered all aspects of your business and provides a roadmap to guide your business activities and decisions.

What does Tennessee require to start a business?

Starting a business in Tennessee requires several vital steps. To start your business, you should develop a business idea and choose a suitable name. Next, deciding on your business’s legal structure is essential. This could involve choosing from options such as a Limited Liability Company (LLC), C Corporation, or a DBA. 

Once you’ve selected a business structure, you must file the appropriate business formation documents with the Tennessee Secretary of State’s office and pay the associated fees.

After officially registering your business, obtaining an Employer Identification Number (EIN) from the IRS is typically necessary for tax reporting. Then, you’ll need to apply for any necessary business licenses and permits, which may vary based on your specific industry and location.

Tennessee businesses earning $100,000 or more within any county or incorporated municipality must register for and remit business tax. Also, companies selling goods or services must pay the state business tax, and certain out-of-state companies with substantial nexus in Tennessee must also pay.

Creating a separate bank account for your business is highly advisable to ensure the clear segregation of personal and business finances. Establishing a dedicated bank account for your business is imperative to unequivocally distinguish personal and business finances.

What is the process for starting a business in Tennessee?

Starting a business in Tennessee involves choosing a viable business idea and creating a thorough business plan. Next, you’ll choose a unique business name, ensuring its availability through the Tennessee Secretary of State’s business search tool. Following this, decide on the most suitable business structure for your operation, such as an LLC, C Corporation, DBA, Nonprofit, or S Corporation. 

File the necessary documents for your chosen structure with the Secretary of State’s office, then obtain industry-specific or local licenses and permits. Once registered, understanding your tax obligations is crucial, and setting up a business bank account and acquiring an Employer Identification Number (EIN) from the IRS, if needed, are the final steps.

Bibliography

1. U.S. Small Business Administration. "Tennessee Small Business Profile." Accessed July 22, 2023.

2. Tennessee Secretary of State. "Business Services - Corporate Filings.” Accessed July 22, 2023.

3. Tennessee Secretary of State. "Business Services - Starting a Business." Accessed July 22, 2023.

4. Tennessee Department of Revenue. "Business Tax." Accessed July 22, 2023.

5. SBA. “Get federal and state tax ID numbers.” Accessed July 22, 2023.