Forming an LLC in Tennessee

By Jordan Walker, J.D. | Legally reviewed by Ally Marshall, Esq. | Last reviewed November 20, 2022

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Forming a limited liability company (LLC) can be an excellent choice when starting your new business. LLCs provide liability protection for personal assets from your company's debts and obligations and are a great option for a small business. You may be interested in structuring your business entity as a Tennessee LLC. Following a step-by-step guide can help simplify the process to start an LLC in Tennessee.

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Table of Contents

Steps to Form an LLC in Tennessee

1

Name the LLC

The state of Tennessee requires every business name to be unique. During business formation, the first thing you should do is a business name search on the Tennessee Secretary of State website. You cannot use a name currently in use by another LLC.

It is important to note that every LLC name must include LLC or L.L.C. or "limited liability company." If the LLC is professional, the name must consist of the abbreviation PLLC or the words "professional limited liability company." You can reserve a business name by submitting an application for name reservation and paying a $20 fee.

2

Get a Registered Agent

Every LLC must have a registered agent. A Tennessee registered agent is a person or company that receives service of process and other legal documents on behalf of the LLC. A registered agent must have a street address in Tennessee.

3

File Your Articles of Organization

Your LLC is officially created when you file articles of organization with the Tennessee Secretary of State. You can file the articles of organization online through the Secretary of State's website or by paper through the mail. The filing fee for the Tennessee articles of organization is $50 for each member, with a minimum fee of $300 and a maximum fee of $3,000. Your articles of organization will include:

  • LLC's name and address
  • Registered agent's name and address
  • Whether LLC is member-managed or manager-managed

4

Draft an Operating Agreement

Tennessee only requires an operating agreement if an LLC is "board-managed" meaning it's governed by a board of governors. Regardless of how you decide to manage, you may want to have an LLC operating agreement in place.

An LLC operating agreement is a breakdown of how the business will run. Typically, when an LLC is drafting an operating agreement, the following is considered:

  • Voting rights of each member
  • Rules for meetings and voting
  • Whether the LLC is member-managed or manager-managed
  • Ownership percentage of each member
  • Responsibilities of each member
  • Distribution of profits and losses

5

Get an EIN

The Internal Revenue Service (IRS) issues an employer identification number (EIN) to businesses for federal tax purposes. This is similar to an individual's Social Security number but assigned to businesses. You typically need an EIN to file taxes, apply for federal and state tax exemptions and credits, and open a business bank account. Applying for an EIN is easy and can be done for free through the IRS website or by phone, fax, and mail.

6

Set Up Business and Tax Accounts

If you conduct business within Tennessee, you're generally required to register with the Tennessee Department of Revenue to report and pay state business taxes. Tennessee requires business tax returns and payments to be submitted online. You should create an account with the Department of Revenue's Tennessee Taxpayer Access Point (TNTAP) to file and pay state LLC taxes. If you plan on having employees, you should find out if you're required to create an account with the Tennessee Department of Labor & Workforce Development. If it's determined that unemployment insurance taxes apply, an eight-digit employee account number will be assigned to your LLC.

Business and Tax Requirements in Tennessee

Your LLC will likely be subject to specific Tennessee business taxes depending on where it is located and the type of business it conducts.

State Business Tax

In Tennessee, the business tax is made up of the state business tax and the city business tax. All businesses that sell goods or services must pay Tennessee's business tax. LLCs located outside of the state with a substantial nexus to Tennessee are still required to pay the state business tax if the business:

  • Sells a service that's delivered within Tennessee
  • Leases items within Tennessee
  • Sells items that are shipped or delivered to a location in Tennessee
  • Makes natural gas sales to customers within Tennessee

Tennessee imposes a franchise and excise tax on LLCs for the privilege of operating within the state. The amount of the franchise tax depends on the total net worth of the real and personal property owned by the LLC within Tennessee. However, Tennessee requires a minimum $100 franchise tax to be paid annually by every business in Tennessee, whether the company is operating or not.

State Employer Tax

Tennessee has no state income tax on earned income so there are no state withholding requirements for LLCs with employees. If your LLC has employees, you must complete and submit a report to the Tennessee Department of Labor & Workforce Development to determine your liability for unemployment insurance. Additionally, certain types of employers must provide workers' compensation insurance benefits unless otherwise exempt. If your LLC engages in construction or coal mining activities and has one or more employees, you must obtain workers' compensation coverage. More information for employers can be found on the Department of Labor & Workforce Development website.

Sales and Use Taxes

The state sales tax is imposed on businesses that sell tangible personal property. The state use tax applies when a taxable product is used, consumed, distributed, or stored in Tennessee but sales tax was not collected at the time of sale. The sales and use taxes include state and local tax portions. If your business involves the sale of alcohol or tobacco, it's also subject to state alcoholic beverage and tobacco taxes.

Business Licenses and Permits

Additional business licenses and permits may be required depending on where your LLC is located or does business. Certain cities in Tennessee collect a local business tax for the privilege of operating there. It's your responsibility to confirm whether your LLC needs to apply for a separate city business license. Your LLC may need other local permits so you should contact the city or county government for more information.

Registration in Other States

If you want to expand your business and operate in another state, you will likely need to apply as a foreign LLC there. To register as a foreign LLC, you will probably be asked to provide a certificate of good standing or otherwise provide proof of your LLC's compliance with Tennessee law and requirements.

Annual Requirements in Tennessee

An annual report is filed with the Secretary of State each year following the year of your LLC's initial formation. In the annual report, you will update the state on information about your LLC to keep business records current with the state. The details that you update are the company name, the LLC business address, the name and the street address of the registered agent, and the name and addresses of your board members. There is a $20 fee to file annual reports.

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Tennessee LLC Formation FAQs

    • The cost of having an LLC in Tennessee can vary depending on a variety of factors. Once you pay the filing fee, business expenses and state fees for LLCs may fluctuate according to the type of business and any taxes, fees, or other costs that apply. A list of common fees for LLCs in Tennessee can be found on the Secretary of State's website.

    • The filing fee for articles of organization is $50 per member at the time of filing. The minimum filing fee is $300, and the maximum is $3,000.

    • After you file your articles of organization and form your LLC, you need to pay $15 to register for the state business tax and apply for a state business license. If your LLC is in a city that has business licensing, an additional $15 fee is required and paid to the appropriate city official. Each year after your initial formation, you must pay $20 to file an annual report and $15 to renew any business licenses.

    • There are options when it comes to the types of LLCs you can form in Texas.

      • Single-member LLC: If you are a solo entrepreneur or sole proprietorship, your LLC will be a single-member LLC. A single-member LLC has only one member who has control over the business. The owner of the LLC personally reports business income and pays the taxes.
      • Multi-member LLC: If you have two or more members when you start your LLC, it's multi-membered and members share control. It can either be member-managed or members can put the responsibility of daily business operations into the hands of a group of managers for a manager-managed LLC. Members can act as both managers and members, or the members can choose to hire a different group of people as managers.
      • Professional LLC: You can form a professional limited liability company (PLLC or professional LLC) if you and other members are properly licensed professionals practicing in industries such as law, medicine, accounting, or you fall under an exception permitted by state law.
      • Series LLC: If you will be forming an LLC that will act an umbrella for several different companies, you can form a series LLC within a master LLC.

    • A certificate of formation is your initial LLC's formation document or charter and establishes the effective date of formation. You may need a copy to open a business bank account or apply for certain licenses and permits. You can request your certificate of formation from the Secretary of State. The fee is $20.

    • A certificate of good standing verifies your LLC's proper formation in Tennessee and compliance with state law. In Tennessee, it's called a "certificate of existence/authorization." This certificate is generally required to apply for business loans or to register as a foreign LLC in another state or jurisdiction. If you need a copy, you can pay the $20 fee and submit a request for your certificate of existence from the Secretary of State.

    • To form an LLC in Tennessee, you must choose a valid business name, select a registered agent with a physical address in Tennessee, file articles of organization with the Secretary of State, and pay the filing fee.

      While Tennessee does not require you to file an operating agreement unless you have a board of governors managing your business, creating one can be an important part of your business plan and strategy.

    • LLCs are a common choice for new businesses because of the advantages this type of business structure offers. One of those benefits is the ability to provide owners or members with personal liability from the LLC's business debts and liabilities. LLCs can also be beneficial for tax purposes as “pass-through" entities that avoid double taxation. Taxes are passed to the business owner who is responsible for paying the business taxes.

    • To continue legally operating in Tennessee, you must comply with the state's laws and requirements for businesses. This means you:

      • Register for state business taxes
      • Obtain and renew required business licenses and permits
      • File annual reports
      • Report and pay federal, state, and local taxes and fees

    • No. In Tennessee, you're required to file "articles of organization" with the Secretary of State to form an LLC. The "certificate of formation" is the charter document issued by the Secretary of State to verify your LLC's proper formation. Unless an LLC is board-managed, an operating agreement is an optional document among members of an LLC and used for internal business purposes. It does not need to be filed with the Secretary of State.

    • It depends on your LLC's type of business and location. Certain cities require businesses to obtain city business licenses and pay a licensing fee. Additional local permits may also apply for specific business activities. Also, some professions and industries will require professional licenses to operate in the state. The Tennessee state government website has a page about licenses and permits that explains if your type of business needs one.

    • Yes. Business entities that have not previously registered with the Tennessee Secretary of State can form an LLC with the Online Business Registration. The amount of the filing fee depends on how many members of the LLC exist at the time of formation, but the minimum fee to file is $300. Online filers can pay the filing fee by credit card. Many business owners choose to hire an LLC formation service to register online as a new LLC in Tennessee. Using a professional service helps to ensure that your articles of organization are properly filed with the Secretary of State.

    • The mailing address for the Secretary of State is:

      Secretary of State's Office at 6th Floor - Snodgrass Tower
      Attn: Corporate Filings
      312 Rosa L. Parks Ave
      Nashville, TN 37243

    • You can hire a registered agent company to ensure your LLC:

      • Has a physical address in Tennessee
      • Receives sensitive legal documents and other important notices
      • Has availability to receive service of process during regular business hours

    • If you form your LLC in the state of Tennessee, it is a domestic LLC. If you form your LLC in another state or jurisdiction, it's a foreign LLC.

    • If you want to do business outside of the state of Tennessee, you will likely register as a foreign LLC in the new state or jurisdiction. You will submit an application and fee to the Secretary of State or government agency that oversees business formation in that state. You will also need to verify your LLC's legal status in its home state of Tennessee. Usually, you can do this by requesting a certificate of existence/authority (good standing) from the Tennessee Secretary of State to submit with your foreign LLC application.

    • An out-of-state LLC can operate in Tennessee by registering with the Tennessee Secretary of State. To do this, the foreign LLC must apply for a certificate of authority and include its certificate of existence, good standing, or similar document from the state or jurisdiction where it was originally organized. The filing fee is $50 per member in existence on the date of the filing, with a minimum fee of $300 and maximum fee of $3,000.

    • To legally dissolve your Tennessee LLC, confirm all business debts are paid and "wind up" any outstanding business activities. A notice of dissolution is filed with the Secretary of State. The filing fee is $20. Organizers of the LLC file articles of termination and pay the $20 filing fee.

    • No. Only a handful of states (Delaware, Nevada, New Mexico, and Wyoming) allow anonymous LLCs. In Tennessee, business formation documents are public record and include personal contact information for any organizers. Registering an anonymous LLC is often used as a way to start a new business while maintaining the privacy of the business owners.

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