How To Start An LLC In Tennessee

ByMatija Kolaric

It’s easy to start an LLC in Tennessee if you follow the steps explained in this ultimate guide. Read on to learn everything you need to know about starting an LLC in Tennessee.

Start An LLC In Tennessee

Forming a Tennessee limited liability company takes some effort, but is well worth the time and money.

The process may seem complicated at first – mostly because of all the forms and fees – but we’ll walk you through everything step by step! 

We’ll also talk about taxes, what to do after forming an LLC in Tennessee, and how to market your new business. 

But first, let’s see if Tennessee is a good place to start an LLC compared to its neighboring states.

StateTennesseeKentuckyNorth CarolinaAlabamaUS Average
Population6,975,2184,505,83610,551,1625,039,8776,619,825
LLC Filing Fee$300$40$125$200$130.38
LLC Annual/Biennial Fee$300 (every year)$15 (every year)$200 (every year)$100 minimum (every year)$89.34 (every year)
Corporate Tax Rate6.50%5.00%2.50%6.50%5.60%
Nominal GDP per capita$59,969$52,002$62,077$49,027$64, 773.08

Before You Set Up An LLC In Tennessee

Forming an LLC in Tennessee isn’t that difficult, but you do need to be organized. This guide can help you do that because it lists all the steps in order. Just follow it, use the links to find the forms quickly, and start your journey!

Once you have the information together, everything is a breeze. Just fill out your forms, send them to the right places, and you’re ready to go.

How Much Does It Cost To Form An LLC In Tennessee?

You may want to learn how to form an LLC in Tennessee for free. Unfortunately, that’s not possible. It’ll cost you something to form an LLC. Let’s take a look at the cost:

Tennessee works differently than other states because each member must pay $50 (to file the Articles of Organization). If there’s only one member or less than six members, the minimum amount is $300. However, the maximum amount is $3,000.

To speed up the process, you can also use a Registered Agent service. The price varies, but expect to pay around $100.

Other costs include:

  • Name reservation – $20
  • DBA name – $20
  • Certified copies of documents – $20
  • Certificate of Good Standing – $20

So, the cost of forming an LLC in Tennessee varies. Overall, LLCs with six or fewer members can expect to pay $400 to $500, depending on the need.

Steps To Start An LLC In Tennessee

Forming an LLC in Tennessee is quite simple if you follow the steps below:

Steps To Start An LLC

Pick A Name For Your LLC

Your company name is an important element of your business. While you can choose any name you like, it must comply with government regulations and be searchable online by potential customers. Here are a few guidelines:

  • The name must include “LLC” or “Limited Liability Company.”
  • It mustn’t include words commonly used by government agencies, such as ” Treasury,” “State Department,” and FBI.
  • Restricted words often require more paperwork. To use words like “bank,” “college,” and “attorney,” you need a licensed professional as part of the LLC. 

It’s best to make sure your name is available in Tennessee. You can do a search for LLC names directly on the Secretary of State’s website.

Find A Registered Agent In Tennessee

Registered Agents keep track of important government correspondence, court notices, legal documents, and tax forms. In a sense, they’re the point of contact between the LLC and the state.

Tennessee residents, which includes you, can be Registered Agents. However, many people use the services of a Registered Agent. The Registered Agent must be licensed to do business in the state.

Do You Need A Registered Agent In Tennessee?

Yes, Tennessee requires you to appoint a registered agent for your LLC. This can be you, another member, or a company that provides such services.

ZenBusiness – $49 + state fees to register your LLC (read review)
Incfile – $0 + $50 state fees to register your LLC (read review)

Articles Of Organization

Forming an LLC in Tennessee begins with filing the Articles of Organization (Form SS -4270) with the Secretary of State. You can file online or by mail.

The fee is $50 per member, but there’s a minimum of $300 and a maximum of $3,000.

Articles Of Organization

Other Required Documents

Even if it’s not required, you should consider these things:

  • LLC Name Reservation – For $20, you can reserve your business name for four months before you form the LLC. Use the Name Reservation Application (form SS -9425).
  • DBA Name – The Doing Business As Name helps you create a name separate from the legal LLC.
  • Clearance Certificate – The Clearance Certificate isn’t required, but is always good to use.

Operating Agreement

LLCs in Tennessee aren’t required to have an operating agreement, but it’s advisable to have one. The legal document helps all parties understand their responsibilities, outlines operating procedures and reduces conflicts.

Get An EIN

The IRS assigns businesses a nine-digit EIN number to identify them for tax purposes. Think of it as a social security number for the business.

FTINs, FEINs, or EINs are necessary. Without them, you can’t:

  • hire employees
  • open a business bank account
  • File or manage your federal and state taxes.

Applying for an EIN is free and you can apply online or by fax/mail.

The Forms You Need To Register An LLC In Tennessee

Did You Know?

The TN LLC Act provides an indefinite lifespan for the company and can outlast its members. In Tennessee, more than 12,000 new LLCs are formed each year. There are over 54,000 active limited liability companies in the state.

LLC Taxes In Tennessee

Learn more about taxes for LLCs in Tennessee here:

How Much Do LLCs Have To Pay In Taxes In Tennessee?

LLCs don’t have to pay taxes in Tennessee because they’re pass-through entities. However, the members of the limited liability company must do so themselves. In a sense, they’re taxed like self-employed individuals.

Differences Between State And Federal Taxes

Federal taxes are paid to the IRS, and LLC members may be taxed as partnerships or sole proprietorships. Generally, this is the best choice because the profits of the business pass to the members and are reported as income on the tax return.

State taxes work the same way, although in Tennessee they’re paid to the Secretary of State. However, there are many other state taxes you need to be aware of such as:

  • Sales tax
  • Employer tax
  • Franchise tax
  • Excise Tax

Businesses that sell products need a sales permit from the Department of Revenue. They also need an unemployment insurance tax if they hire employees.

How Much State Taxes Do LLCs In Tennessee Have To Pay?

LLCs in Tennessee must pay excise and franchise taxes to the Department of Revenue. The franchise tax is 0.25 percent and is based on the net worth or book value of real and tangible property used/owned in the state.

The excise tax is 6.5 percent and is based on the LLC’s net income for that tax year. There’s a fee for filing the franchise and excise tax.

So the LLC itself is taxed under the franchise and excise tax rules. Then the individual members share the profits and must file a tax return for their income. Then, the excise tax is 6.5 percent and focuses on the net income or earnings of the LLC for that tax year. There’s a filing fee for filing your franchise and excise taxes.

How Much Federal Taxes Do LLCs In Tennessee Have To Pay?

In a sense, the IRS taxes the self-employed twice. You pay the 7.65 percent from the employer’s point of view and also your 7.65 percent as an employee. However, it depends on your profit in the year.

Corporate-Tax-Rate

Is Tennessee A Good Place To Start An LLC?

Many consider Tennessee a “good” place to form an LLC. The high cost of filing and payment by each member discourages some.

Add to that the franchise and business taxes that all LLCs must pay (unless they’re exempt). Unfortunately, the exemption procedures are lengthy, and many don’t qualify.

Forming an LLC in Tennessee is still cheaper than forming a corporation.

How Long To Form An LLC In Tennessee

After you file your Articles of Organization, it only takes 24 hours for it to be approved. It’s often better to choose a registered agent and select the name of your LLC beforehand, which can take about a week.

The operating agreement can take a few days to draft, and the IRS usually issues the EINs within a few business days.

Ultimately, you could be done with the formation in about two weeks. However, most people give themselves four to six months so they don’t rush and get everything right.

How Much Does It Cost To Run An LLC In Tennessee?

Forming an LLC in Tennessee is just the beginning. After formation, there are ongoing fees to keep everything running smoothly. These may include:

  • Annual fees for the registered agent
  • Annual renewal of business licenses and permits
  • Annual filing of reports (minimum $300 to maximum $3,000)
  • Equipment maintenance and repair
  • Purchase of new equipment
  • Salaries for employees
  • Marketing
  • Rent or mortgage payments
  • Insurance
  • utilities

What To Do After Formation

After you form an LLC in Tennessee, you may think you’re done. But there’s more to do. You’re excited about this new journey, but you should consider these aspects:

  • Create a logo – People need to associate your brand with a logo that clarifies your mission and values.
  • Create a website/e-commerce store – All businesses need a website. It helps you be accessible 24/7, answers questions, makes purchases, and demonstrate your legitimacy.
  • Bank account – You probably already have a bank account for yourself, but business accounts protect you and keep everything separate for insurance and tax purposes.
  • Business Insurance – You’ll need insurance for your property and vehicles, but also general liability and workers’ compensation.
  • Annual reports – Shareholders and other members want to keep up with what the business is doing to get a sense of the future.

Resources To Start A Successful LLC In Tennessee

Start Marketing Your LLC in Tennessee

Once you’ve formed the LLC, you should market yourself. Create a website and add a blog so you can offer information to others. Content marketing also uses these things, but it does much more. Consider hiring a marketer who knows SEO and email marketing!

How To Dissolve An LLC In Tennessee

As a business owner, you may have decided to dissolve your limited liability company (LLC) for a variety of reasons. Perhaps your business is no longer profitable, or you simply want to retire. 

Whatever the reason, dissolving your LLC is a relatively simple process in the state of Tennessee. You’ll need to notify all creditors of the dissolution and provide them with an address where they can send outstanding debts. 

Once all debts are paid, you can file the Articles of Dissolution with the Secretary of State. Once approved, your LLC is officially dissolved.

Conclusion

You just learned how to form an LLC in Tennessee. We explained the steps you need to take, the forms you can use, pricing, and what you need to do after formation. 

Then we looked at marketing your business, dissolving the LLC, and even little-known facts about LLCs in Tennessee.

Frequently Asked Questions (FAQ)

To form an LLC in Tennessee, you must file your Articles of Organization. Processing time is 24 hours online or three to five business days by mail.

Before you form an LLC in Tennessee, you should be responsible and know what to expect when it comes to paying taxes. At the federal level, LLCs can choose to be taxed as a corporation, a sole proprietorship, or a partnership. Many people prefer the latter two options, so members must file personal tax returns. You can also choose to be taxed as a corporation. This is advantageous if you make large profits. There's also the excise tax and franchise tax that all LLCs must pay.

All businesses must comply with state regulations, so you may need business licenses and permits. However, this depends on the nature of your business and many other circumstances

No, the Secretary of State doesn't require an operating agreement to form an LLC in Tennessee. So there's nothing you need to officially file. However, it's advisable to have an agreement that outlines the responsibilities of each person.All companies must comply with government regulations, so you might require business licenses and permits. However, this varies based on your company type and many other circumstances.

Most LLCs cannot avoid paying the franchise tax in Tennessee. However, some entities are exempt from the tax, including: LLCs that purchase receivables from affiliates with TN income LLCs that provide affordable housing and obtain loans for low-income housing OME LLCs (members are liable for the debts of the entity).

Generally, businesses with taxable sales of less than $10,000 per year are exempt from state business tax. Franchise tax exemptions apply here as well. However, businesses with taxable sales of more than $3,000 are required to have certain licenses, so they'll likely pay something to the state. It's just called something different.

To become tax exempt in Tennessee, you must apply for tax exemption with TNTAP (Tennessee Taxpayer Access Point) by applying for registration. There's a one-page form you must fill out, and you can't leave anything out. Usually, you'll need supporting documentation or receipts. These are listed on the website and are included with the form.

Author

Matija Kolaric

Matija Kolaric

Amazing content is the core of what we do. With more than 5 years of experience in branding, name development, and business, Matija helps create and manage content production.

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