How Much Does an LLC Cost in Tennessee? (Fees Breakdown)
Launching a business requires investment, time, and expertise. With my experience as a Mergers and Acquisitions specialist, I have dedicated significant effort to assisting clients in establishing businesses and partnerships.
Following consultations with business professionals in the region and thorough research into Tennessee's LLC formation procedures, I have put together a detailed summary of the associated expenses.
This detailed summary aims to provide you with a clear understanding of the financial commitments required to start an LLC in Tennessee, ensuring you're well-prepared for the journey ahead.
Quick Summary
- An LLC in Tennessee costs $300 to cover the basic filing fees to register the Articles of Organization and between $100 and $300 to employ a registered agent service.
- Additional costs include LLC name reservation fees, business licenses, taxes, and annual fees.
- In 2023, Tennessee saw a vibrant increase in entrepreneurial activity, with 96,903 new business applications filed, as per U.S. Chamber of Commerce data, highlighting the importance of initial investments in LLC formation for potential business owners.
- I advise clients to consider the company's needs and determine whether the business entity requires professional assistance or additional documentation.
Cost to Start an LLC in Tennessee
Starting an LLC in Tennessee entails basic expenses to cover requirements and documentation for the business entity to be legally registered.
1. LLC Formation Filing Fee ($300 - $3,000 - Mandatory)
In Tennessee, LLCs' Articles of Organization fees depend on the number of members. For LLCs with six members or fewer, the minimum cost is $300 to a maximum of $3,000. There is an extra charge of $50 for each additional member.
In light of the state's thriving business landscape, underscored by 96,903 new business applications in 2024, as per the U.S. Chamber of Commerce, the initial investment in LLC formation becomes a pivotal step towards entrepreneurial engagement [1].
When I wanted to avail of accelerated filing options, I discovered that the state doesn’t offer expedited services since online filings only took 2 business days to be approved.
2. Registered Agent Service Fee ($80-$300 – Optional)
Registered agent services in Tennessee will act as a liaison between your business and the Secretary of State's office.
The Tennessee registered agent fee ranges between $80 and $300.
3. Name Reservation Fee ($20 - Optional)
Reserving an LLC name in Tennessee costs $20, which includes a name availability search. I had to visit the Secretary of State’s office to confirm that my desired company name has not been taken by another business entity.
Learn about the process of LLC name change in Tennessee.
"In Tennessee, should you choose to operate your business under a name that differs from the registered one, a $20 filing fee is required for a DBA (Doing Business As) or assumed name."
- Jon Morgan, Co-Founder & Chief Editor of Venture Smarter
Expenses Following the Approval of Your LLC
Aside from the basic expenses, forming an LLC in Tennessee may result in additional costs to cover the operations.
1. Business License (Depending on the Line of Business - Mandatory)
The cost of a business and professional license depends on what type of business is incorporated. Most licenses will cost anywhere from $50 to $100.
Several of my clients were required to obtain professional licenses to prove that their company met specific requirements necessary to operate in the area.
2. Annual Report Fee ($20 – Mandatory)
An LLC annual fee is necessary to maintain your business's existence in Tennessee. Like any other business, you will need annual reports and a $20 fee for this service.
An LLC in Tennessee must file an annual report with its Secretary of State office within four months from the last day of its fiscal year.
3. Franchise and Excise Taxes (Mandatory)
LLCs in Tennessee are subject to franchise and excise taxes, which are based on the LLC's net worth or income.
As noted by the Department of Revenue, the state franchise tax requires a minimum payment of $100 [2].
Additionally, LLCs are obligated to pay the excise tax, which is calculated at a rate of 6.5 percent on the net taxable income generated within the state.
To avoid penalties, I personally settle my LLC taxes and advise my clients to do the same at least a month before they are due.
4. EIN ($0 - Optional but Recommended)
Obtaining an EIN is necessary for tax purposes, opening a bank account, hiring employees, and availing of loans. You can apply for an EIN on the Internal Revenue Service's website free of charge.
Reflecting on the robust backbone of the local economy, where 664,681 small businesses represent 99.5% of Tennessee businesses, as per SBA data, acquiring an EIN is a critical step for integrating into this vibrant business community [3].
5. Operating Agreement (Optional but Recommended)
An operating agreement specifies the rules and regulations governing your LLC. It outlines the company's management structure, distribution of profits and losses, members' rights and responsibilities, and voting procedures.
There is no associated cost to drafting an operating agreement yourself. However, you can employ a lawyer or use an online LLC formation service. The cost varies depending on the company; it usually ranges from $100 to $200.
FAQs
What Payment Methods Can I Use To Pay Tennessee's State Fees For Filing My LLC?
The payment methods you can use to pay Tennessee’s state fees for filing your LLC include check, money order, debit, or credit cards.
What is the Penalty for Filing Taxes Late in Tennessee?
The penalty for filing taxes late in Tennessee is 5% of the amount due per month.
References:
- https://www.uschamber.com/small-business/new-business-applications-a-state-by-state-view?state=tn
- https://www.tn.gov/revenue/taxes/franchise---excise-tax.html
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-TN.pdf
