How to Start an LLC in Tennessee? (Step by Step Guide)
Starting an LLC in Tennessee is a very straightforward process. From our experience, setting up a business in this state was simple, relatively fast, and well-guided by our legal experts.
With decades of experience and a team of legal experts and attorneys, I'm here to guide you through the process of starting an LLC in Tennessee.
From selecting a unique business name to filing the necessary paperwork, we'll cover all the essential steps to ensure a seamless and successful LLC formation in Tennessee.
Quick Summary
- To start an LLC in Tennessee, you must follow essential steps, such as choosing a business name that meets state requirements.
- Additionally, ensure compliance with state requirements by obtaining mandatory business licenses and permits, and establishing an operating agreement for your Tennessee LLC.
- Tennessee LLCs are required to pay several taxes to be in good standing.
Start a Tennessee LLC Today
You can begin the process of LLC formation by following the step-by-step instructions in this blog post.
You have to find a name for your business, file an EIN application, and fill out Articles of Organization.
LLC filing with the Secretary of State is pretty easy to do yourself. All you have to do is go online and pay a filing fee.
If the process becomes too burdensome at any point, you can always hire an LLC formation service to help you out.
See how long it takes to start an LLC in Tennessee.
1. Register a Name for Your Tennessee LLC
Register a name for your Tennessee LLC to make your business official. You can't have a business without a name.
Before you file anything, make sure the business name is available for use in Tennessee.
Go to the State of Tennessee business name database and search for your name of choice [1].
If you find that the name is available, then go ahead with filing the articles with the Secretary of State.
You can reserve a business name for four months with the Secretary of State for a $20 fee.
Reservation means that no other business can use your business name during those four months.
However, keep in mind that this does not give you full legal rights to a business name. Only the exclusive right to use it within Tennessee until the 4-month period passes or someone challenges your claim.
Read our article and learn how to change an LLC name in Tennessee if you need to.
2. Hire a Registered Agent
Tennessee registered agent is a third party who agrees to receive important legal and tax documents on behalf of your LLC.
Registered agents also accept service of process for lawsuits, summonses, or other notices that the state may send you.
They can either be an individual or business entity registered in Tennessee to provide registered agent services.
In most cases, a registered agent charges a monthly or annual fee. It's doubtful you'll be able to get registered agent services free of charge.
3. File Tennessee Articles of Organization
File Tennessee articles of organization online or by mail.
You'll need to include your business name, its physical street address, the articles' effective date, and a registered agent's name and address on each form you submit electronically.
You have to file Tennessee articles of organization with the Tennessee Secretary of State before your LLC can get a federal tax ID number.
The Articles of Organization will have an LLC file number assigned after being accepted for filing by the Tennessee Secretary of State.
You can't have a Tennessee LLC without this document, and it's one of the essential steps in forming your new business.
4. Formulate an Operating Agreement
A Tennessee LLC operating agreement can be internal or external.
However, you must have an internal operating agreement. Formulate one that the LLC members create internally to establish how they will conduct business together and each member's rights.
The only requirement for a Tennessee LLC is that it has at least one member.
An operating agreement should include information such as:
- Names of all LLC members
- Equity each member has in the company
- The name of the LLC
- How profits, losses, and distributions are shared among members.
- Roles and responsibilities of each member
- How the LLC will be managed, if managers are appointed
- A way to terminate membership.
Tennessee law doesn't require this document for a single-member LLC, but it's still a good idea to have one.
5. Obtain an Employer Identification Number
An employer identification number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States.
You need an employer identification number if you have employees or want to hire independent contractors. However, it's not necessary for sole proprietorships and single-person LLCs [2].
Open a Bank Account for Your New Business
Open a business bank account for your Tennessee LLC. Every LLC in Tennessee needs a business bank account. It's not legally possible to have business assets in your name.
So you are required to have at least one business account for credit cards, loans, and income.
Your business can open a business checking, or savings account with just the LLC's formation documents.
Separate Private and Business Assets
Separating private and business assets is a crucial factor in an LLC. Keeping personal and business assets separate maintains liability protection for your assets and property.
If you do not separate your business and personal assets, then it can be argued that they are "intermingled."
Not separating means the courts may decide to allow creditors to claim personal assets as business ones [3].
This would defeat the personal liability protection that LLCs are known for—and may end up costing you money!
If your personal and business accounts have been intermingled, then seek legal counsel immediately to determine what steps need to be taken to separate them again.
Tennessee LLC Tax Requirements
LLCs in Tennessee need to pay a federal business tax, a state business tax, and a city business tax.
However, there are some exceptions, so make sure to check if you belong to one of those categories.
If you have an LLC, you need to register for and pay franchise and excise taxes. It does not matter if your LLC is active or inactive; you need to pay a minimum fee of $100.
This minimum fee is not only for LLCs but for other forms of business as well. You can manage registration in person or online through the Department of Revenue.
In case you have employees, there are employer taxes to pay. Some of them are on the federal level, but Tennessee has state taxes on this too [4].
Don't forget state Unemployment Insurance for your LLC, paid quarterly to Tennessee's Department of Labor and Workforce Development.
Find forms on their website and submit paperwork to the Tennessee Department of Revenue and IRS, including sales taxes if applicable.
The Tennessee Department of Revenue is in charge of this, and you should register there. Again you can do it online or in person [5].
The Sales tax has two parts: the state portion and the local portion. The general state rate is 7%, but the local rate depends on the county or city. Again, you should check DoR's website for more information on that [6].
If your LLC field of work is on this list, then you will have to pay sales taxes:
- Retail sale of tangible personal property
- Lodging services
- Telecommunications services
- Installation and repair of real personal property
- Sale of specified digital products
- Sale of computer software
- Sale of specified amusements
- Warranty contracts covering tangible personal property
- Computer software maintenance contracts
If this is too much for you and you are not good with these sorts of taxes, please speak to your accountant or professional tax preparer.
Ask them to make it more transparent for you or just let them handle it all so you can focus on your business side of the LLC.
Get Business Insurance
Business insurance helps protect the growth of your business. And this is more important than ever if you are an entrepreneur working on your own, without the support of a big company behind you.
In addition, business insurance helps maintain your business in case of unexpected downturns.
However, you can also get other types of insurance for your business, such as workers' compensation insurance.
General liability insurance is one of the basic types you should have. It protects your LLC from lawsuits.
To protect yourself from malpractice and business errors caused by consultants, accountants, and others, you can take professional liability insurance.
Unfortunately, there are many cases where their mistakes can cost you money.
On the other hand, workers' compensation insurance is a must for every business.
Your workers need to know that the company has their back in case of injury while at work, and you will financially support them throughout the recovery process.
If you own an LLC, make sure you contribute to unemployment and workers' compensation insurance because these benefits can help your employees feel more secure on the job.
What Is a Limited Liability Company?
A limited liability company is a unique business structure that offers liability protection and pass-through taxation for its members. As such, this
How Do I Create an LLC in Tennessee?
type of business structure that has gained popularity over the years.
This form of legal arrangement offers limited liability to its owners, managers, and members.
Many business people decide to start an LLC in the United States because it provides personal liability protection against business debts or lawsuits.
An LLC can also come from out of state, in which case it's called a foreign LLC. A foreign LLC is largely the same structure as a regular LLC.
Aside from personal asset protection, a Tennessee LLC also provides its members with certain tax benefits.
For you to start a limited liability company in Tennessee, you'll need to file papers with the Secretary of State and obtain an EIN for your business.
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FAQs
Is an LLC Easy to Form in Tennessee?
An LLC is easy to form in Tennessee.
All you have to do is file articles of organization and create an operating agreement.
There's no need to hold a formal meeting, and members don't have to vote on anything.
Do I Need a Registered Agent for My LLC in Tennessee?
You need a registered agent for your LLC in Tennessee. Without one, you risk losing business entity protection or even facing LLC termination.
Are LLCs Expensive to Start in Tennessee?
LLCs are not expensive to set up in Tennessee.
It costs just $50 per LLC member, with a minimum of $300 to file articles of organization and create an operating agreement.
Can I File LLC Tennessee documents by Myself?
You can file LLC Tennessee documents yourself, however, you'll need to hire an attorney or tax professional if there's ever a problem with the government that requires legal research and writing.
Can I Be My Own Registered Agent For an LLC in Tennessee?
You can be your agent as long as you have a street address in Tennessee.
However, you will need to complete an extra step in filing for the LLC by submitting a form called "Appointment of registered agent" when registering with the state.
Forming an LLC in Tennessee
When forming an LLC, it's essential to make sure you have the appropriate information and documentation.
The state of Tennessee has a website that can help guide you through this process with ease.
Since online guidelines sometimes aren’t enough, we recommend hiring a professional support service such as ZenBusiness to help you navigate through the process of starting an LLC in Tennessee.
References:
- https://sos.tn.gov/node/353
- https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
- https://www.td.com/us/en/small-business/benefits-of-separating-personal-and-business-finances
- https://taxfoundation.org/state/tennessee/
- https://www.tn.gov/revenue.html
