How To Start Your Tennessee LLC

Whether you are currently operating a business in Tennessee and want to convert it to an LLC or are you want to establish a new business in the state, an LLC (or Limited Liability Company), may be the best option for you. An LLC can help protect your personal assets and can be beneficial in certain tax situations.

Like every other state, Tennessee has its own rules and regulations that you need to follow to create your LLC and keep it running legally. In this article, we will tell you everything you need to know about starting an LLC in Tennessee, which can cost you as little as $300 to get set up.

Setting up Your LLC in Tennessee

Beginning the process of starting your Tennessee LLC may seem intimidating at first, but as you start to understand the requirements and individual steps, you’ll realize that it is not that confusing of a task.

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Step 1. Naming Your Tennessee LLC

When naming your Tennessee LLC, there are several things you need to keep in mind to make sure that the name is legally acceptable and available for use.

Legally Required Designation

According to Tennessee requirements, the name for your LLC must contain the phrase “limited liability company” or one of the following abbreviations:

• LLC
• L.L.C.

Unique Name

When choosing a name for your LLC, you should make sure that it is unique and doesn’t infringe on an existing business, either intentionally or accidentally. You may also want to choose something that is easily searchable by potential clients or customers, making it easier to find and increase visibility for your business.

The name you choose should not already be in use by another business or LLC operating in Tennessee. You can perform a search of available names with the TN Secretary of State database to help narrow down the options. However, if the name you choose is indistinguishable from another, you have the option of filing a name consent form with the agreement of the existing business that allows the two LLC names to co-exist.

Restricted Words

There are certain words that you cannot include in your LLC’s name, as they may cause confusion between your business and a government entity. These words include things like:

• IRS
• FBI
• Treasury
• State Department

Restricted words, such as “bank”, “attorney”, and “university”, may require additional paperwork and the presence of a properly licensed individual in your LLC.

Reserve a Name

It is possible to reserve a name for your LLC up to 4 months in advance of filing to establish the business. You need to fill out this form and pay a $20 filing fee. The form can be filed online or through the mail.

You should check to see if a domain name is available for your LLC’s intended name. Even if you don’t want a business website right away, purchasing or reserving a domain ahead of time can be a helpful investment.

Using an Assumed Name

If you want to conduct your business under an assumed, or fictitious, name, this is allowed in Tennessee.

While you will need to register an official LLC name and keep it on all documents filed with the state, you can also file a form for a DBA name (doing business as name). This can be extremely helpful for someone who registers their LLC under their own name but wants to use a different name when operating with the public.

To register an assumed name for your Tennessee LLC, you will need to file a registration application with the Tennessee Secretary of State’s office. You will also need to pay a $20 filing fee for this form.

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Step 2. Choosing a Registered Agent

You are required to appoint a registered agent for your LLC in Tennessee. The registered agent will be the individual or business entity who is solely responsible for receiving all tax forms, legal documents, notices of lawsuits, and official government communications.

This effectively makes them a point of communication between your business and the state of Tennessee. The registered agent is expected to be available during regular business hours.

Whoever you choose as a registered agent must be a resident of Tennessee or a business entity that is authorized to conduct business in the state, like a registered agent service, and must have a Tennessee street address. Any individual in the LLC, including yourself, can be nominated as a registered agent if these requirements are met.

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Step 3. File Your Articles of Organization

To start the official process of establishing your LLC, you will need to file the Articles of Organization with the Tennessee Secretary of State. There are a few requirements for filing, which we will discuss below.

Required Information

This information is required on the Articles of Organization, and your LLC cannot be formed without it.

• Your LLC’s name.
• If the LLC is similar to an existing name in Tennessee, a name consent form
• Written approval for the LLC if the name contains words such as “bank”, “banks”, “credit union”, “trust”, or “insurance company”. You can access the forms for approval through the Tennessee Department of Finance or the Tennessee Department of Commerce and Insurance, in the case of insurance companies.
• The name and address of the registered agent for your LLC.
• The end month of your LLC’s fiscal year, which is typically December.
• The date you wish the Articles of Organization to be effective, if not immediate.
• Whether your LLC will be member-managed or manager-managed.
• The number of LLC members on the date of filing.
• Your LLC’s duration, if it is not perpetual.
• The address of your LLC’s principal office.
• The signature of an LLC member, the organizer, or other authorized person.

You may also have to check additional boxes if your LLC is a non-profit, a professional LLC, or a series LLC, if it is an obligated member entity in which members will be personally liable for LLC’s debts (this is a rare occurrence), or if your LLC is prohibited from doing business in Tennessee.

How to File

You can file your Articles of Organization online or by mail, whichever is easier for you. There is a filing fee of $50 per member, with a minimum of $300 and a maximum of $3,000, and you may have to pay additional fees for expedited services or mailing.

The processing time for your LLC’s establishment can be anywhere between 1 to 14 days, with online having a faster turnaround time than using the mail filing option.

Online

Filling your Articles of Organization online is one of the easiest ways to establish your LLC. For this method, you will need to go to the Tennessee Secretary of State’s website here and select the “start” option to begin filing.

You will fill in all the necessary registration information online and be prompted to pay the required filing fee at the end of the process.

Keep in mind that there will be additional fees for credit or debit card processing (2.29% per transaction) or for the e-check payment option ($0.95 per transaction), and that certain options selected during the filing may require additional documents to be printed out and mailed directly to the Secretary of State’s office.

By Mail

If you want to file your Articles of Organization by mail, send the completed form and all additional necessary documentation to the address below. Make sure to include a check made out to the Tennessee Secretary of State that covers the appropriate fee amount ($50 per member, with a $300 minimum and a $3,000 maximum).

6th floor – Snodgrass Tower

Attn: Corporate Filing

312 Rosa L. Parks Ave.

Nashville, TN 37243

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Step 4. Create an Operating Agreement

Even though an operating agreement isn’t required for LLC formation in Tennessee, it is a good idea to create one anyway. An operating agreement outlines all of the rights and responsibilities of every LLC member and manager, establishes in writing how the LLC is managed, and gives clear direction on what to do in the case of dissolving the LLC or a lawsuit.

Operating agreements can help you avoid conflicts caused by miscommunications and can protect your liability better, as they show that your LLC is established as a true business entity.

If you do not have an operating agreement, Tennessee’s state LLC law will dictate how your LLC should operate in the event of a conflict—this is something that may not be in your best interests.

You can use an online template to help you get started drafting your operating agreement. Remember that you don’t need to file this form, but you should keep it on hand and treat it like the important business document it is. You may also want to give copies of it to the other members of your LLC.

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Step 5. Get an EIN/Tax ID Number

Your Tax ID number, also known as an EIN (Employer Identification Number), is required by the IRS for LLCs that have more than one member, even if there are no employees. You can think of an EIN as a social security number for a company that helps identify your LLC on tax documents or other government fillings.

Multi-member LLCs will need an EIN to hire employees, open a business bank account, and file or manage their federal and state taxes.

If you are forming a sole-member LLC, you will only need an EIN if you choose to hire employees or you want to tax your LLC as a corporation instead of a sole proprietorship.

It is free to receive an EIN through the IRS and can be requested either online or through the mail. If you do not have a social security number, you will need to file through the mail.

Online

You can complete the EIN application form through the IRS website here. This is the quickest way to request the EIN, and you will receive your number as soon as the application is completed.

By Mail

If you want to request your EIN by mail, you can fill out this form and mail it to the address below. Leave section 7b blank if you do not have a social security number.

Once you mail the form off, you can call the IRS at (267) 941-1099 to follow up on your application. This step is especially important for international EIN applicants.

Internal Revenue Service

Attn: EIN Operation

Cincinnati, OH 45999

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Step 6. Keeping Your LLC Running

After you have filed your Articles of Organization and received your EIN from the IRS, you are free to start doing business under your LLC in Tennessee. However, there are a few things that you will need to keep up with to keep your business running smoothly and legally.

Pay Annual Registration Fees

LLCs that are authorized for business in Tennessee must file an annual report in addition to paying an annual registration fee. The fee has the same structure as the one for setting up the LLC, which is $50 per member with a $300 minimum fee and a $3,000 maximum fee.

The annual report is a way for the state to keep updated with your business and needs to include the name of your LLC, the principal office address, the information for your registered agent, and your LLC’s Secretary of State control number, which you should receive from the state after you initially file your Articles of Organization.

Your annual report will need to be filed on or before the first day or the fourth month after the fiscal year ends. Most LLC owners go by the calendar year as their fiscal year, which would make the year end December 31st and the due date for the annual report April 1st.

You can file your annual report online through the Tennessee Secretary of State’s website, or by mail, including a check for the applicable filing fee made out to the Tennessee Secretary of State along with your completed report.

The mailing address for your annual reports is below:

Secretary of State

Attn: Annual Report

6th Floor – Snodgrass Tower

312 Rosa L. Parks Avenue

Nashville, TN 37243

Separate Your Business Finances

Separating your business and personal finances is an important first step in keeping your LLC running. In the case that your LLC is sued, your personal assets will be kept safe from liability, as your LLC and its assets will be the ones dealing with the lawsuit.

You can open up a business checking or credit account to handle any of the finances associated with your LLC, and you may want to hire a professional business bookkeeper or accountant. This will help you keep track of your expenses and taxes easily and may even help you build a relationship with your bank or financing institution that can make it easier to secure business loans in the future.

Make sure that you have your EIN on hand when opening any type of business financial account for your LLC. You may also need your operating agreement, Articles of Organization, and the name of your registered agent. Keep in mind that there could be additional documents of information required depending on the bank you use, so make sure to organize everything you need or call ahead and check with a bank employee before showing up to open your business account.

Be aware that some banks will charge fees or have minimum required balances, so you should be sure that the bank and account type you choose will work the best for your LLC and its needs. This may require some research and comparison among available account types at your local banks.

Keep up With Federal and State Taxes

Upon establishment of your LLC, you will need to stay on top of both federal and state taxation requirements in order to keep your LLC running legally. Below, we discuss some of the requirements you may need to meet.

Tennessee State Business Taxes

Tennessee requires a basic state business tax for all entities that are established and conduct business in the state. You will need to register to pay your business tax with the Tennessee Department of Revenue.

Your gross receipts for your LLC must be reported annually, and your state business tax will be calculated from them. LLCs that gross between $3,000 and $10,000 in income will be required to obtain a minimal activity tax license from their resident county or municipal clerk – visit your county’s webpage to find the appropriate filing resources.

LLCs that gross over $10,000 annually will be required to obtain a standard business tax license (which has a filing fee of $15) from their resident county or municipal clerk.

Keep in mind that your business tax will be due on the 15th day of the fourth month after the end of your LLC’s fiscal year. You will also be required to pay a franchise tax of 0.25% of either the LLC’s net worth or of any real and tangible property in the state, whichever is greater. The franchise tax has a minimum payment of $100.

The city that your LLC is established in may have a similar city business tax. You can check the county and city tax list here to determine if you will need to pay this as well as the basic state business tax.

Additionally, an excise tax of 6.5% of your taxable income, which is based on your net earnings for the tax year, is required to be paid by any Tennessee LLC.

Tennessee Sales Taxes

If your LLC will be selling goods and collecting sales tax, you must also register with the Tennessee Department of Revenue to pay sales and use tax. A complete guide to this tax can be found here.

You can register for this tax online through the Department of Revenue website.

State Employer Taxes

If your LLC has employees, you will need to pay both state employment tax and unemployment insurance (UI) taxes. You will register for and pay these taxes through the Tennessee Department of Labor and Workforce’s website. Use form LB-0441 to register for taxes, and then form LB-0456/LB-0851 to report wages and pay UI taxes each quarter.

Keep in mind that some of your state employment taxes will need to be paid to the IRS, something which you can discuss with a professional accountant if you are confused about the distinction or how much to pay to each entity.

Federal Tax Requirements

Your Tennessee LLC is considered a pass-through entity, meaning that it is exempt from a corporation tax in most cases, but you will need to pay federal taxes as an individual member of the LLC.

You should choose a tax structure that works for your LLC and your business needs, which can be a sole proprietorship, a partnership, an S Corporation, or a C Corporation, and file your taxes accordingly. You can read more about the differences in these tax structures in this article.

If you elect to have your LLC taxed as a corporation instead of a sole proprietorship or partnership, you will need to fill out the IRS Form 2553. As a corporation, your LLC will have to file a separate corporate tax return, unlike with a sole proprietorship or partnership where you only have to file an individual tax return. Additionally, you will need to pay Tennessee’s corporate tax of 6.500% of your gross income.

If you decide to be taxed as a sole proprietorship, you will file an individual tax return and will likely need to pay self-employment taxes to the IRS. You may also need to make estimated payments throughout the year to avoid being fined by the IRS.

Acquire Necessary Permits and Licenses

In addition to required state and city business tax licenses, you may need to require permits to operate your LLC in Tennessee, depending on what business type you have. Tennessee doesn’t require a general state business license, but certain counties and cities might, so you should be sure to check your localities office website for more information.

If your LLC is offering things such as legal or financial services, you will be required to have a professional license to perform these services before establishing your business. Tennessee does impose an extra $400 annual professional privilege tax on certain occupations.

Additional permits may be required for serving alcohol or for businesses that require Department of Health licensing. Specialized research about your business type should be done on the Tennessee Secretary of State website and your locality’s website to determine if any additional permits are needed.

For federal permits and licensure requirements, you can check out the Small Business Administration’s website for more information.

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Tennessee LLC Resources

These resources can be helpful during every step of the process of establishing and operating your LLC in Tennessee.

• Tennessee business name search database
• Reserving an LLC name form
• Available domain name search
• Registering a DBA name form
• Name consent form for Tennessee businesses
• Online filing for the Articles of Organization
• Free IRS EIN application
• Tennessee Secretary of State
• Filing Tennessee annual reports
• Tennessee Department of Revenue
• Tennessee Department of Labor and Workforce
• Guide to sales and use tax
• IRS estimated payment information
• Federal permit information

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Tennesee LLC FAQs

Check out these most frequently asked questions about Tennessee LLCs to understand more about establishing and running your LLC effectively.