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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Forming an LLC in Tennessee follows a standard procedure similar to those used in most states. However, Tennessee Secretary of State filing fees are more expensive than average as they are mainly calculated based on how many members an LLC has.
To avoid a misstep in the filing process, follow these steps to start an LLC in Tennessee, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Tennessee step-by-step
1. Select a name for your Tennessee LLC
Follow naming requirements
There are 2 major rules to follow when naming your LLC in the State of Tennessee:
- An LLC’s name must be distinguishable from the names of existing business entities on file with the Tennessee Secretary of State.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, or “L.L.C.”
Check LLC name availability
Confirm that your chosen LLC name is available in Tennessee using the Search Name Availability Tool provided by the Secretary of State.
Reserve your LLC name with the Secretary of State
Reserving your name with the Tennessee Secretary of State is a good idea because it prevents another business entity in the state from using it before Articles of Organization are filed and your LLC is legally formed.
File an Application for Reservation of Limited Liability Company Name with the Secretary of State online or by mail to reserve a name for up to four months. The filing fee is $20.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Tennessee requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Tennessee OR if the individual or business is based out-of-state, they must have a business office in Tennessee.
3. File Articles of Organization
An LLC is formed in Tennessee through the filing of Articles of Organization Limited Liability Company with the Tennessee Secretary of State.
You can file the articles online or by mail. The filing fee is based on how many members the LLC has: $50 for each LLC member, with a minimum fee of $300 and a maximum fee of $3,000.
The Articles of Organization must provide the following details about the LLC:
- LLC’s name and the address of its principal office
- Registered agent name and address
- End month of the LLC’s fiscal year
- Whether the LLC is member-managed or manager-managed
- The number of LLC members
- Whether the LLC is perpetual or has a term end date
- Articles’ effective date (if not immediate)
- Information regarding the LLC’s business and designation
- The names and addresses of all LLC organizers
- The signature of one LLC organizer, member, or an authorized representative
Foreign LLC registration
An LLC originally formed in a state other than Tennessee that intends to do business in the state must register with the Tennessee Secretary of State.
Complete the following steps to do business in Tennessee as a foreign LLC:
- Comply with Tennessee LLC naming guidelines and confirm that the LLC’s name is available using the Secretary of State’s Search Name Availability Tool.
- If your LLC name is already in use in the state, you must choose another name and file an Application for Registration of Assumed Limited Liability Company Name.
- Appoint a Tennessee registered agent.
- File an Application for a Certificate of Authority Limited Liability Company with the Tennessee Secretary of State by postal mail (there is no online filing option). The filing fee is $50 per member, with a minimum fee of $300 and a maximum of $3,000.
- The application must include either a Certificate of Good Standing or Certificate of Existence from the LLC’s state of origin dated from no more than two months prior to the filing of the application.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Tennessee, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Tennessee LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
File annual reports
All LLCs actively doing business in Tennessee must file an annual report with the Secretary of State each year. This includes foreign LLCs doing business in the state. An LLC’s annual report is due by the first day of the fourth month after the end of its fiscal year (April 1 if the LLC’s fiscal year is the same as the calendar year).
The annual report can be filed online or through the mail. The annual report filing fee is $50 for each LLC member, the minimum is $300 and the maximum is $3,000.
Obtain business licenses and permits
Many LLCs doing business in Tennessee are required to obtain business licenses issued at the local or county level. Additional occupational licenses and permits may be necessary depending on an LLC’s type of business.
Use the Tennessee Smart Start guide provided by the Tennessee Department of Economic & Community Development to determine which licenses will be necessary to operate in the state, and consult with a county or city clerk in your area for further information on satisfying local requirements.
Register with the Tennessee Department of Revenue
Certain LLCs active in Tennessee must register with the Tennessee Department of Revenue, including those that collect sales tax on retail goods and services and those with employees.
You can register to pay state taxes online using the Tennessee Taxpayer Access Point.
Tennessee LLC checklist
A Tennessee LLC’s name must obey the following guidelines:
- Must be distinguishable from the names of existing business entities on file with the Tennessee Secretary of State.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, or “L.L.C.”
Formational documents and filing fees:
- Application for Reservation of Limited Liability Company Name (optional) – $20 filing fee
- Articles of Organization Limited Liability Company – $50 per LLC member filing fee (min: $300, max: $3,000)
- Application for a Certificate of Authority Limited Liability Company (foreign LLCs only) – $50 per LLC member filing fee (min: $300, max: $3,000)
- An LLC is formed in Tennessee by the filing of Articles of Organization Limited Liability Company with the Tennessee Secretary of State.
Additional legal obligations:
- File annual reports – Required for all LLCs active in Tennessee
- Obtain business licenses and permits – Required for a majority of LLCs active in Tennessee
- Register with the Tennessee Department of Revenue – Required for certain LLCs active in Tennessee, depending on the type of business and location