How to Start an LLC in Tennessee (Step-by-Step Guide)

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FAQs

Can I use a DBA in Tennessee?

Yes, in Tennessee you can use a “Doing Business As” (DBA) for your LLC, though it is typically called an assumed name. This allows you to form your LLC using one legal company name and then to operate it under another for marketing purposes.

Do I need to hire an attorney to form an LLC in Tennessee?

Hiring an attorney is not a requirement to form an LLC in Tennessee, as many entrepreneurs choose to file the necessary paperwork themselves or use online legal services. However, consulting with an attorney can provide valuable legal advice, especially for complex business structures or for those seeking tailored legal protection and compliance strategies.

Can a non-resident start an LLC in Tennessee?

Yes, a non-resident can start an LLC in Tennessee. There are no residency requirements for owners (known as members) to form an LLC in the state. Non-residents will still need to comply with all state regulations, including appointing a registered agent with a physical address within Tennessee.

What is the difference between a member-managed and manager-managed LLC in Tennessee?

A member-managed LLC in Tennessee is operated directly by its owners, with all members having a say in the daily business operations. In contrast, a manager-managed LLC delegates management responsibilities to one or more appointed managers, who may or may not be members, allowing owners to be passive investors.

Can an LLC in Tennessee be owned by a single person?

Tennessee allows for the formation of single-member LLCs, which are owned and operated by one individual. This structure offers the same legal protections and pass-through taxation benefits as multi-member LLCs, but the same flexibility as a sole proprietorship.

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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 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.

Starting an LLC in Tennessee step-by-step

1. Select a name for your Tennessee LLC

Follow naming requirements

There are two major rules to follow when naming your LLC in the State of Tennessee:

1. An LLC’s name must be distinguishable from the names of existing business entities on file with the Tennessee Secretary of State.
2. An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, or  “L.L.C.”

Need help coming up with a business name? Check out our free business name generator.

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 by mailing it to the Secretary of State or by bringing it in person 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.

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

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.

4. Create 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:

1. Describe the LLC’s business structure
2. Establish the individual responsibilities and obligations of LLC members
3. 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 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

Tennessee does not have a universal, general business license. However, any business involved in sales will need to obtain a seller’s permit, also known as a sales tax registration, which lets you collect and remit sales tax to the state. There is no cost to register for this permit, but it does need to be renewed each year.

Occupational licenses: Different industries are subject to unique licensing requirements, and these can often be found through professional organizations or on government websites dedicated to business regulation. It’s crucial to understand these industry-specific requirements to ensure compliance.

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.

Local licenses: The location of your business plays a significant role in determining the necessary licenses and permits. Local regulations vary, so reaching out to the clerk’s offices in your county and municipality is a wise step. They can provide detailed information on any local licensing or permit requirements based on your Tennessee business’s specific location.

Consult with a county or city clerk in your area for further information on satisfying local requirements.

Understand state taxes

In Tennessee, LLCs are recognized as pass-through entities for tax purposes, meaning the business itself is not subject to federal income taxes. Instead, the profits and losses of the LLC are passed through to the individual owners, who then report this income on their personal tax returns.

• No state income tax: It’s noteworthy that Tennessee does not impose a state income tax on individuals, which can be seen as a financial advantage for LLC owners in the state.
• Other tax considerations: Despite the pass-through nature and the absence of a state income tax, LLCs in Tennessee are not exempt from all taxes. While LLCs are exempt from the franchise tax, owners are still responsible for self-employment taxes, which cover Social Security and Medicare, and must adhere to other federal tax obligations.
• 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.

Understand BOI reporting

In 2024, the United States introduced a significant regulation concerning the disclosure of Beneficial Ownership Information (BOI) for certain business entities.

This federal mandate requires corporations, limited liability companies (LLCs), and other similar structures to report details of their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Beneficial owner defined: A beneficial owner is defined as any individual who directly or indirectly owns or exercises control over more than 25% of the entity’s ownership interests or who has significant influence over the entity’s management and operations.

Filing deadlines:

• Entities that were established or registered prior to January 1, 2024, are required to comply with this reporting obligation by January 1, 2025.
• Entities that form on or after January 1, 2024, are given a deadline of 90 days from their date of formation or registration to submit their initial BOI report.
• Starting in 2025, this timeframe will be adjusted to a more stringent 30-day deadline.

While this is not a recurrent report, you have 30 days to report any changes to BOI through the same FinCEN portal.

Learn more about BOI Reporting.

Post LLC tasks

Set up business bank accounts

One of the key advantages of establishing an LLC is the personal liability protection it offers business owners. However, this protective barrier can become vulnerable if there is any intermingling of personal and business finances. To safeguard the distinction between your personal and business assets, it is essential to open a business bank account in the name of your company.

This step is not only crucial for maintaining the integrity of the LLC’s liability shield but also simplifies tax reporting and the management of business expenses.

Bank options: When it comes to selecting a banking institution for your business account, there is a wide range of options available. While you can choose from various banks, small businesses often find that local banks and online banking services offer more competitive rates. Several banking services provide plans tailored to meet the needs of newly established LLCs, like Found, Relay, and Mercury.

Obtain a Certificate of Good Standing

In Tennessee, you can obtain a Certificate of Existence to serve as official evidence of an LLC’s compliance with state regulations and its authorization to conduct business in the state.

Why you need it: This certificate is often required for various business activities, such as securing financing, entering into contracts, or registering to do business in another state.

How to get it: To acquire one, LLCs must ensure they are up to date with all state filings, including any required annual reports and payment of associated state fees. Once compliance is confirmed, businesses can request a certificate from the Tennessee Secretary of State’s office. This can be done online, by mail, or by phone.

Build a website

Before your Tennessee LLC is fully established, it’s wise to start planning for your website. This digital platform often becomes the most crucial marketing tool for your business, providing a pathway for new customers to discover you and helping to solidify your presence on the internet.

While every LLC owner knows a website is necessary, you might not know where to start. Follow these steps to get started:

1. Search for and purchase a domain name.
2. Sign up for web hosting.
3. Pick a web builder like Domain.com or GoDaddy to create a site with no coding experience necessary.
4. Tailor your site to your customers, adding appropriate pages, content, and images.
5. If you’re selling goods, add an e-commerce section to your site.
6. Review, test, and publish your site.

Costs to set up an LLC in Tennessee

Average cost to get started in Tennessee: $600-$900

While forming an LLC in Tennessee offers a budget-friendly option for structuring your business, it’s crucial to assess the specific investments that align with the needs of your small enterprise. Certain expenses are unavoidable, but many others can be chosen based on what’s best for your situation.

• Incorporation fees: The primary expense you’ll encounter is the filing fee for your Tennessee Articles of Organization, which amounts to $300 for up to 6 members, with an additional cost of $50 per additional member, paid directly to the Secretary of State.
• Annual Report filing fee: The annual report carries a $300 fee for LLCs with up to six members, with an additional charge for each additional member. This ensures your business remains compliant and in good standing with state regulations.
• Registered agent service fees: A common service many opt for is a registered agent service. The cost for such services can range from $50 to $300 annually. In some cases, you may also want to use more services, like lawyers or accountants, to handle complex matters. These services will have a wide range of prices.

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:

1. 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.
2. Appoint a Tennessee registered agent.
3. 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 no more than two months prior to the filing of the application.