How to Start an LLC In Tennessee

Starting a Limited Liability Company (LLC) in Tennessee is advantageous over the different types of business entities as it offers certain benefits. The major benefit of starting an LLC in Tennessee is that the organization does not pay state income tax and the organizers enjoy limited liability. 

Forming, running, and dissolution (where it applies) of an LLC in Tennessee is regulated by the Tennessee Revised Limited Liability Company Act (TULLCA). To  form an LLC one would need to do the following:

Step 1: Select a name for the LLC.

Step 2: Assigning a Tennessee LLC Registered to the LLC. 

Step 3: Fulfil all LLC filing requirements in Tennessee.

Step 4; Apply for the LLC.

Step 5: Request an EIN.

Step 6: Register for Local and  State taxes.

The Tennessee Secretary of State- Division of Business Services is in charge of handling the process involved in filing and registering an LLC in Tennessee. The Secretary of State (SOS) publishes a Quarterly Business and Economic Indicators Report which contains quarterly general information about business entities in the state. Based on this report, in the 3rd quarter of 2022 13,536 new Domestic LLCs were filed, and 12,000 Domestic LLCs were filed in the 4th quarter. In the 1st quarter of 2023, 16,257 Domestic LLCs were filed. Members of the public who want to find records on LLCs in Tennessee can check the SOS web page.

What is an LLC?

A Limited Liability Company (LLC) is a type of business entity where its owners bear limited liability. It can be formed by one or more individuals. This type of business combines a partnership and a corporation in its operation. The persons who form an LLC are called members. A one-person LLC is called a Single member Limited Liability Company (SMLLC) which is regarded as a disregarded entity; an LLC with more than one Member is called a Multi-member Limited Liability Company (MMLLC) and is treated as a partnership (Limited Liability Partnership). The type of taxation to which an LLC in Tennessee is subject can be chosen by its owner(s).

The right to start an LLC in Tennessee is provided for by the Tennessee Revised Limited Liability Act. This law grants both Domestic and foreign entities permission to conduct business within the state. Only those who have fulfilled all the requirements by law of the state can form an LLC. Some of these requirements include choosing a name that meets the LLC naming requirement in Tennessee; selecting a resident registered agent; having a Tennessee address; and most importantly filing the necessary documents and paying the fees required.

Naming an LLC in Tennessee is governed by T.C.A. § 48-249-106. Applicants who want to apply for an LLC in Tennessee are recommended to carry out a name search. This is to ensure that the chosen name is distinguishable and meets the state’s name requirements.

The LLC name requirement in Tennessee is as follows: 

Members of the public interested in carrying out an LLC name search can do so on the Secretary of State web page using the Business Name Availability search system. One can also opt to do a name availability search on a third-party site that offers this service, howbeit, it is better to directly check the SOS website.

Furthermore, although it is not compulsory, it is advised that applicants carry out a name search on the web page of the United States Patent and Trademark Office (USPTO). This is to ensure that the name chosen does not violate any trademark registered.  

On availability of the name, organizers can fill out and submit a Name Reservation Form for a fee of $20. Payment is to be made using a money order or check payable to the Tennessee Secretary of State. Cash payments are only applicable for in-person filing. Finally, note that an LLC name can only be reserved for up to 120 days.

Step 2: Choosing an LLC Registered Agent in Tennessee

As provided in Tenn. Code § 48-249-109 LLCs in Tennessee are required to have and continuously maintain a registered agent. A registered agent serves as a representative for the organization. This person receives notices, emails, and legal documents on behalf of the business entity. A registered agent can be an individual or a business entity that has accepted to represent the LLC.

Prerequisites for an LLC registered agent include the following:

Individuals looking to find the registered agent of an LLC can perform a search on the SOS website. One would need to provide the name of the LLC to conduct the search. The details of a registered agent alongside other information are included in the Article of Organization submitted by an LLC.

How Do I Change my Registered Agent for my LLC in Tennessee?

An LLC in Tennessee can change its registered agent by filing a Statement of Change of Registered Agent with the Secretary of State. The form would contain the name of the LLC, the name, address, and phone number of the current registered agent and the new registered agent including a statement that when the change is effected the address of the new registered agent would be similar to that of the organization. The fee is $20.

A Change of Registered Agent can be filed online, via mail, paper submission, or in person. Online filing can be done using the online tool provided on the webpage of the SOS. the applicant would need to enter the SOS control number of the LLC to begin the process. Payments can be made using a debit or credit card; a service charge applies. Those who do not want to file online can print out the form after completing it online and send it including the fee to the address below:

Tennessee Secretary of State

ATTN: Corporate Filing

312 Rosa L. Parks Avenue Floor 6

Nashville TN 37243

Members of an LLC can also file a Change of Registered Agent in person. An empty form can be gotten from the office of the Secretary of State. One can get the form, fill it out, submit it at the address above, and pay the required fee.

Ensure that the form is filled accurately as an error on the form may have legal repercussions. 

Step 3: LLC Filing Requirements in Tennessee

To form an LLC for the purpose of running a business in Tennessee, organizers would need to file with the Secretary of State. One of the requirements among others includes filling and submitting the required documents. These documents include the Article of Organization, Operating Agreement, and Statement of Operation. A Foreign LLC would need to file documents such as a Certificate of Existence or Good Standing from its home country, An Application for registration, and pay the required fees. In a situation where the LLC would be using a different name to run in the state, A Certificate of Assumed Name would need to be filed. 

LLC Articles of Organization in Tennessee

It is essential for members applying for the formation of an LLC in Tennessee to submit an Article of Organization (Form SS-4270). This legal document provides details about an organization, its registered agent, the reason for its formation, the type of management, and the details of its members. The fee to file an Article of Organization ranges from $300 to $3000. The $300 filing fee applies to LLCs of not more than 6 members. An extra cost of $50 applies for every extra member above 6.

 The document can be filed online, via mail, paper submission, or in person. 

LLC Operating Agreement in Tennessee

A Tennessee Operating Agreement is a formal contract for the members of the LLC. this document provides information on the ownership and management structure of the company and how it would be operated. Details such as the roles and responsibilities of its members are outlined, management, financial allocation, and right to vote. It is not mandated by law for an LLC to have one, but it is in the best interest of its members to create one as it provides security and clarity for them. 

Tennessee LLC Statement of Information

A Statement of Information is one of the documents required by the SOS to be submitted by an LLC registered to do business in the state. This document usually contains up-to-date information about the organization, including any changes. The details mentioned on the form enable the government to administrate the organization and check its compliance. A Tennessee Statement of Information is to be submitted biennially.

Do You Need a Tennessee Address for LLC?

Yes. As per one of the requirements for LLCs in Tennessee, having a Tennessee office address to carry out business is compulsory. The office address of the LLC is one of the details included in the Article of Organization filed with the Secretary of State. In a situation where an LLC does not have a physical Tennessee address, a virtual address can be used. There are several service providers that offer several service packages which cover a physical address. The company can use the address for official purposes.  

How to Get a Virtual Address for LLC in Tennessee

Organizers who plan to get a virtual address are recommended to carry out proper research and analysis of the various offers of service providers. This would help the members of the LLC compare the services and choose the service that best caters to the needs of the organization at a reasonable cost. Together with providing a virtual address, services may also include a registered agent, and mail handling (forwarding, scanning, pick up, and storage). Other packages may include rentals for meeting rooms, working spaces, and a receptionist. 

It is important to note that a virtual address can only be used as the office address of the LLC, it cannot be used as the address of a registered agent. 

Step 4: How to File for an LLC in Tennessee

In Tennessee, LLCs can be filed online, by mail, by paper submission, or by walk-in to the Office of the Secretary of State. Inquirers considering filing via mail can complete the application form online, print the form, then forward it including the fee to the office of the Secretary Of State via mail. The mail should be sent to the address below:

6th Floor  Snodgrass Tower

ATTN: Corporate Filing, 312 Rosa L. Parks Avenue, 

Nashville, TN 37243.

Individuals can also get a blank application form, complete it and send it including the filing fee to the address above. One can get the form from the SOS website, by sending a mail to the Secretary of State at Business.Services@tn.gov or by putting a call to (615) 741-2286.

Those who want to file in person can do so at the office of the SOS. Blank forms are available at the office. One would need to get one, fill it out, pay the fee, and submit the form.

It is very important that the application forms are filled accurately as an error could lead to rejection.

How to Create an LLC Online in Tennessee

The process for filing an LLC online in  Tennessee is outlined below:

Click ‘Continue’.

A form would be displayed. Fill out the necessary details. One would need a written name consent or an active reserved name.

Click Continue.

Click Continue

Click Continue

Click Continue

Click Continue

Click Continue then proceed to payment.

Organizers are also required to file a Statement of Information (Annual report) with the SOS. This document can be filed online on the SOS web page. Filers would need the SOS Control number of the LLC, the name and address of the business principal officers, directors, managers, etc, and a debit or credit card.

Can You Have Multiple Businesses Under One LLC in Tennessee?

Yes. An LLC in Tennessee can have several businesses running under it and these businesses would not need to be filed as different entities as provided in the T.C.A. § 48-249-106; the LLC would only need to register an Assumed Name (DBA). Although this is possible, depending on the kind of business, the various businesses may be required to secure individual licenses or permits. It is suggested that the organizers differentiate the accounting documents of each business and also seek legal advice to know exactly what the implication of this type of setting is.

One would need to fill out and submit the Application for Registration of Assumed Name (Form SS-4402) for a fee of $20. 

How Long Does it Take to Set Up an LLC in Tennessee?

The length of time taken to set up an LLC in Tennessee depends on how soon the organizers can meet the condition for filing one and the medium through which it was filed. The processing time generally takes a relatively short time. Online filing can be processed on the same day that the document is filed. The processing of LLCs filed via mail takes 3 to 5 days. While walk-in filing can be processed that same day if there are no errors. Please note that these time frames are tentative.

Step 5: How to Get an EIN for LLC in Tennessee.

Members of an LLC in Tennessee can apply for an Employer Identification Number (EIN) online, via mail, or fax. Applications are submitted to the IRS. Organizers who want to get an EIN for their LLC can do so online, Online application is advised as it is easy. On the IRS website, there is a guide provided which applicants can follow. EINs are generated as soon as applications are completed.

Persons who want to file via mail or fax would need to complete and submit Form SS-4 to the following address:

Internal Revenue Service

Attn:  EIN Operation

Cincinnati, OH 45999

Fax: 855-641-6935

Applicants who do not have a legal residence, principal place office, or agency in any state can forward it to:

Internal Revenue Service

Attn:  EIN International Operation

Cincinnati, OH  45999

Fax: 855-215-1627 (within the U.S.)

Fax: 304-707-9471 (outside the U.S.)

Processing time for fax applications is 4 days and mail application is 4 weeks.

Step 6: Do LLCs Pay Taxes in Tennessee?

Yes, LLCs are required to pay taxes in Tennessee.  Pursuant of Tenn. Code Ann. §§ 67-4-2004(38); 67-4-2005; 67-4-2104. LLCs are liable to pay business tax, franchise tax, and excise tax, except for an exempted LLC. Because tax laws are constantly amended, it is advised that one query the Department of Revenue for up-to-date taxation of LLCs.

How Are LLCs Taxed in Tennessee?

There are several provisions for the payment of tax in the law, some of them include Tenn. Code Ann. § 67-4-701, 730, 2105(a), – 2106(a) (2013) and Section 67-4-2008. LLCs running a business in Tennessee are expected to pay tax on or before the 15th day of the 4th month after the end of the fiscal year of the LLC. The tax rate in the state is dependent on the gross sales of the LLC, the type of business (whether the business is retail or wholesale), its business activities, and its structure. A business tax could be state-level (businesses with a physical location and those without physical location that have substantial nexus) or municipal-level (businesses that have a physical location). 

LLCs that are subject to state-level tax may not be subjected to municipal-level tax as the municipality may not have enacted the tax payment.  It is mandatory that all LLCs (but for those exempted) pay excise and franchise tax. LLCs in Tennessee are regarded as separate and single business entities for the purpose of excise and franchise tax and are expected to file on this basis. Excise tax rate is 6.5% on the net earning of individuals and franchise tax rate is 0.25% of the greater net worth or tangible real property, $100 is the least amount of tax to be paid.

Note that a business is only subject to state-level tax if its gross receipt within a county is up to $100,000 or more.

Additionally, some LLCs in the state are eligible for franchise and excise tax exemption. For instance, if a Single-member LLC is a corporation and considered a disregarded entity for federal income tax reasons, it is also disregarded for franchise and excise taxes. This means that the organization does not need to pay both taxes. However, some SMLLCs are required to pay the franchise and excise tax. Provisions for tax exemption are stated in Tenn. Code Ann. § 67-4-2004(38). Tenn. Code Ann. § 67-4-2008(a)(10)(A)

Tax Benefits of an LLC in Tennessee

Like other states, in Tennessee, there are certain tax benefits available to an entity doing business in the state. Some of these benefits are as follows:

Maintaining Compliance with Annual Filing Requirements in Tennessee

For an LLC in Tennessee to remain in good standing after it is started, it is required to meet the following annual filing requirement:

Do You Have to Renew LLC Every Year in Tennessee?

No, an LLC in Tennessee does not need to be renewed every year. After formation, an LLC in the state is perpetual as far as it is continually in good standing. LLCs that want to remain in good standing are expected to:  

If an LLC is unable to meet the requirements outlined above, it may lead to penalties and sometimes the eventual dissolution of the company.

How Much Does It Cost To Start an LLC in Tennessee

The initial cost of forming an LLC depends on the documents filed and the type of LLC. The fee for filing an Article of Agreement is $50 per member with $300 being the least and $3,000, being the most. Organizers who file a Name Reservation form would incur an extra $20. Hiring a registered agent or employing the services of a virtual address service provider would increase the cost, depending on the chosen package. Those who want a Certificate of Formation would need to pay an extra $20.

There are also annual running costs to keep the LLC in good standing. For example; the Fee to file a Statement of Information (Annual Report) starts at $300 but is no more than $3,000, depending on the number of organizers. Members are also required to pay franchise and excise taxes; the total tax paid depends on the income of the company. Organizations with $100,000 and above income from one business are subject to business tax.

Generally, one could spend from $300 to $4,000 and sometimes more to start an LLC in Tennessee, excluding annual fees and taxes.

Can You Form an LLC In Tennessee For Free?

No, there is no provision in Tennessee for filing an LLC for free, however, there are options in which one can pay less. 

How to Start an LLC in Tennessee At a Minimal Cost

Normally, there are fixed filing fees and annual taxes linked with forming an LLC in Tennessee. Filing online incurs an additional service fee of 2.29% of the total transaction if payment is made using a debit or credit card or $0.95 per transaction if using an e-check. This fee does not apply to paper submissions and walk-in filings. Organizers can minimize the cost of filing an LLC by filing using the paper submission and in-person option.

Some SMLCCs are considered disregarded entities for federal tax purposes and hence are exempted from paying franchise and excise taxes. An LLC can also apply for an exemption pursuant to Tenn. Code Ann. § 67-4-2008.

What Businesses Should Consider Forming an LLC in Tennessee?

Generally, small businesses and start-ups with a few members would benefit from filing LLCs as this type of business entity is simpler to form, and its administration, ownership, and management are flexible. Additionally, its formation does not require tedious paperwork. LLCs can be used for nearly any type of business so far as their operation is within the state’s legal permission.

What are the Benefits of An LLC in Tennessee?

Some of the benefits of forming an LLC in Tennessee are stated below:

How Does an LLC Work in Tennessee?

LLCs are business entities that offer security to the personal properties of their owners. LLCs function as corporations at the same time as partnerships. This is to say that organizers enjoy benefits from both types of entities. LLCs in Tennessee can either be owned by a single member as in a sole proprietorship or by several persons as in a partnership or a corporation.

To remain in good standing, all LLCs are required to file the necessary documents with the Secretary of State including payment of fees in time. The company would also need to pay their taxes to the Department of Revenue and comply with federal and state regulations. Negligence of any of these requirements may have repercussions on the company.

LLC VS S Corp in Tennessee

An LLC and an S Corp are similar in the way the organizations are taxed. Both companies are regarded as passthrough entities. Howbeit, both entities have several differences. Firstly, an LLC is an official category of business on the other hand, an S Corp is a type of taxation. 

The member(s) of an LLC in Tennessee can be persons who are not citizens or residents of the U.S. However, individuals who are not U.S. citizens or residents cannot be members of an S Corp. Also, while LLCs can have an unlimited number of members, S Corp can only have at most 100 persons as members. LLCs are also generally, simple to form and manage, having flexible ownership and management; an S Corp on the other hand is not as flexible in its ownership and management. 

The major advantage of setting up an S Corp instead of an LLC in Tennessee is the tax benefit enjoyed by this type of business; the owners of an S Corp may not be subject to self-employment tax. While the allocation of income and expenses to its members in an S Corp is determined by the percentage of the shareholder, LLC organizers can determine how these allocations would be shared. Transfer of ownership is more flexible in an S Corp as long as the IRS regulations regarding ownership transfer are met, on the other hand, it is not so for LLCs.

An LLC can elect to be regarded as an S Corp. Applicants would need to file Form 2553 with IRS. An instruction manual is provided on the IRS web page so that interested persons.  

LLC vs. Sole Proprietorship in Tennessee 

LLCs are business forms where the owners and the business are separate entities, however in a Sole Proprietorship, the business and the owner are one. LLC offers its owners the security of their assets, conversely, the owner of a Sole Proprietorship is liable for any debt incurred by the business or lawsuit filed against it. A Sole Proprietorship is an informal business entity with one owner, while an LLC is official and can be owned by more than one person.  LLCs are often considered more reliable than Sole Proprietorships.

A sole proprietorship is the simplest, easiest and cheapest business entity to form (its formation and running) compared to an LLC. Unlike other business entities, one does not require to file any document, pay any fees, appoint a registered agent, or create a Statement of Operation. Decision-making is also less complicated compared to an LLC.

LLC vs. Corporation in Tennessee.

Usually, LLCs have a flexible framework (Its structure, ownership, management, and taxation) in their operation, however, a corporation is more complex, (its rights and taxation). Because of the complexity of a Corporation, it requires more tedious paperwork in contrast to an LLC. an LLC can run as a sole proprietorship as well as a partnership. A corporation cannot be a sole proprietorship.

In the situation where one of the organizers of an LLC dies, the LLC would be dissolved except there is a provision in the Operating Agreement. Conversely, a corporation would continue even if it lost a member. Corporations are generally bigger businesses compared to LLCs.

Individuals looking to have a more defined and structured large business would best meet their goals by forming a Corporation rather than an LLC. 

Business License vs. LLC in Tennessee

A business license and an LLC are different in the sense that, a business license is a legal document that permits its bearer (a business in this case) to carry out business activities in Tennessee. On the other hand, an LLC is a kind of business entity in which its organizers are required to file a couple of documents with the Secretary of State and pay taxes. In Tennessee, there is no general business license. Business owners are required to get different licenses depending on the type of business, its location within the state, and its gross income.

Do I Need a Business License if I Have an LLC in Tennessee?

An LLC with less than $3,000 gross income would not need a license to operate in Tennessee, however, one with more than $3,000 would need to obtain a license to operate. There are different types of licenses depending on the gross income in the state. These licenses include: a minimum activity license, for businesses with above $3,000 gross sales but not more than $100,000 and standard activities license for businesses above $100,000 gross sales. An LLC would be required to have a business tax account and filing to obtain a standard activities license. Filing and payment of business tax would automatically renew the business license. 

LLCs can apply for a license online on the web page of the Tennessee Department of Revenue. Applicants would need to pay $15 for license registration.

How to Dissolve an LLC in Tennessee

Organizers who want to dissolve an LLC in Tennessee can begin the process by filing a Notice of Dissolution form (SS-4246). The LLC would then need to obtain a Certificate of Tax Clearance for Termination from the Department of Revenue. When that is done, an Article of Termination by Organizers form (SS-4244) can then be filed with the Secretary of State. This can be done online or via mail. The fee required to file this form depends on the type of business and its registration status. 

Please note that domestic LLCs in Tennessee are required to be dissolved first before termination for cessation of business within the state. The business shall be required to continue filing required annual reports and pay taxes until the Article of Termination is filed.