Start an LLC in Tennessee

If you plan to open an LLC and do business in Tennessee for the very first time, you will likely face quite an undertaking. For more effective business solutions, it’s important to establish a competent management network. 

Tennessee LLC formation is strictly regulated, so a thorough grasp of Tennessee LLC requirements, the state’s rules for filing formation documents, and the general approach to a registration procedure is of the utmost essence.

This guide features step-by-step instructions to hopefully help you understand the proceedings and form an LLC in Tennessee while avoiding common filing errors.

How to Form an LLC in Tennessee

Choose a Name for Your Tennessee LLC

The decision that goes into your Tennessee LLC’s name is one of the key defining factors in your company’s future. A well-chosen name is a precursor to steady and successful business growth with the potential to attract more customers through the recognition factor alone.

A good Tennessee business name should be memorable, concise, and above all, original. The latter can only be achieved by avoiding generic words and names that are too similar to other existing companies.

Even if you’ve already decided on a seemingly perfect option, don’t be in a rush to file your Articles of Organization or build a marketing strategy around that name as you first need to ensure your choice fits Tennessee guidelines.

This state’s key name requirements include:

  1. Avoiding banned words that: 
  • Imply any connection to the government, e.g. federal, FBI, etc.;
  • Indicate a specific field that doesn’t align with the company’s activities such as “university”, “insurance”, “attorney”, and other designations that require additional licensing;
  • Characterize the LLC as part of any “fraternal, veterans’, service, religious, charitable, or professional organization” without going through the appropriate registration with the secretary of state.
  1. Using a “designator” within the name pointing to the type of your business, in this case:
  • “LLC”;
  • “L.L.C.”;
  • “Limited Liability Company”.
  1. Making it unique: before going ahead with the application, make sure the name isn’t already taken by checking its availability through the official business name database;

If the Tennessee LLC name search shows no close matches, you can use the name in your Articles of Organization. But if another entity has already chosen it to conduct business in Tennessee, you should definitely rethink your options or alter the name by using synonymous terms and rearranging the word order.

Some changes won’t be enough to improve your name’s uniqueness. The state won’t see the name as viable if you only change the following:

  • Capitalization;
  • Articles;
  • Punctuation;
  • Prepositions;
  • Conjunctions;
  • Business type designators.

If you still have questions, be sure to check the Tennessee naming requirements.

If you have already found a fitting name but would rather postpone forming a Tennessee LLC, you can always reserve an LLC name until you’re ready to file the documents.

Tennessee allows for a 120-day reservation, which costs $20. You can submit your Application for Reservation of Limited Liability Company Name by post, in person, or online.

Online

To reserve online, download the form, fill in the name to be reserved and the name, title, address, and dated signature of the applicant, then submit the application.

By mail

If you are unable to do it online or simply prefer not to, you can also apply via mail. Download the form, then print and fill it out. Send it along with the filing fee check to:

Department of State
Corporate Filings 
312 Rosa L. Parks Avenue 6th Floor
William R. Snodgrass Tower 
Nashville, TN 37243

Mail applications are usually processed within 1-2 business days.

In person

If you live in or visiting Nashville, TN, you can hand in the form in person. In this case, the processing only takes a day.

Obtain an EIN for an LLC

Obtaining a Tennessee employment identification number (EIN) from the IRS is best done as soon as you open a Tennessee LLC. This number is assigned to keep track of your business activity in Tennessee, allowing you to:

  • Hire employees;
  • Open bank accounts;
  • Pay state and federal taxes.

You can apply for an EIN online, by mail, or via fax.

Online

The fastest way to obtain a Tennessee LLC’s EIN is to file online by using your Social Security Number. Applications are accepted between 7 a.m. and 10 p.m. EST, Monday through Friday, and the ID will be assigned almost immediately after processing.

Fax

Fill out the Form SS-4 and fax it to: 

(855) 641-6935

These applications are typically processed within 4 business days.

Mail

Download the Form SS-4, fill and print it out, then post it to:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

Applications submitted by mail can be reviewed for up to 4 weeks. 

Designate an LLC Registered Agent

LLC owners are required to appoint a resident agent in Tennessee throughout the company’s duration. With a registered agent, LLCs will be able to receive vital correspondence from the state and other agencies, including:

  • Taxes;
  • Lawsuits;
  • Service of process;
  • Maintenance requirements etc.

In other words, a registered agent operates as a representative for a business in Tennessee, maintaining lines of communication between the entity and the state.

Registered agent info is part of the Articles of Organization. So to create an LLC in Tennessee, your agent must meet state requirements.

Individual as Registered Agent

Any Tennessee resident is qualified to be an agent as long as they are 18 years of age and have a physical address. They also must be able to be present at the registered office at all business hours to receive correspondence. 

Registered Agent Service

Hiring a professional registered agent service like Northwest Registered Agent or IncFile comes with a whole set of benefits. The main advantage they offer is the reliability of document processing as both companies ensure no piece of paperwork ever gets lost in delivery. And since registered agent information is legally required to go on public record, hiring these companies’ agents will allow you to keep your privacy.

Submit the Articles of Organization

The formation process legally starts when you file the Articles of Organization to register your Tennessee LLC with the state. This document includes essential information related to the company, such as:

  • LLC name;
  • Principal office address;
  • Registered agent’s name and address;
  • Type of management;
  • Period of duration, if not ongoing;
  • Last month of the fiscal year;
  • Number of members at the time of filing;
  • Effective date, if not date filed.

You can submit it by post, online, or in person.

Online 

Online filings are the fastest applications since their processing is immediate. Keep in mind that paying the state fee with a credit card is subject to a 2,35% carrier fee.

Mail

First, download the Articles of Organization (Form ss-4270). Fill it out and send it along with the payment check to:

Department of State
Corporate Filings 
312 Rosa L. Parks Avenue 6th Floor
William R. Snodgrass Tower 
Nashville, TN 37243

With this method, the process takes about 1-2 days.

In person

Residents and visitors of Nashville, TN are welcome to file in person at the same address. These applications are reviewed on the same day.

The state sets a filing fee for Articles of Organization submissions, calculating the rates based on the number of members where each LLC member is charged $50. However, you cannot file the Articles if the sum of your members’ filing fees is below $300 or over $3000.

Once the Articles are approved by the Secretary of State, you are free to commence business in the state of Tennessee and make your first earnings.

Draft an LLC Operating Agreement

An operating agreement is an internal document establishing the core goals of a business entity, its operational procedures and membership rights. In most cases, a Tennessee LLC operating agreement details such aspects as:

  • Owners’ rights and responsibilities;
  • Allocation ratio of profits and losses;
  • Compensation policy;
  • Rules for replacing/accepting new members and selling LLC percentage;
  • Voting rights;
  • Accounting procedures;
  • Measures for possible dissolution;
  • Operating agreement amendment rules etc.

Although it’s not legally required to create an operating agreement to launch a company, it’s highly recommended you draft one anyway. Its advantages include:

  • Additional legitimacy proof in case of litigation;
  • Structural standardization;
  • Improved efficiency;
  • Minimizing internal conflicts; 
  • Reinforcing limited liability status through separation of personal and LLC’s assets;
  • Avoiding state default laws that are too general in nature to take the company’s specifics and interests into consideration.

If your formation budget is less limited, you can always hire an attorney to draft a personalized operating agreement. That said, most startups might find attorney rates much too steep, but DIY-ing it won’t be too difficult with hundreds of free LLC operating agreement templates available online. Some formation services also include it in their service packages.

What are Post-Filing Requirements for an LLC in Tennessee?

Tennessee LLC Taxes

In most cases, LLCs are exempt from federal taxes. In the eyes of the IRS, such entities are seen as “pass-through,” meaning their tax return flows through owners’ personal 1040 tax returns on Schedule C.

That said, LLCs can file a separate corporate tax return should the owners elect this taxation system. 

As for Tennessee’s state income taxes, LLCs are once again exempt from the filing. This creates a very favorable environment for doing business, although there are still 3 taxes that an LLC has to pay:

  • Business Tax: state and municipal taxation calculated based on gross income;
  • Excise Tax: calculated based on gross income/sales profit with the added rate of 6,5%;
  • Franchise Tax: calculated based on the real or personal property value (depending on which is evaluated higher) at the rate of 0,25% with a minimum of $100.

To apply for these 3 taxes in Tennessee, visit the Tennessee Department of Revenue. Filing deadlines for all three are the 15th of the 4th month following the end of your fiscal year.

Additional taxes can also apply depending on your industry and entity operations, namely:

For more information on LLC taxation, visit the state’s official Department of Labor and Workforce Development website. It’s also recommended to check with your municipal and county governments before you elect your specific taxation system.

LLC Annual Report in Tennessee 

After setting up a Tennessee LLC, your next step is to ensure its ongoing compliance. This includes meeting the Tennessee LLC annual filing requirements, meaning you have to file your annual report every year but no later than the 4th month of your fiscal year. So if the calendar year aligns with your fiscal year, the deadline is April 1.

The state’s filing fee is $50 for each member, but the total sum must be no lower than $300 and no higher than $3000. When you file your Tennessee annual report after replacing your registered agent, the state will also charge you $20 for the amendment.

It’s possible to file the annual report online, in person, or via mail. For the latter, send the filled out form to:

Department of State
Corporate Filings 
312 Rosa L. Parks Avenue 6th Floor
William R. Snodgrass Tower 
Nashville, TN 37243

Unlike some states, Tennessee does not enforce fines for missing annual report deadlines. Still, if you fail to submit one within 60 days following the deadline, the state may impose an administrative dissolution.

Tennessee Business Licenses and Permits 

Aside from the Articles of Organization, most LLCs will most likely need to obtain a license to operate legally. If you need to check licensing requirements for your company, visit the Department of Commerce and Insurance website for state license information.

Aside from statewide Tennessee business licenses and permits, there are certain municipal and county requirements that could apply to your business. So if you want to operate your Tennessee LLC in a compliant fashion, make sure to learn more about this form of licensing from your county clerk. 

Wrapping Up

As this step-by-step guide shows, it’s perfectly possible to be fully compliant without paying for expensive services, whether it’s to officially start an LLC in Tennessee or keep the existing TN LLC in good standing.

As long as you estimate the cost to start an LLC and file all required Tennessee LLC forms, launching a company on your own won’t be a problem.

But if you’d rather save time and avoid unnecessary stress, a good alternative would be hiring an LLC formation service like ZenBusiness that offers to file your LLC formation documents and provide a free registered agent service.

Their rates start at only $49, while the quality of their service is truly spectacular as proven by thousands of testimonials. By working with such services, you can not only reduce the formation time in half but also start doing business right away.