How to start an LLC in Tennessee
Getting a business off the ground is no easy task. Even the initial business formation process can feel complex and overwhelming, but it doesn’t have to! In this guide, we will break down how to start an LLC in Tennessee, step-by-step.
Limited Liability Companies (LLCs) are a popular option for entrepreneurs in Tennessee and throughout the United States. They help shield the personal assets of LLC owners from lawsuits related to their business. In addition, LLCs are often simpler to set up – and easy to maintain – than corporations.
If you’ve decided to start a Tennessee LLC, this guide explains everything that you need to know.
Consider utilizing an LLC formation service
LLC formation services are professional companies that specialize in helping entrepreneurs form new businesses. Two great options in this industry are Northwest Registered Agent and ZenBusiness. Both have excellent reputations, low prices, and quality service.
When you use a formation service, you will be walked through the entire formation process with a modern online interface. And if any issues arise, you can contact support for help.
These services do cost a bit extra (ZenBusiness starts at $49), but they can save you a lot of time. For many, it’s well worth the cost.
If you choose to not use a service, the steps below explain the steps you’ll need to take.
Name your new company
First, you will need to find an appropriate – and available – name for your company. Under Tennessee state law, the LLC name must contain the phrase “limited liability company”, or an appropriate abbreviation such as “LLC” or “L.L.C.” Equally important is that each name must be unique from all other business names that have already been registered in TN. You can search a business name database here to confirm whether or not a name is available.
Keep in mind that you will also need to avoid the use of certain words or phrases that are restricted. This includes protected industry terms like “banking” or “trust”, as well as government-related words.
Once you find a name you like, you can move on to step #3 below. Alternatively, Tennessee allows you to reserve the name using the Application for Reservation of Limited Liability Company Name. Reserving is useful if you want to save the name, but aren’t yet ready to form the company.
Using an Assumed Name in Tennessee
Businesses that are already registered in TN can register additional assumed names, otherwise called doing business as names, if they so desire. These assumed names/DBAs allow the company to do business under multiple names. The LLC name is the official name of the company, but the business can legally operate under the assumed name, as well. This is optional, but it’s useful for branding purposes.
Appoint a Registered Agent
All Tennessee LLCs must appoint a registered agent, otherwise known as an agent for service of process. This agent is an individual (or business entity) that agrees to accept legal notices on behalf of the business, in the case where the business is sued. The agent will also receive other important mailed documents, tax forms, etc.
You can appoint yourself to be the registered agent or any other individual who lives in Tennessee. Alternatively, you can hire a registered agent service. This provides the benefits of a professional level of service, plus, it also protects your privacy as your mailing address won’t need to be listed.
Registered agent services typically cost around $100-$150 per year. Two great options are Northwest Registered Agent and ZenBusiness. ZenBusiness actually includes the first year of registered agent services for free when you form an LLC through them, so you can save some money there.
Create an operating agreement
Note: This step is optional, but recommended.
You aren’t required to create an operating agreement, because the document doesn’t actually need to be submitted anywhere. Instead, it’s just kept on file with the business itself. However, just because it’s optional doesn’t mean you should overlook it – most LLCs should still have an operating agreement.
This document essentially establishes how your LLC will be run – and how it will be managed by the various stakeholders/managers. It also sets out the rights and responsibilities of all involved members. Thus, it’s particularly important for multi-member LLCs.
You can draft an operating agreement with the help of a local attorney, or you can use the template provided by a service like ZenBusiness.
File LLC Articles of Organization
To form a Tennessee limited liability company, you must file the Articles of Organization with the Tennessee Secretary of State. This process can be handled online, or through the mail. The filing fee will vary depending on the number of members of the LLC. There is a $50 filing fee per member, with a minimum of $300 and a maximum of $3,000. The $300 minimum means that even single-member LLCs will still need to pay $300 to file the Articles of Organization.
To file online
File online with the TN Secretary of State website. Pay the filing fee ($300 for most businesses) by credit or debit card.
To file by mail
Download and fill out the Articles of Organization. Pay the filing fee ($300 for most businesses) by check or money order, made out to the Tennessee Secretary of State. Mail the documents to:
6th floor – Snodgrass Tower
Attn: Corporate Filing
312 Rosa L. Parks Ave.
Nashville, TN 37243
Next, you will just need to wait for the application to be processed. This typically takes 2-6 business days, depending on the current backlog of applications. You will be notified if there are any issues.
Apply for an EIN
An Employer Identification Number, or EIN, is a federal tax identification number issued by the Internal Revenue Service. It is used to identify your business on tax forms and filings. It is required if you want to hire employees, and it’s required for any multi-member LLC, even if there are no employees involved.
You can apply for an EIN for free. Simply fill out this application on the IRS website. The application is very quick, and most of the time EINs are issued instantly, assuming there are no issues.
Apply for business licenses & tax accounts
Next up, you will need to see if your business has any additional permitting requirements. Most businesses do, although the specifics will vary depending on the industry and planned business activities.
You will need to apply for a general business license with the county you plan to operate in. The city may also require a business license separately. If you plan to have multiple locations, you will need to comply with rules in all the jurisdictions where you plan to do business.
On the state level, certain businesses may need permits or licenses. The Tennessee Smart Start Guide is a good place to start researching these requirements.
You will also likely need to register with the Tennessee Department of Revenue. You may need to register for unemployment insurance tax and employer withholding tax, as well.
Keep your business in good standing
There are a wide variety of ongoing compliance requirements that your business will need to stay on top of. This includes tax filings, permit renewals, annual reports, and more. The specific requirements will depend on the type of business, the industry, and your business’s location or locations.
With all that said, there are some common requirements that most/all LLCs in Tennessee will face. This includes the Tennessee Annual Report, which is due every year three months after the end of your firm’s fiscal year. If your fiscal year is the calendar year, then the report is due on April 1st. The filing fee is $50 per LLC member, with a minimum fee of $300 and a maximum of $3,000.
Other common requirements include tax returns and reports: Tennessee sales tax returns, employer tax returns, federal tax returns, local city/county government tax returns, excise tax returns, and more. You will need to research your individual requirements on your own.
Finally, you will need to renew any permits or business licenses before they expire. Most are annual, but some may be valid for longer terms. If your LLC members or employees require professional licenses (health care workers, for instance), you will need to stay on top of those renewals as well.
This can all seem like a lot to take care of, but it is much easier if you plan ahead. By putting in some time now to research all your requirements, you can ensure that you don’t miss anything. It’s also wise to make calendar reminders for yourself.
Also, if you use an LLC formation service and/or a registered agent service, these companies can help keep you on track with compliance needs, as well. They can send reminders before key due dates, and even help prepare certain filings like the Annual Report.
Open a business checking account
With an EIN and your formation documents, you will be able to open a checking account for your business at most local banks or credit unions. This is an important step that you should handle right away. It’s vital to have separate accounts for business and personal so that you can keep all your finances completely separate from your business’ finances. Once your account is open, use it exclusively for business transactions.
Each bank will have its own requirements, but at a minimum, you will need an EIN, a business license, and a small opening deposit. Call ahead to the bank to see if there are any other specific requirements.
This is also a good time to research other financial products for your business, like business credit cards, business insurance, etc.