How to start an LLC in Tennessee

A limited liability company keeps your personal assets, like your home and savings, separate from the business's debts and lawsuits. By default it's taxed like a sole proprietorship or partnership, so profits pass through to your personal return, and it has far fewer formalities than a corporation: no board, no required annual meetings and no stock.

In Tennessee, you form an LLC by filing the Articles of Organization (Form SS-4270) with the Tennessee Secretary of State, Business Services. The state fee is $300, and the LLC files the Annual Report every year after that.

An LLC fits most small businesses, freelancers and side projects. If you plan to raise venture capital or issue stock to employees, a C corporation in Tennessee is usually the better fit.

• a business name, plus two or three backups in case your first choice is taken
• a registered agent with a physical Tennessee street address
• the LLC's principal business address and a mailing address
• the names and addresses of the members (owners), and of any managers
• whether the LLC will be member-managed or manager-managed
• a payment method for the $300 in state fees

Your name must be distinguishable from every business already on file with the Tennessee Secretary of State, Business Services. Search the state's business records before you settle on one; the Tennessee filing office's website is the place to start.

The name also needs an LLC ending. "Limited Liability Company," "LLC" and "L.L.C." are the usual choices, but Tennessee sets its own list, so confirm it before you file. Words that suggest a regulated business, such as "Bank," "Insurance" or "University," generally need approval or a license.

Check that the matching domain is free and search the USPTO trademark database so your name won't collide with a registered mark. Our guide to choosing a business name covers the details. If you'll operate under a different brand, you can register a DBA after the LLC is formed (what a DBA is).

Every Tennessee LLC must name a registered agent: a person or company with a physical street address in Tennessee that accepts lawsuits and official state mail for the LLC during business hours. A P.O. box doesn't qualify.

You can serve as your own agent if you have a Tennessee street address and are reliably there during business hours. Many owners use a commercial agent instead, which keeps a home address off the public record and makes sure nothing time-sensitive is missed. EZ Entity Setup can serve as your registered agent, and it's included with the Advanced and Premium plans.

Submit the Articles of Organization (Form SS-4270) to the Tennessee Secretary of State, Business Services. The state filing fee is $300. $50 per member at filing, with a $300 minimum and a $3,000 maximum. The annual report fee follows the same scale: $300 for up to six members, plus $50 for each member over six, up to $3,000.

The filing generally lists the LLC's name, its registered agent and address, its principal address, and whether members or managers run it. Once Tennessee approves it, your LLC legally exists. Keep the approved copy with your records; banks ask for it.

An operating agreement is the LLC's internal contract. It sets who owns what, how decisions get made, how profits are split and what happens if a member leaves or dies. It isn't filed with Tennessee, but it's worth having even for a single-member LLC: it supports your liability protection and banks often ask for it.

A good agreement covers ownership percentages and capital contributions, voting and management, how profits and losses are allocated and distributed, and how a member can join, leave or sell. Our article on LLC operating agreements walks through each clause.

An Employer Identification Number is your LLC's federal tax ID. You need one to open a business bank account, hire employees and, for multi-member LLCs, file the partnership return. The IRS issues it for free, and an online application gets you the number right away. Read what an EIN is and how to get one.

Depending on what you sell and whether you hire, you may need to:

• register for sales tax if you sell taxable goods or services (see our sales tax license guide)
• register for state payroll withholding and unemployment insurance before your first payroll
• get city or county business licenses, plus any professional or industry licenses your work requires
• open a business bank account so the LLC's money stays separate from yours (how to open one)

Our checklist for your first 30 days after forming an LLC puts these in order.

By default, the IRS treats a single-member LLC as a "disregarded entity," so profit is reported on your personal return, and a multi-member LLC as a partnership, which files Form 1065 and issues each member a Schedule K-1. Either way, active owners pay self-employment tax on their share of profit.

What to know about Tennessee:

• LLCs registered in Tennessee owe franchise and excise tax: franchise tax is 0.25% of Tennessee net worth and excise tax is 6.5% of Tennessee taxable income.
• The minimum franchise tax is $100 and applies to any entity registered with the Secretary of State, whether active or inactive.
• Franchise and excise tax returns are due on the 15th day of the fourth month after the tax year ends (April 15 for calendar-year filers).

An LLC can also elect to be taxed as an S corporation, which can lower self-employment tax once profits are high enough. See the Tennessee S corporation guide and our article on when an S corp election makes sense.

Tennessee requires the Annual Report every year.

• When it's due: On or before the first day of the fourth month after the fiscal year ends (April 1 for a December year-end).
• State fee: $300

Also keep a registered agent on file, keep business money in its own account, and update the state when your address, agent or managers change. Missing a report or fee can lead Tennessee to dissolve the LLC, which puts your liability protection at risk. Our guide to annual reports and franchise taxes explains the deadlines, and Worry-free compliance files the reports for you.

State fees change from time to time. When you order through EZ Entity Setup, you see the exact state fee before you pay. For a state-by-state breakdown, read how much it costs to start an LLC.