Think about your LLC a year from now: raking in profits and taking Tennessee by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in Tennessee.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Tennessee startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in Tennessee
- Optional: LLC Name Reservation Fee
- $20 for a hard copy filing
- Required: Articles of Organization Fee
- $50 per LLC member, with a $300 minimum and a $3,000 maximum, for online or hard copy filings
Overall Tennessee LLC Formation Costs
LLC Name Reservation Fee
You don’t need to reserve a business name prior to forming your LLC. This fee is completely optional. In fact, if you’re ready to start your business right off that bat, it’s better to skip the name reservation because the Articles of Organization will register your name for you. But if you aren’t prepared to file the Articles of Organization yet and you came up with a great name, consider reserving it. It costs $20 to reserve a name for 120 days, and you can renew the hold for another $20.
Articles of Organization Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your Tennessee LLC. Filing the Articles of Organization is makes your business official and authorizes it to do business in Tennessee. You can file it online or by mail, and the process is fairly simple. The filing fee, however, is a bit more complicated. It depends on how many members your LLC has.
The fee is $50 for each member active at the time of filing, with a $300 minimum and a $3,000 maximum. The cost is a bit steep, but this is a one-time filing so you won’t have to worry about paying it again.
Business and Professional Licenses
Your Articles of Organization has been accepted, but that doesn’t necessarily mean your LLC is ready to do business. Some LLCs must obtain licensure from certain state agencies first. For example, grocery stores must apply for a Retail Food Store license and real estate firms must be licensed by the Tennessee Real Estate Commission. Plus, individual cities and/or counties have their own licensure requirements.
Your LLC might not need any licenses, or it might need a few. Search for licenses on the Department of Commerce and Insurance website and contact your local government to see which (if any) your business requires.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Registered Agent Service
Appointing a registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Tennessee business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000.
Cost variations depend on the experience and location of the lawyer, and there are a ton of qualified lawyers out there. So how do you choose the right one? Use a site like Avvo, which allows you to search and compare the rates, locations, and specialties of Tennessee business attorneys so you can be confident that you’re getting a good fit for your LLC.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Tennessee. Is this your business? Then don’t worry about the Articles of Organization. Instead, you’ll need to file an “Application for Certificate of Authority.”
All foreign business entities are required to foreign qualify in Tennessee, or they could incur some pretty severe penalties. The Application for Certificate of Authority is available online and as a paper form and its fee is the same as the Articles of Organization: $50 per member, with a minimum of $300 and a maximum of $3,000.
LLC Annual Fees
All the fees discussed so far have been one-time startup costs. But after your business is up and running, you’ll have to pay maintenance fees as well, primarily the Annual Report. Each year, LLCs are required to file an Annual Report online by the first day on the fourth month of its fiscal year. Once again, the fee is $50 per LLC member ($300-$3,000) so if you add or lose members throughout the year, you can expect this fee to change. It’s somewhat pricey, so be sure to write it into your budget each year.
Since LLCs are considered “pass-through” entities, and because Tennessee doesn’t have an income tax, your business won’t be liable for corporate income taxes. However, there are a few different taxes that the state imposes on its LLCs:
- Franchise Tax: “Based on the greater of net worth or the book value of real or tangible personal property owned or used in Tennessee”
- Excise Tax: Based on net income for the year
- Business Tax: Required of all businesses that sell goods or services in Tennessee. Consists of a state tax and a city tax.
- Sales and Use Tax: Required of all businesses that sell merchandise
- Unemployment Insurance Tax: Required of all businesses with employees.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
If you don’t file the Articles of Organization or obtain a Certificate of Authority, you won’t be allowed to do business in the state. Miss an Annual Report and you’ll receive a delinquency notice. Delinquent businesses cannot foreign qualify in most other states, apply for business loans, renew some professional licenses, and more. If you don’t file within 60 days of the notice, your LLC will be administratively dissolved. Administrative dissolution is also a penalty for failing to maintain a valid registered agent.
Outstanding taxes are charged a penalty of 5% of the unpaid amount per month (maximum 25%), plus 11.75% interest. Learn more about tax penalties on the Department of Revenue website.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Tennessee.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like Annual Reports and franchise taxes – so your business doesn’t fall out of good standing.