If you’re looking for a reliable DIY guide for starting an LLC in Tennessee, look no further.
Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire an LLC formation service.
Need Help Starting Your LLC?If you want to make sure your LLC is formed correctly, hire an LLC service. Below are the top two that will take care of all the legal paperwork:
ZenBusiness – $39: If getting the most value out of an LLC service is your priority, choose ZenBusiness. They charge one of the lowest rates online and include all the most important features when starting a business. IncFile – $0: If you're on a strict budget and prefer using the cheapest LLC service, choose IncFile. They will form an LLC for free (plus state filing fee) and give you great features along the way.
ZenBusiness – $39: If getting the most value out of an LLC service is your priority, choose ZenBusiness. They charge one of the lowest rates online and include all the most important features when starting a business.
IncFile – $0: If you're on a strict budget and prefer using the cheapest LLC service, choose IncFile. They will form an LLC for free (plus state filing fee) and give you great features along the way.
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Tennessee LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
No matter what, your name must include an entity type designator like “Limited Liability Company,” “L.L.C.,” or “LLC.” Moreover, it cannot contain language that implies affiliation with any “fraternal, veterans’, service, religious, charitable or professional organization” unless that affiliation is recorded with the Secretary of State’s office,” nor can it imply association with any government agencies.
You may have followed all these guidelines, but if your name is already in use, it’s not considered valid. It must be distinguishable from every other business name on record with the Secretary of State.
But what does it mean to be distinguishable? If you’ve discovered that your desired name is off the table, making changes to the following components will NOT distinguish it:
- Business type designators like LLC, Inc., or LP
Essentially, your name needs to have at least one different letter or word, or a different arrangement of words, to be considered distinguishable. You need to change the name’s key words, not just its syntax. Find more particulars about name requirements here.
Consider this: your friend Fanny wants to open a flower shop in Knoxville, Tennessee. The name she is considering, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s Name Availability Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Tennessee for a total of 120 days.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by mailing or hand-delivering an Application for Reservation of Name and a $20 payment to:
Department of State
312 Rosa L. Parks Avenue 6th Floor
William R. Snodgrass Tower
Nashville, TN 37243
There’s no online filing option, so you’ll need to go the hard copy route. Standard processing time is 1-2 business days after receipt. If you drop the form and payment off in person, it will be completed in the same day.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Tennessee, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. But maintaining an agent isn’t just a convenience, it’s required.
According to the Secretary of State: “A corporation transacting business in Tennessee is required to have a person or legal entity located in this State designated to receive documents on its behalf, and this function is served by the registered agent.”
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Tennessee.
Now for the practical application, the “how-to.” Once you have an acceptable registered agent lined up, simply include their name and address on your Articles of Organization to put them on file with the Secretary of State. Be sure to speak with your desired agent and confirm that they consent to the appointment.
You have two options for who can serve as your agent: an individual or a company.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they are a Tennessee resident and have a physical address in the state (no P.O. boxes). You can even serve as your own LLC’s agent, provided you meet these requirements.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like ZenBusiness (or even IncFile and Northwest Registered Agent), so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your LLC on your own, you can use a national registered agent service to cover your agent duties.
During the life of your LLC you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Tennessee Secretary of State, giving it authorization to commence business in the state.
The Secretary of State gives you three options for filing the Articles of Organization: online, by mail, and in-person. The filing fee is a bit more complicated, though. It costs $50 per member, with a minimum of $300 and a maximum of $3,000. So, if your LLC has eight members at the time of filing, it would owe $400. If it has twenty, it would owe $1,000. And if it only has three, it would owe the minimum $300.
If you want your Articles of Organization to be processed immediately upon completion, file online. When you pay via credit card online, there is a small service charge – 2.35% of the total payment.
Filing by Mail
Find the paper application, available for download here. Fill it out, then mail it, along with the requisite payment, to:
Department of State
312 Rosa L. Parks Avenue 6th Floor
William R. Snodgrass Tower
Nashville, TN 37243
Live in Nashville? Feel free to drop it off in person at the same address. Like the name reservation form, typical processing time is 24-48 hours after receipt for mailed documents. Hand-delivered forms will be processed on the same day they’re received.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
Even though you’re not technically required by law to adopt an operating agreement, doing business without one can be detrimental to your LLC. Creating an operating agreement ensures that your business will run smoothly and your personal assets will have protection in legal disputes. It gives you legitimacy in the eyes of courts, banks, other businesses and more, so you should think twice before proceeding without one.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Tennessee LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Tennessee’s state income taxes are as simple as federal ones – that’s because they don’t have any, so you won’t need to worry about business income taxes or withholding taxes. But your LLC will owe three state taxes:
- Franchise Tax: Based on either the net worth or book value of the real or personal property in Tennessee, whichever is greater.
- Excise Tax: Based on net earnings or income in Tennessee for the year.
- Business Tax: Based on gross receipts and includes both a state and city tax
To pay all three, set up an account with the Tennessee Department of Revenue.
After the one listed above, your LLC might be responsible for other taxes if it meets certain conditions. If you sell merchandise, your LLC will owe a Sales Tax and Use Tax, payable through the Tennessee Department of Revenue. And if you have employees, you will need to pay an Unemployment Insurance Tax by filling out a Report to Determine Status, Application for Employer Number (LB-0441). Visit the Department of Labor and Workforce Development website to learn more.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
Our friend Fanny, for example, would need to apply for a Florist License from the Department of Agriculture before selling a single bouquet. Your LLC might need certain licenses too. Check out the Department of Commerce and Insurance website to find out.
Certain cities and counties require their own specific licenses, so you should also check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that Tennessee requires all of its businesses to submit one important recurring filing: the Annual Report.
You’re required to submit an Annual Report by the fourth month of your LLC’s fiscal year. The filing fee is the same as your Articles of Organization: $50 for each member ($300 minimum and $3,000 maximum). If you include a registered agent change on the form, it will cost an additional $20.
For immediate processing, file your Annual Report online. Or, you can print the online form and mail or hand-deliver it to the address listed in the Articles of Organization section above.
Miss your filing due date? No worries! You have a 60-day grace period. However, if you still haven’t submitted your Annual Report by the end of that window, your LLC can be administratively dissolved.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Tennessee LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.