How to Start an LLC in Tennessee (May 2024 Update)

If you're an entrepreneur or small business owner in Tennessee looking to limit your personal liability and gain some tax advantages, forming a limited liability company (LLC) is likely an excellent move. An LLC combines the liability protection of a corporation with the flexibility of a partnership or sole proprietorship. By following the proper steps to establish your Tennessee LLC, you can rest assured that your personal assets are protected from any legal issues or debts incurred by your business.

This comprehensive guide will take you through the entire process, from researching your business name to submitting your annual reports to the state. By the end, you'll be well on your way to launching your Tennessee LLC!

Choosing Your Business Name

The first step to forming your LLC in Tennessee is selecting an appropriate business name. There are a few key factors to keep in mind during this process:

• Your name must contain the words "Limited Liability Company," the abbreviation "LLC," or the abbreviation "L.L.C." This alerts customers that you are an LLC and not another business entity.
• Search the Tennessee Secretary of State's database to ensure your chosen name is distinguishable from other registered businesses in the state. The last thing you want is to select a name, only to find out later it's already taken! You can search for availability online or call the Secretary of State's office at 615-741-2286.
• You can optionally reserve your business name with the state for four months by submitting the Application for Reservation of Limited Liability Company Name (Form SS-4228) and paying a $20 fee. This reserves the name so no one else can register it in Tennessee during that period.

Once you land on the perfect name, double check that the corresponding domain is available so you can register your website URL!

Appointing Your Registered Agent

All LLCs formed in Tennessee need an appointed registered agent to receive important legal documents and service of process notices on behalf of the business. This person or company has a few requirements in the state of Tennessee:

• They must be located in Tennessee and have a physical street address within state lines (no P.O. boxes).
• They need to be available at their registered office during normal business hours to accept any deliveries.

Many LLC owners serve as their company's registered agent to save money, which is perfectly acceptable in Tennessee. However, you can also hire a third-party registered agent service for increased privacy and reliability. Just make sure to do your research to pick the best registered agent service for your needs and budget.

Filing Your Articles of Organization

To formally register your Tennessee LLC with the Secretary of State, you must file Articles of Organization by submitting Form SS-4270. This application should include the following details:

• Your selected company name
• Registered agent's name and address
• Principal office address
• Management structure (member vs. manager managed)
• Business purpose
• Duration of LLC
• Effective date of filing
• Number of members

You'll also need to check some additional boxes if your LLC will be member-obligated (rare), prohibited from doing business in Tennessee upon formation, or designated as a non-profit, professional, or series LLC.

The articles can be filed electronically online or submitted by postal mail. Be sure the document is signed by an authorized member or organizer of the LLC before sending it in! The state charges a filing fee of $50 per member, with a minimum charge of $300 and a maximum charge of $3,000 (major corporations hit this upper limit).

Receiving Operating Authority

Once your articles of organization are approved, the Tennessee Secretary of State's office will send over your certificate of operating authority for your records. This certification proves that your LLC has been registered within the state and grants you legal authority to start conducting business as that entity.

This documentation comes in handy when opening business bank accounts, obtaining licenses or tax IDs, and more. It establishes your LLC as separate from your personal identity in the eyes of financial institutions, government agencies, and potential customers.

Drafting Your Operating Agreement

Now it's time to establish exactly how your Tennessee LLC will operate internally through an operating agreement. While not strictly required by law, having this governing document is highly recommended for all LLCs to jot down important company processes and policies.

These agreements protect your limited liability status and prevent disputes on significant issues like:

• Member responsibilities
• Profit/loss distribution
• Member changes
• Decision making structure
• Rules for dissolution

Sit down with your business partners to hammer out details on all of these LLC considerations and more. Consult examples of operating agreements online for guidance. Outline everything agreed upon in your document, then review it with an attorney before signing to verify everything looks accurate from a legal perspective.

Having a detailed Tennessee operating agreement gives your business legitimacy and will serve as an invaluable reference as you launch your company!

Obtaining an Employer Identification Number

Nearly all LLCs need to obtain an employer identification number (EIN) from the IRS, which serves as a tax ID used to identify your business for tax and reporting purposes. This step helps separate your LLC's tax obligations from your personal ones.

Single-member LLCs only require an EIN if they plan to hire employees or elect taxation as a C Corp or S Corp. All other LLCs should apply for this unique identifier, which can be obtained instantly online. The EIN will be needed to open business bank accounts, apply for licenses, hire staff members later on, and manage taxes appropriately.

Complying with Regulatory Requirements

With all the big LLC formation steps handled, it's time to consider additional requirements before opening for business:

• Licensing: Research if your Tennessee LLC needs any state or county licenses to legally operate in its industry. Common examples include resale certificates, food handling permits, liquor licenses, and professional licenses for certain regulated occupations. Check Tennessee's business license portal for more information.
• Taxes: Most LLCs will need to register for Tennessee tax obligations like sales tax, franchise taxes, business taxes, and excise taxes. Review all applicable business taxes and stay compliant with the Tennessee Department of Revenue. You may need to make estimated quarterly payments for some tax categories.
• Annual Reports: All LLCs in Tennessee must submit annual reports and $50 per member filing fees (minimum $300, maximum $3,000) to the Secretary of State to maintain active legal status year after year. You'll also owe an extra $20 if appointing a new registered agent.

Following Tennessee's legal compliance regulations will keep your LLC in good standing so you can focus on growing your small business!

Conclusion

Launching an LLC in Tennessee is straightforward when you break down the process step-by-step:

• Select and reserve your business name
• Appoint a registered agent located in state
• File formal Articles of Organization
• Obtain an Operating Authority certificate
• Draft a company Operating Agreement
• Apply online for your EIN
• Comply with licensing, taxes, annual reports

Check these items off your list, and you'll be all set to open for business as an official LLC entity in Tennessee! There are countless benefits to forming this flexible business structure, from personal liability protection to operational versatility to tax deduction options.

Hopefully this guide gave you a clear path to marshal through LLC creation. Consult with an attorney if you need any legal or tax advice along the way. Tennessee offers an extremely business-friendly environment, so take advantage by launching your company here today!