Wondering how to start an LLC in Tennessee? You’ve reached the right place if you want to organize an LLC for your Tennessee business but don’t know where to begin. While forming an LLC in Tennessee is not difficult, you must follow specific steps to starting an LLC in Tennessee. In this article, we will guide you with simple steps on how do you set up an LLC in Tennessee.
Regardless of the industry, the first step in beginning a business in Tennessee is to establish a corporate entity structure. Limited liability companies (LLCs) are the most frequent business structure in Tennessee. This is due to the ease with which a limited liability corporation (LLC) can be formed and operated and the numerous advantages it offers.
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Tennessee has seen a significant increase in new company filings and has benefited from the launch of new businesses. While forming an LLC provides some long-term benefits for your business, it also has certain legal consequences that you should consider before making a choice.
If you are looking for how to set up an LLC Tennessee, now is the best time to do it. If you want to get more information on how to start an LLC in any state, you can read our complete guide on How To Form An LLC. While forming an LLC provides some long-term benefits for your business, it also has certain legal consequences that you should consider before making a choice. Let’s get started with how to start an LLC business in Tennessee.
Before we start, here are the top picks for Best LLC Service Companies in Tennessee :
What Are The Benefits Of An LLC In Tennessee?
- Limited liability protection will be available to Tennessee LLCs, which ensures debtors can sue the LLC but not the owner or investors
- A Tennessee LLC is categorized as a flow-through entity, which means it is not subject to corporate income tax
- Profits from an LLC are not taxed twice as much as earnings from a C-corporation.
- Tennessee Revised LLC Act provides flexible operations management for entrepreneurs.
- The most significant benefit of forming a new firm in Tennessee as an S Corporation is that it will have its own existence
- A Tennessee LLC has the benefit of being able to select different forms of distribution of profits
- Tennessee LLC formation cost is quite simple and guaranteed and provides you with securing information
A Limited Liability Company, or LLC, is a hybrid company form that combines the features of a corporation with those of a partnership or sole proprietorship. It protects your personal assets from your business assets, allowing you to protect your personal assets.
LLCs are the most prevalent structure for small businesses in Tennessee. This is due to the simplicity with which a limited liability corporation (LLC) can be formed and operated and the numerous benefits it offers. Depending on the type of business structure you choose, a unique feature may be a benefit or a negative. The following are some of the advantages of how to start a business in Tennessee. Let’s have a look at some of the benefits of LLC in Tennessee:
1. Pass-through taxation
If you form a new company as an S corporation in Tennessee, the company or firm will not have to pay any taxes. Instead, the corporation’s profit or loss will be distributed to its stockholders. Earnings are taxed before being dispersed to owners, and profits are taxed again when owners declare their part of the profits on their personal tax returns.
2. Limited Liability Protection
“Personal liability protection” is one of the most significant benefits of forming a Tennessee LLC. As the proprietor of an LLC, you will not be held personally liable for any of the company’s debts. Your personal assets, such as your automobile, property, and bank accounts, will be protected from LLC creditors.
3. Independent life
When you set up a new business as a Corporation in Tennessee, it will be self-contained. This means that a stockholder’s incapacity or death would not have a serious effect on the company’s activities.
4. Flexible Taxation
A limited liability business (LLC) can pay income tax in one of three ways. Being taxed as an S company is one alternative. An S corporation is a tax structure, not a specific sort of corporate entity.
5. Increased Credibility
Incorporating a limited liability company (LLC) gives your company more legitimacy. A limited liability company (LLC) is considered a more corporate management structure than a sole privately owned company. Customers and partners will recognize you as a respectable company if you include LLCs in your company.
6. Ownership Flexibility
There are limited constraints on how you can arrange the management and ownership of an LLC in Tennessee:
- You can form a single-member LLC or a multi-member LLC.
- Members can control a Multi-Member LLC, which is referred to as member-managed.
- Manager-managed LLCs are those that are controlled by a manager who is appointed by the members.
7. Perpetual Existence
A new company incorporated as a Corporation in Tennessee will have perpetual succession. This means that a stockholder’s incapacity or death would not have a serious effect on the company’s activities.
Limited liability businesses in Tennessee are simple to start and maintain, requiring minimal paperwork and cost. LLCs, unlike C companies, are not obliged to designate formal officer responsibilities, have annual meetings, adopt bylaws, or keep track of business records and decisions.
Disadvantages Of Forming An LLC In Tennessee
- Incorporation is a time-consuming and expensive process when compared with other types of company formations
- A Tennessee LLC has a limited lifespan and can be dissolved if one of its members passes away.
- An LLC can’t issue shares, making it more difficult to raise funds from investors
There are various disadvantages while forming an LLC In Tennessee, which include the following:
- Since LLCs, like sole proprietorships, are pass-through businesses, LLC owners must pay taxes on their portion of the LLC’s net income, whether or not they get a payout.
- High registration cost compared to sole proprietorships and general partnerships
- An LLC, unlike a corporation, cannot raise funds by issuing stock
- Members of an LLC found it more difficult for obtaining loans compared to a corporation
Steps For How To Start An LLC In Tennessee
In Tennessee, forming an LLC is not exceptionally difficult or expensive, but it is a multi-step procedure that necessitates the use of certain specialized forms. If you make a mistake or don’t meet all of the conditions, you’ll have to start the procedure all over again, which will cost you time and money. To ensure that you’ve done everything correctly, you need to follow some specific steps. This procedure will be assisted by the following step-by-step instructions. Let’s get started with how to register an LLC in Tennessee.
Here are the steps you need to take to form an LLC in Tennessee which will get you started today:
1. Choose A Name For Your Tennessee LLC
The first step in forming an LLC in Tennessee is deciding on a name. You won’t be able to proceed without a name because it will appear on all of your formal formation documentation. Every LLC operating in Indiana is required to have a distinctive name. For branding considerations, your business name should be distinctive, as well as legal. The name of your LLC must be distinct from the names of other businesses registered with the Tennessee Secretary of State. For more information, check Tennessee Business Name Database.
If you search the company database and discover that a name is available, Tennessee allows you to reserve it for up to 120 days by submitting Form SS-9425. The filing fee is only $20. Filling out this form ensures that the name you want will be available when you complete the other processes of incorporating an LLC in Tennessee.
The following are the Tennessee LLC naming guidelines:
- The phrase “limited liability corporation” or one of its derivatives must be in your name (LLC or L.L.C.)
- Your LLC’s name cannot contain any words that could be mistaken for a government department (FBI, Treasury, State Department, etc.)
- Restricted words (e.g., bank, attorney, university) may need additional paperwork and the inclusion of a licensed professional in your LLC, such as a doctor or lawyer
- Your business name must be distinct from any other limited liability company, corporation, limited liability partnership, or limited partnership in Tennessee.
- Check Name Availability: Do a name search on the State of Tennessee website to be sure the name you choose isn’t already used. Check Tennessee Naming Guidelines.
- Reserve Your LLC Name: It’s a great idea to reserve your LLC name with the Tennessee Secretary of State as it protects the name from being used by another company before your LLC is formally incorporated in the state.
2. Appoint A Registered Agent In Tennessee
Before you can legally file to form your Tennessee LLC, you’ll need to choose a registered agent in the state. Your LLC must maintain a Tennessee Registered Agent at all times in order to do business in the state. A Registered Agent in Tennessee is a person or business that receives legal mail and papers directed to your Tennessee LLC. You can act as your own registered agent or hire any professional registered agent service. Check our guide on Cheapest Registered Agent Service
Legal documentation and tax notices will be accepted on your LLC’s behalf by your registered agent. When you submit your Certificate of Formation, you will identify your registered agent.
A Tennessee registered agent must meet the following criteria such as:
- The Registered Agent for your Tennessee LLC must have a physical address in the state
- If your LLC’s Registered Agent will be a single person, he or she must be at least 18 years old and a Tennessee resident
- If a person or company is based outside of the Tennessee business office
- A designated registered agent must provide an address of a registered office in Tennessee and must be found during normal business hours
- In order to be eligible as a registered agent in Tennessee, the business must already be operating in the state when the LLC is formed.
3. File Your Tennessee LLC Articles Of Organization
In Tennessee, a limited liability company (LLC) is founded by filing Articles of Organization with the Secretary of State. The Certificate of Organization is the paperwork you’ll submit to the Department of State to formally register your LLC. When you’re ready, submit Articles of Organization to the Tennessee Secretary of State to formalize your LLC.
The articles can be filed either online or by mail. Each existing LLC member in Tennessee is charged $50, with a minimum price of $300 and a maximum fee of $3,000. For online filings, there is also a processing cost.
The following information must be included in the Articles of Organization:
- Name of the LLC, address of the principal office, email address (optional), and phone number
- Name and address of the registered agent
- Articles that are out of date are no longer effective (if not immediate)
- Names and addresses of the Articles’ signatories
- A member’s, organizer’s, or their representative’s signature
4. Establish Company Records
Your LLC’s books and records must be accurate and comprehensive. The articles of organization you filed are the initial documents in your LLC’s file. Many more public documents will be created by your LLC, including:
- Minutes of the meeting
- Operating Agreement
- EIN Verification Letter
- Throughout the LLC’s existence, amendments and other filings are made
5. Receive a Certificate From the State
Articles of Organization have often been approved quickly in Tennessee. Approval applications are only accepted online. After the LLC’s creation paperwork is filed and approved, the state will provide you with a certificate confirming the LLC’s formal existence. The materials for approval will be forwarded to your email address.
The LLC will be able to obtain an Employer Identification Number (EIN), business licenses, and a business bank account with the help of this certificate.
6. Obtain An Tennessee Business License
In order to operate in Tennessee, certain sectors will require a company registration. You may require one or more types of licenses, including:
- Licenses issued by your city or county.
- Certain skilled vocations require professional licenses.
- Environmental permits.
- Licenses for health and safety.
- Permits are required by zoning.
- Liquor licenses, for example, are regulatory permits.
- Sales tax exemptions are available.
7. Prepare Tennessee LLC Operating Agreement
Although preparing a detailed LLC operating agreement is not a legally required step for incorporating an LLC in Tennessee, it is strongly suggested for all emerging limited liability businesses. You should consider developing an operating agreement as part of your LLC strategy. The purpose of this paper is to establish how your firm will operate.
The operating agreement is the basic document that spells out the members’ rights, powers, responsibilities, debts, and obligations to one another and to the LLC. The agreement is strictly internal and has not been lodged with the Secretary of State.
If an LLC does not establish an operating agreement, the articles of organization, rules, and/or member control or limited liability company agreement will serve as the operating agreement.
The following should be included in the operating agreement:
- Define the business structure of the LLC.
- Determine each LLC member’s particular roles and obligations.
- Describe how the LLC will be managed.
An LLC may suffer substantial legal and operational challenges if it does not have an operating agreement that spells out the precise responsibilities of its members.
8. Hold The Organizational Meeting
The organizational meeting is the LLC’s initial gathering of members. To hold this meeting, you’ll need your filed articles of incorporation and your operating agreement. This meeting’s minutes should be kept and filed in your company’s record book.
9. Get An Tennessee LLC EIN
In the United States, all newly created LLCs must get an Employer Identification Number (EIN) from the Internal Revenue Service. The nine-digit EIN is a company’s equivalent of a social security number, and it’s required to pay income taxes, submit tax returns, open corporate bank accounts, and do a variety of other activities. Your Tennessee LLC’s “social security number” is a Federal Tax ID Number. For taxation and reporting purposes, the IRS uses it to identify your LLC.
You can apply for EIN online, by fax, or by mail. Federal tax ID numbers are free and don’t charge anything.
You will need an EIN number for the following:
- Open a business bank account
- Register for business licenses and permits
- Transact business with other companies
- Taxes are filed and managed at the federal and state levels
10. Comply With Tennessee Employer Obligations
In addition to the steps outlined so far, Tennessee LLCs with employees must also comply with the following requirements:
- Employers are required by state and federal law to report new employees to the Tennessee Department Of Employment Security within 20 days of their hire date.
- Employers in Tennessee are required to withhold state and federal income taxes from their employee’s paychecks. Employers must remit withheld taxes to the state on a regular basis.
- Employers are liable to compensate unemployment taxes in Tennessee. Every firm is allotted a tax rate depending on its age, industry, and history of unemployment insurance claims.
- A small-business owner in Tennessee is required to acquire workers ’ compensation as soon as they recruit their first employee. Employers can self-insure or obtain workers’ compensation coverage from a private insurer or the state insurance fund.
11. Comply With Federal Requirements
In Tennessee, LLCs must follow both state and federal regulations. Most LLCs are treated as pass-through entities under federal law, just as they are in most states. On their personal income tax returns, LLC members disclose their portion of LLC income. The LLC does not have to pay federal income taxes.
An LLC’s members can choose to have it taxed as a C-corporation at the federal level, in which case the LLC will pay a flat federal corporate tax of 21%.
Important Steps After Forming The Tennessee LLC?
After registering your Tennessee LLC, you need to follow some important responsibilities. Here are some important steps you need to consider, after forming an LLC in Tennessee:
- Open a business bank account: A business bank account lets you keep personal and business costs separate, which is necessary to keep your LLC’s corporate entity intact. In the event that your LLC or business is sued, a corporate veil shields your personal assets from creditors. Also read, How To Open A US Bank Account As A Non-Resident?
- Get a business credit card: A company credit card will help you separate personal and business costs while also creating a credit record for your firm.
- Hire a business accountant: An accountant for your business can help you save money on taxes and prevent penalties and fines. Accounting and payroll are made easier with the help of an attorney.
- Get Business Insurance For Tennessee LLC: Risk management is aided by business insurance. General liability, professional liability, and workers’ compensation are the most prevalent types of business insurance.
Keep Your Company Compliant
- You need to research and get a Tennessee license and permits
- File your Tennessee annual reports statement online with the Tennessee Department of State at the end of the month in which the LLC was formed
- In the next step, you need to understand Tennessee sales tax requirements and seller’s permits
- Understand the federal tax requirements to report income to the IRS each year using Form 1065 Partnership Return
LLCs are easier to set up than other business structures. Small businesses, especially start-ups, can easily incorporate an LLC in Tennessee for a very low cost. LLCs have a tax advantage known as “pass-through taxation,” which allows them to avoid having to pay some taxes. To start a limited liability company, you’ll need considerably less paperwork and legal processes.
Forming an LLC in Tennessee takes time and effort, but once you have everything in place, you can rest comfortably so that your business is ready to thrive. Several ambitious entrepreneurs may have pondered how to form a limited liability business in Tennessee (LLC). You must go through a multi-step process that includes everything from naming your company to hiring a designated individual, as well as signing a multi-member operating agreement.
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Are you ready to start an LLC in Tennessee? If you have any questions just leave them in the comment section below! Our experts will reach you soon!
Frequently Asked Questions (FAQs)
1. How much does it cost to set up an LLC in Tennessee?
The Secretary of State of Tennessee charges $50 per LLC owner included in the filing, with a $300 minimum total fee. The filing fee for the Articles of Organization cannot surpass $3,000.
2. Do LLCs pay taxes in Tennessee?
LLCs do not pay income taxes by law; only their shareholders do. Most LLCs, however, are subject to a franchise and excise tax in Tennessee. This tax must be registered with the Department of Revenue (DOR). You can register by mail or in person at a Department of Revenue office.
3. Do I need a business license if I have an LLC?
Whereas most states do not require a business license to incorporate an LLC, you must follow your state’s processes. An LLC must register with the state and file the necessary paperwork. Even while you don’t need a business permit to incorporate an LLC, you’ll almost certainly need one to run it as a company.
4. Do I need an operating agreement for my Tennessee LLC?
Although operating agreements are not required in Tennessee, they are strongly recommended. An operating agreement will assist protect your limited liability status, eliminate financial and managerial misunderstandings, and ensure that you, not state law, choose the rules that govern your company.
5. How do I file an LLC in Tennessee?
Domestic LLCs must fill out Form SS-4270, whilst foreign businesses must fill out Form SS-4233. Forms can be mailed or filed electronically. For LLC formation or authorization to conduct business in Tennessee, you’ll spend a minimum of $300 and a maximum of $3,000.
6. How much does an EIN cost in Tennessee?
It is entirely free to apply for an EIN for your Tennessee LLC. The IRS does not charge a fee for obtaining an EIN.
7. Does Tennessee require a registered agent?
A registered agent is a person or business that agrees to receive legal mail on your behalf. All businesses excluding General Partnerships (GP) must have a registered entity in Tennessee under all circumstances.
8. Can I be my own registered agent in TN?
Yes, any business owner or employee who is over the age of 18 and has a Tennessee street address can serve as the company’s registered agent in Tennessee.