How to Form an LLC in Tennessee

Co-authored by Clinton M. Sandvick, JD, PhD

Last Updated: March 29, 2019 References

An LLC (Limited Liability Corporation) is a flexible and efficient business structure, ideal for many new businesses. An LLC limits your personal liability for business losses or lawsuits. An LLC makes filing your business taxes more efficient and enhances the operational flexibility of a partnership.^{[1]
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U.S. Small Business Administration
U.S. government agency focused on supporting small businesses

Go to source} If you are a resident of Tennessee, or if you want to arrange your business in that state, you'll need to file your LLC's information with the state and your tax paperwork with the IRS and Tennessee Department of Revenue.

Part 1

Part 1 of 2:

Filing Your Business with the State

1
Name your LLC. The name of your business should include the words Limited Liability Corporation, or LLC. The LLC's name should be unique and not easily confused with any existing company name. Be aware that certain terms, such as "bank," "credit union," "mortgage," or "trust" are restricted terms, and will not be allowed for use in your LLC's name.^{[2]
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- You should check with the Tennessee Secretary of State business name database to find out if your LLC name is available.
- It's a good idea to file an Application for Reservation of Limited Liability Company Name (Form ss-4228) with the Tennessee Secretary of State. The reservation is good for four months from the filing date, and there is a $20 fee for the reservation.
- Check to see if the business's name can be made into a URL so that you can make a website for your LLC. If the URL is already being used by another company, consider making an alteration in your company's name.
2
Choose a registered agent. The registered agent for your LLC is an individual or a business that agrees to be the LLC's legal representative in the state of Tennessee. If you desire your business operations to be anonymous, or if you live in another state, hiring a representative to be your registered agent is necessary.^{[3]
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- You may serve as the registered agent for your own LLC.
- The registered agent must have a physical street address in Tennessee, and be licensed to operate business in the state.
- The registered agent agrees to accept papers on the LLC's behalf if it's ever sued.
3
Decide whether or not to hire an attorney. You can either organize an LLC by yourself, or you can hire a lawyer or a legal firm to do this for you. There are benefits to both approaches. Making your own business arrangements is less expensive, but more time-consuming. If you don't file the proper paperwork, you may end up paying more in the long run. Hiring a legal firm ensures that all paperwork is properly arranged. However, they are likely to use standardized documents that don't fit with your specific business needs.^{[4]
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- Legal support comes in a range of pay grades, with less expensive options being more standardized. More experienced firms may cost more, but allow for greater individualization within the paperwork.
- Expect to pay $500–$2,000 for legal fees associated with setting up an LLC.
4
Define the management structure. You'll need to decide whether your LLC would be best managed by its members, or by appointed managers who may or may not be members in the LLC. Most smaller businesses tend to be member-managed, and single-owner LLCs are almost always member-managed as well. Larger LLCs may opt for appointed managers, whose function is purely administrative. Manager-managed LLCs are more complex, as managers must follow voting rules and other procedural formats.^{[5]
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- If your LLC is opting for appointed managers, consider how many managers would be optimal. One manager is likely sufficient for a smaller business, while larger LLCs may benefit from a larger team.
- Appointing an odd number of managers helps decrease the likeliness of a voting tie.
- You can change your structure at any time, but you'll need to establish an initial management structure prior to filing the articles of organization.
5
File the articles of organization with the Secretary of State. These documents include the LLC's legal name and address, the name and street address of the registered agent, and whether the LLC will be member-managed or managed by a representative-managed. If the LLC is not intended to be an ongoing agreement, the length of time you anticipate the LLC existing should be specified in the articles of incorporation.^{[6]
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- The articles may be filed online or by mail. There is a $50 fee per LLC member.
- The minimum filing fee is $300; the maximum filing fee is $3000.
- Expect processing time of three to five business days. There is no expedited service available for the articles of incorporation.
6
Create an operating agreement. It isn't required to create an operating agreement to form an LLC in the state of Tennessee, but it's recommended if you have more than one member. The operating agreement states the obligations and responsibilities of all LLC members in regards to the LLC. It structures the company's financial and functional decisions.^{[7]
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- There's no need to file the operating agreement with the articles of incorporation.
- Because of the complex nature of some operating agreements, you may wish to consider hiring a lawyer to help you with this process.
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Part 2

Part 2 of 2:

Filing Required Tax Paperwork

1
Obtain an FEIN or tax number. The FEIN, or the Federal Employee Identification Number, is a unique identification number for tax purposes, like a social security number. If your LLC has more than one member, you must obtain an IRS Employer Identification Number (EIN). Even if your LLC it has no employees, you will require this tax number. If your LLC has only one member, you must obtain an FEIN for it only if it will have employees or if you choose to pay taxes as a corporation instead of a sole proprietorship.^{[8]
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Internal Revenue Service
U.S. government agency in charge of managing the Federal Tax Code

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- Complete an online FEIN application on the IRS website to get your FEIN number.
- There is no filing fee for an FEIN.
2
Register for state taxes. All Tennessee companies are required to file with the Tennessee Department of Revenue. Most LLCs are required to pay business tax and sales tax. You'll need to register for state taxes if you have employees or if you're selling a product within the state of Tennessee that will require sales tax.
- You can file your registration with the Tennessee Department of Revenue either online or by mail.
- Particular counties or cities within the state of Tennessee may require additional taxes.
3
Prepare to file an annual report. The annual report of an LLC should be submitted no later than April 15. The report is meant to keep information updated with the state, including the LLC's name, physical address, and details of the services provided. An authorized member, officer, or partner may file, and original signatures are not required.^{[9]
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- There is a $300 minimum fee fore your annual report. The fee is $50 per member with a maximum of $3,000, plus an optional $8.25 fee for filing online.
- Send your annual report to the Tennessee Secretary of State, or use the online filing method.
4
Prepare to pay franchise and excise taxes. The state of Tennessee requires all businesses located within the state to pay annual taxes on the value of the LLC. The minimum franchise tax payment is $100. The excise tax is basically an income tax rate of 6.5% on the LLC's federal tax earnings.^{[10]
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- Franchise and excise Taxes are due on April 15 of every year. All franchise and excise taxes must be paid electronically.
- You may register electronically at the Department of Revenue’s Online Tax Registration page. There is a seven to 10 business day turnaround time for this registration.
5
File for all required business licenses or permits. Depending on the particular nature of the LLC and where it's located, there may be additional licensing and permit requirements for your LLC. For example, you may be required to apply for permits through the health department (for restaurants, food service, grocery, etc.) You may have to get a permit for signage, or construction permits to set up your LLC business location.^{[11]
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- Contact your city or county government for more information regarding local business licenses and permits.
- Allow time for permits to be issued. Allowing commercial transactions to take place without the coverage of a permit may result in fees.
6
Get insurance coverage for your employees. If your LLC will have five employees or more, you are required to offer worker's compensation insurance for your employees. If your LLC provides services in the construction business or trades, no matter how many employees, you must provide worker's compensation.
- If you are an employer in the coal-mining industry, you must have worker's comp if you have one employee.
- If you have trouble finding the required insurance coverage for your employees, contact the National Council on Compensation Insurance (NCCI) at 800-622-4123.
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Tips

Make sure the LLC is the best choice for your business.

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You may wish to consult a lawyer for best results.

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Warnings

If you fail to file an annual report, you risk forfeiture of business registration and the license to operate, and dissolution of the company by the state of Tennessee.

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