Forming an LLC in Tennessee is an excellent way to start your business in the state. A Tennessee LLC is a legal business structure that protects your personal assets in case your business is sued. Limited Liability Companies provide asset protection while also giving you the ease of doing business without formalities that encumber several other structures.
The basics of how to form an LLC in Tennessee are quite straightforward. You’ll have to register your company with the Secretary of State by filing the Articles of Organization. This guide will take you through the process.
We’ve also included some pointers to consider so that the process is smooth and your company continues to run without a hitch.
1. Finding A Name For Your LLC
Considering the right name for your LLC is important for obvious reasons. However, it’s also necessary to pick a name that’s unique and distinguishable upon record. Simply put, this means that your LLC can’t have a name that’s the same as, or very similar to, another entity registered in Tennessee.
The name of your company should be clearly distinguishable from the name of all other entities registered with the secretary of state. This requires some careful thinking on your part and a bit of due diligence. It makes more sense to find a name that works, rather than getting your filing rejected later because of naming issues.
Secretary of State website offers two tools for this purpose:
The Business Information Search page also offers a full database of registered entities so you get a more thorough look. Usually, it’s a good idea to think of a few names for your Tennessee LLC. That way, you can quickly move to the next choice in case your top choice is unavailable.
Tennessee LLC Name Designator
Any LLC in Tennessee must end its name with a proper designator. This identifies the company as an LLC and helps differentiate it from other types of businesses. As such, the accepted designators include variations on “limited liability company”. These include:
- LLC
- L.L.C.
- Limited Liability Company
If in doubt, you can go with the most popular designator: LLC.
Reserve The Name For Forming Your LLC In Tennessee (Optional)
Reserving the name is an option you can exercise to quickly get hold of the desired name. Alternatively, if you’ve got a name in mind, but aren’t quite ready to set up a business yet, reserving the name is a useful option.
This requires filing Form SS-4228 with the Secretary of State. You can download and file the form via mail or do it online. The filing fee is $20. However, some additional charges may apply if you file online and use a credit card to pay.
Once approved, the name reservation is valid for four months. At the expiration of this time period, you may file to reserve the name again. Do keep in mind, the reservation is not renewed, it’s filed again. So once the reservation period expires, anyone can file to reserve/use the name.
2. Appoint A Registered Agent For Your Tennessee LLC
Any LLC in Tennessee must have a registered agent in the state. This agent receives the service of process on behalf of your LLC. This includes receiving legal documents in case your LLC is sued, and other communication like summons, subpoenas, etc.
Registered Agents are also a general point of contact and can receive relevant information, including tax notices and payment reminders. The agent can be a person or entity.
If it’s a person, they must be an adult and a legal resident of the State of Tennessee. Entities serving as registered agents must be registered and allowed to do business in the state.
The Registered Agent must have a physical street address in Tennessee. PO Box addresses are not acceptable. Ideally, they should also be available during general business hours (9 am to 5 pm) so they can receive service of process, if necessary.
So you can be the registered agent of your LLC. Your friends/family living in the state may fulfill the role too. Entities/businesses registered in the state can work as the registered agent.
A lot of people choose to hire commercial registered agents for their Tennessee LLC. That’s because a commercial agent can fulfill all responsibilities with professionalism and can easily maintain regular business hours.
The address of the registered agent is included in the public record. Hiring a commercial agent keeps your address (or that of friends/family) off the public record, thus affording some privacy.
3. File The Articles Of Organization With The Tennessee Secretary Of State
The Articles of Organization is the key document for filing with the Secretary of State. The approval of this document means your Tennessee LLC has been formed.
You can file the articles online, via mail, or through walk-in filing.
Filing online utilizes the state’s Business Services Online system. When you file online and pay via credit card, you’ll also have to pay a convenience fee.
When filing via mail or walk-in, you’ll have to download and fill Form SS-4270 (Articles Of Organization). The filing fee should accompany the form. Accepted modes are cashier’s check or money order payable to the Tennessee Secretary of State. Those walking in the office for filing can also use cash to pay the fee. The mailing address is:
Secretary of State
Attn: Corporate Filing
6th Floor – Snodgrass Tower
312 Rosa L. Parks Avenue
Nashville, TN 37243
Tennessee LLC Cost (LLC Filing Fee)
Unlike most states, Tennessee doesn’t use a fixed fee for filing the articles of organization. Instead, your Tennessee LLC cost depends on the number of members of your LLC. In case no number is entered, the filing is assumed to be for a single member LLC.
Filing fee for the Articles of Organization for an LLC in Tennessee is $50 per member. All members must be listed on the Articles of Organization. That said, the minimum fees for filing the documents is $300. Similarly, the maximum fee is $3000.
Those paying via credit/debit cards can expect a “convenience fee” over the amount of their filing fee. On the plus side, those filing online can expect a near-instant approval for their LLC – assuming all information is in order.
4. Get An Operating Agreement
Even though not required by law, it is highly advisable to get an operating agreement for your LLC. An operating agreement lays the groundwork for the functioning of your LLC. It’s also an important document that may work as evidence in a court of law to show that your LLC is operating correctly.
Operating Agreements are internal documents and don’t need to be filed with the secretary of state or any other government agency/department. They signify an agreement between members on the functioning of the company.
For example, your Tennessee LLC Operating Agreement may include the approach to taxation, ownership of each member in the LLC, distribution of profits/losses, hiring policy, and a lot more. The agreement can also come in handy for dispute resolution or handling changes within the company.
It is very relevant to multi-member LLCs, but single member LLCs shouldn’t ignore the importance of an operating agreement.
5. Get A Federal Tax ID (EIN)
A federal tax ID or EIN (Employer Identification Number) is very important for an LLC. To get an EIN, you have to file a form with the IRS. You should do this step only after the articles of organization have been approved to create your LLC.
Getting an EIN is easy enough. You can simply file with the IRS online. In case you can’t file online, download and fill Form SS-4. It’s possible to submit this form via mail or fax. The latter works much faster than mail, so use fax if it’s available.
6. Annual Reports For Your Tennessee LLC
All LLCs in Tennessee must file an annual report with the Secretary of State. The due date for filing the report is before the first day of the fourth month after the end of your LLC’s fiscal year. Assuming you’re using the conventional fiscal year (same as calendar year), the due date for your annual report is before April 1.
Annual reports can be filed online or via mail. The mailing address is:
Secretary of State
6th Floor – Snodgrass Tower
312 Rosa L. Parks Avenue
Nashville, TN 37243
The filing fee for annual reports is the same as that for articles of organization. The minimum fee is $300, the maximum fee is $3000. You’ll have to pay $50 for each LLC member.
For example, an LLC with 1-6 members will have a $300 fee. An LLC with 10 members will pay $500. LLCs with 60 members or more will pay $3000.
If the LLC fails to submit an annual report and is delayed by two months or more, the state may administratively dissolve the company.
7. Licenses, Business Permits, And Taxes
Having relevant business licenses and permits is important for any company. These licenses/permits may be governed by local, state, or federal law. The exact requirement can vary depending on the city/county of your business, or the industry of activity.
State taxation requirements like franchise tax, excise tax, and sales tax must be considered. Additionally, relevant business licenses and permits issued by the state for your industry or Tennessee LLC will have to be considered.
Federal Taxation for Tennessee LLCs usually takes a pass through approach. This means that the gains from your LLC in Tennessee can be reported as part of your personal income tax returns. However, it is possible to have your LLC taxed as an S-corp or C-corp. In these cases, the relevant tax rates and filing can vary.
It is often fruitful to hire a professional to handle the various aspects of taxation, licenses, and permits for your business. All of these are necessary to run your business smoothly, and often require an in-depth knowledge of the relevant processes and laws.