How to Form an LLC in Tennessee: Everything You Need to Know
Those wondering how to form an LLC in Tennessee are probably considering setting up a limited liability company in the state.4 min read
How to Form a Tennessee LLC
Those wondering how to form an LLC in Tennessee are probably considering setting up a limited liability company in the state, and if so, they are considering embarking on an involved, many-step process, but one which could ultimately yield very satisfying results.
An LLC is an efficient, flexible business structure that many new business owners find ideal for their commercial purposes. Features of the LLC include limited liability from business-related debts and lawsuits, easier tax filing, and a more flexible business structure. If you wish to set up an LLC in Tennessee, the following steps will be necessary:
- Pick an LLC name. The name of your business needs to conform to a variety of stipulations, including that it must have “Limited Liability Company” in it in some form, it must be completely unique, and it must not contain restricted or forbidden words. You can check with the Tennessee Secretary of State LLC name database to see if the name you want is available.
- Pick a registered agent. A registered agent is a business entity or person who serves as your legal representative if actions are brought against your company. Your agent must be a resident of Tennessee or a business authorized to function in the state with a Tennessee address. It can also be yourself or another member of your LLC.
- Decide to hire an attorney or not. An LLC can be organized by the LLC’s owners, or an attorney can be hired. The former is cheaper but more time-consuming and could lead to greater costs and complications later. The latter is more expensive but could save you money, time, and grief in the long run. Legal fees could range from $500 to $2,000.
- Choose your management structure. LLCs can have member management or manager management. Small businesses are usually member-managed, while larger ones tend to be manager-managed. Manager management tends to be more complex, since managers are required to follow procedural formats and voting rules.
- Submit articles of organization. These should include essential information like your LLC’s name, address, and type of management; your registered agent’s name and address; and how many members the LLC has. These articles may be filed by mail or online. The filing fee ranges from $300 to $3,000 dollars. Per member, the filing fee is $50.
- Form an operating agreement. Operating agreements are not required, but are recommended, especially if your LLC is multi-member. This agreement sets out the responsibilities and obligations of LLC members in relation to the LLC. It also structures the LLC’s functional decisions. Because these agreements can sometimes be rather complex, consulting with a lawyer for this part may be a good idea.
- Get a Federal Employee Identification Number (FEIN). This identifies your LLC to the IRS for tax purposes. You must get one if your LLC is multi-member, has employees, or takes S or C corp IRS election. Some banks also require a FEIN for certain account types. You can obtain a FEIN for free online from the IRS.
- Register for state taxes. All Tennessee LLCs must file with the Tennessee Department of Revenue and most must pay sales and business tax. If you have employees, you must register for the unemployment insurance tax. Certain cities and counties may also call for additional local taxes.
- Get ready to file your annual report. The purpose of this is to update the state on your LLC’s basic information, such as its name, address, and the kind of services it provides. The report should be filed by April 15th and there is a minimum $300 filing fee with it. If you do not file, your LLC may be dissolved by the state after 60 days.
- File to pay excise and franchise taxes. All Tennessee LLCs located in the state must pay a franchise tax on their value. This is calculated at .25% of the LLC’s net worth, and the minimum fee is $100. The excise tax is 6.5% of the LLC’s federal tax earnings. Both these taxes must be paid online, and you can register to do so at the Department of Revenue’s Online Tax Registration page.
- Get any necessary permits or licenses. Your LLC must adhere to all local, state, and federal regulations. The U.S. Small Business Administration (SBA) guide can help you see what federal permits and licenses you need. State permits and licenses can be learned about at the Tennessee government’s website. Your local Chamber of Commerce can inform you about local permits.
- Acquire insurance for employees. LLCs with five or more employees must offer workers’ compensation insurance. LLCs in construction or the trades must offer this no matter their employee count. If you are having difficulty acquiring this insurance, the National Council on Compensation Insurancecan help.
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