Here's What You Need To Know About Starting An LLC In Tennessee

Choosing the limited liability company (LLC) structure for a Tennessee business will provide the owner with personal asset protection.

Choosing the limited liability company (LLC) structure for a Tennessee business will provide the owner with personal asset protection. That means that as an owner, will not be held personally liable for any of the possible debts and actions of the company. This advantage is one of the main reasons why many new entrepreneurs decide on starting an LLC. Aside from this, other benefits make it an appealing option. Here are some of them:

  • It offers liability protection for the assets of the owners. However, you have to make sure that the company remains a separate entity and never engages in any fraudulent and illegal activities.
  • All profits of the business can be passed directly to the owners, who are known as members. They will then report the profits on their individual tax returns.
  • LLCs do not pay taxes at the corporate level by default, which means you can avoid double taxation.
  • Compared to a corporation, the filing, management, and compliance requirements of LLCs are simpler.
  • Organizing an LLC can establish a business’ credibility.
  • Maintaining an LLC can help build the credit history of the company. That can be advantageous if you ever need to acquire loans of credits in the future.

Starting An LLC in Tennessee

Every state implements laws that regulate businesses. So, it is necessary for all companies to formally register their operations with the state. The registration process includes the filing of formal paperwork, payment of corresponding fees, and completing compliance obligations.

Choosing to do business in Tennessee comes with benefits and opportunities. Generally, the state offers a business-friendly climate. In addition to the benefits that come with the structure, starting an LLC in Tennessee will give access to the following:

  • Doing business in the state is affordable.
  • The state does not impose personal income taxes on wages or salaries.
  • There are various programs and incentives, such as the FastTrack Infrastructure Program, FastTrack Economic Development Fund, FastTrack Job Training Assistance Program, Job Tax Credit, Enhanced Job Tax Credit, Industrial Machinery Tax Credit, Sales Tax Exemption Program, Valley Incentive Programs, Investment Credit, and Loan Funds.

Register a Business

Before officially launching a business venture, you need to understand the steps that need to be followed. Here are some of the things you have to know about starting an LLC in Tennessee:

  • Business Name – After deciding to pursue a business idea, one of the first things an entrepreneur has to do is to choose an appropriate name for the company. The name will be a reflection of what the business has to offer and what it values. Ask what you want the company to stand for? Then, think of the most appropriate name that will represent the company’s vision.Aside from that, make sure that you comply with the naming regulations of Tennessee. State law requires the inclusion of the proper indicator. Using the phrase Limited Liability Company or any of its abbreviations, such as LLC or L.L.C. Do not use any word that could confuse the business for any government agency.Like in other states, Tennessee also requires company names to be distinguishable. That means you cannot use a name if another entity in the state has already taken it. To check the availability of the desired name, do a business entity name search at the Secretary of State’s database.

    Tennessee also gives the option to reserve a company name. You can do that by filing a completed Application for Reservation of Limited Liability Company Name form with the Secretary of State and paying the $20 fee. Doing this will reserve the desired name for four months.

    In some cases, a company may choose to use a name different from the one registered in the formation documents. If this is the course you want to move forward with, then the owner must register an assumed name. It is also known as a fictitious business name or doing business as (DBA). Submit an Application for Registration of Assumed Name to the Secretary of State. It costs $20. Remember that you can only do this after successfully registering the LLC with the state.

  • Compliance Requirements – The business formation process in Tennessee includes the preparation and filing of formal paperwork. Additionally, the business owner will also have to complete certain state compliance requirements.
    • Articles of Organization – Submit a formation document, which is called the Articles of Organization, to register the business with the Secretary of State. Doing this will legalize operations. The filing fee will depend on the number of members. It costs $50 per member. But, the minimum fee for an LLC is $300 and the maximum is $3,000.You will have to provide the following information to accomplish the form:
      • Company name
      • Consent to use the name of it is similar to an existing entity’s name in Tennessee
      • Additional designation for the name if necessary
      • Name and Address of the registered agent
      • End month of the company’s fiscal year
      • Effective date of the Articles of Organization if it is not upon filing
      • Management structure
      • Number of members on the date of filing
      • Duration of the LLC if not perpetual
      • Principal office address
      • Whether it is a professional, non-profit, or series LLC
      • Whether members will be personally liable for the debts of the LLC
      • Whether the company is prohibited from doing business in the state
      • Signature of an authorized representative, member, or organizer
    • Registered Agent – Tennessee requires all companies doing business in the state to have a registered agent to serve as the point of contact between the company and the state. They will receive all legal correspondence and business mail on behalf of your LLC. Also check if they qualify based on the requirements of the state.
      • If you choose an individual, make sure that they
        • are a resident of Tennessee
        • has a physical address in the state
        • is present at the said address during regular business hours, and
        • are at least 18 years old
      • If you nominate a third-party company, they should
        • be authorized to do business in the state
        • have a good standing with the state
        • have a physical address in Tennessee, and
        • always be present at the said address during normal business hours
    • Operating Agreement – This document is not a requirement. But, it is highly advisable to create one. It will set out the rights and obligations of the members and managers, which can prevent disagreements. It will also establish the processes of running the business. This internal document will also help maintain the limited liability protection that comes with the structure since it will prove that the company is a separate entity. Learn more about this document by reading our article on the LLC operating agreement.
    • Other Obligations – The requirements that you have to fulfill during the formation stages are only some of the obligations. The LLC needs to complete ongoing compliance requirements as well. For example, you may need to acquire an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number may be necessary for filing taxes, hiring employees, and opening a business bank account.

Most companies in Tennessee also need to acquire business licenses. This can be checked with the local county and city clerks where your primary place of business is located.

If you plan on selling goods that require the collection of sales taxes, then you will have to register with the Department of Revenue. Most Tennessee LLCs also need to pay franchise and excise taxes. Check this with the department and register if necessary.

All LLCs in the state have to submit an annual report to the Secretary of State on or before the first day of the fourth month after the end of the company’s fiscal year. The filing fee is $50 per member, with a minimum amount of $300 and a maximum of $3,000.

If you want to know more about the process or are looking for a reliable company to help handle the whole ordeal, contact DoMyLLC.

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