The Simple Guide to Forming an LLC in TN
Starting an LLC is a common business entity choice among entrepreneurs in Tennessee since an LLC as it is more flexible than a corporation and also allows you to separate your personal liability from your business liability and debts.
Here is what you need to start your Tennessee LLC:
- Pick a unique business name and check if it is available
- Decide who will be your Registered Agent
- File your Articles of Organization with the TN Secretary of State
- Making an Operating Agreement is a smart move, though it's not mandatory
- Get an EIN if you plan to hire employees
- Register with the Tennessee Department of Revenue
- Remember to file the annual report
Select a Business Name for your LLC
Your Tennessee LLC is legally required to have a distinguishable name, so you need to choose one before you file the formation paperwork. This name should be unique to your new company and should not resemble the name of an existing organization.
Tennessee LLC Naming Requirements
Your LLC must contain a "limited liability company" or another approved variation at the end, so that it could be easily identifiable as an LLC.
The LLC name should not contain terms such as a bank, Federal, doctor, or other words which require special licensing or are reserved for government agencies.
According to Tennessee Secretary of State Division of Business Services Business Name Availability Guidelines an LLC name must be distinguishable upon the records of the secretary of state from:
- The LLC name of an LLC organized or authorized to do business in this state;
- An LLC name reserved or registered under § 48-207-102 or § 48-207-103;
- The corporate name or assumed corporate name of a corporation incorporated or authorized to transact business in this state;
- A corporate name or an assumed corporate name reserved or registered under § 48-14-102 or § 48-14-103;
- The corporate name of a not-for-profit corporation incorporated or authorized to transact business in this state; and
- A limited partnership name of a limited partnership organized under the laws of the state of Tennessee, if the use of such name is evidenced by a filing at the office of the secretary of state, or a limited partnership name reserved under the law of the state of Tennessee, or a limited partnership name of a limited partnership registered as a foreign limited partnership in Tennessee.
Tennessee LLC Business Name Reservation
If your name is in a competitive niche and might be in high demand, you may opt to reserve it for four months by paying a fee of $20 to the Tennessee Secretary of State Division of Business Services.
You'll need to complete an Application for Reservation of Limited Liability Company Name online or by completing the form and mailing it to the Secretary of State.
Please mail the completed LLC name reservation form to:
Tennessee Corporate Filings
312 Rosa L. Parks Ave. 6th Floor, William R. Snodgrass Tower
Nashville, TN 37243
Tennessee LLC Business Name Search
Before filing for a company formation make sure you do a business name search for your chosen LLC name.
The Secretary of State in Tennessee offers a free service that you can use to search for the business names of existing companies. Just use their Business Name Database to see which companies have names that are like yours.
For example, if a business in Tennessee is already called Sam's Stock LLC, you cannot call your new company Sams Stocks L.L.C. Pluralization, punctuation, and the identifier that's used with a name, do not make it unique.
LLC stands for limited liability company, which is a US business entity that can protect the personal assets of a business owner from business debt and lawsuits. Unlike corporations, LLCs are relatively easy to form and maintain and are not subject to double taxation.
Designate a Registered Agent
Every Tennessee LLC is required to have a registered agent, who can receive legal papers for the company. While you may ask a person, who is a full-time resident of Tennessee to serve in this capacity, you can also ask a business to be your registered agent.
Either way, they must have a physical address in the state since a P.O. box or UPS box cannot be used.
In Tennessee, your registered agent will have the responsibility of filing reports with the Secretary of State and receive documentation and legal notices.
The law allows you to be a Registered Agent yourself, but this way you lose some privacy since your address will be publicly available.
Another member in your LLC can also do it, as long as they are available to receive documents during business hours.
Benefits of a Registered Agent Service
There are certain benefits when using a professional Registered Agent service which includes:
- Convenience. Using a professional registered agent service is an affordable way to manage all government filings and legal notices for your Tennessee LLC.
- Lower risk. This way you can also avoid any fees or further legal trouble caused by missing or misplacing an important document or notice.
- Privacy. If you were thinking of using your home address, but would rather keep it off public records, you can hire a Registered Agent that will allow you to use their address throughout your Articles of Organization.
A Registered Agent is an individual or a business entity that has been designated by the LLC to receive service of process notices, government correspondence, and compliance-related documents on behalf of the LLC. The registered agent must be residing in Tennessee.
File the Articles of Organization to Form an LLC
To legally form an LLC in Tennessee you have to file the Articles of Organization with the Tennessee Secretary of State.
Your Articles of Organization will be used to officially create your Tennessee LLC entity. This is the actual document that organizes your business.
This form contains information such as your registered agent's name, your LLC's name, and your principal office address.
Tennessee in some cases makes allowances for names that are similar to each other, so if your LLC's name is indistinguishable, you should submit a Name Consent Form with your Articles of Organization.
Your Articles of Organization should also contain information on the number of members at the date of filing, whether it's a non-profit or a professional LLC, and the end month of the LLC's fiscal year.
Submitting the Articles of Organization
You can file online or mail the completed Articles of Organization form to the Tennessee Secretary of State. While the minimum fee for filing in Tennessee is $50 per member, with a minimum fee of $300, this can go up to $3,000.
To apply your Articles of Organization online just visit the Secretary of State Business Services Online page and proceed with your application without prior registration.
Applying by mail
To apply by mail, you need to print out and fill in the Articles of Organization form and mail it to:
Tennessee Corporate Filings
6th floor - Snodgrass Tower
Attn: Corporate Filing
312 Rosa L. Parks Ave.
Nashville, TN 37243
Visit the Secretary of State website for the most recent information.
Prepare your Operating Agreement
An Operating Agreement is a document that states how your business will be run from day to day. You do not have to submit your operating agreement when you are filing but it is a good idea to have one.
By specifying how your business will be run in writing, you have additional proof that it operates as a separate business entity.
This document also says who the owners of the LLC are, in plain, clear language. That helps to clear up any disputes that can arise.
Your operating agreement indicates how many shares in the company each member has and under what circumstances they can transfer or sell those shares. it's important to discuss those matters and put them in writing.
You should also declare whether one of the members will be responsible for managing the daily activities of the company or an external manager will be hired to do that. All the rights and responsibilities of members should also be detailed in your agreement.
Apply for an EIN Number
Each Tennessee LLC that has more than one member will need an Employee Identification Number (EIN). Your EIN will also be required if you only have one member, but you decide to hire employees.
Your EIN is available for free from the IRS, so you can visit their website and apply for it online. If you decide to open a business account in Tennessee, your EIN will be required.
Apart from that, it will be used to keep track of the state and federal taxes that are paid by your business.
An EIN allows to:
- Hire employees
- Open a bank account
- File and manage state and federal taxes
- Register for business licenses and permits
EIN stands for Employer Identification Number. EIN is a unique nine-digit number assigned by the IRS to help identify your businesses for tax and filing purposes. An EIN is sometimes referred to as a FEIN (Federal Employer Identification Number) or FTIN (Federal Tax Identification Number).
LLC Taxes in Tennessee
Your Tennessee LLC will not have its profits taxed at the business level like other C corporations.
This is one of the reasons why entrepreneurs in Tennessee like to structure their businesses as LLCs.
LLCs formed in Tennessee are liable to pay franchise tax and must also register with the Tennessee Department of Revenue.
The franchise tax imposed on LLCs is 0.25 percent of the real and tangible worth or net worth of a property in the state of Tennessee (whichever is greater). The minimum payment for the state franchise tax is $100.
Another tax requirement is the excise tax, which is 6.5 percent of the net taxable income that is generated in the state.
You'll need to file an annual report for your LLC, starting a year from the date on which it is formed. The filing fee is calculated based on the number of members you have and is $50 per member.
The minimum filing fee is $300, and the maximum is $3,000. Your report is always due before the start of the fourth month after your LLC's fiscal year closes.
You can file the annual report online, but make sure that you have the Secretary of State Control Number on hand.
A 'Secretary of State Control Number' is a number with zeros to the left to reach nine digits in length (for example: 000123123).