Last Updated on September 13, 2020
Cost to form an LLC in Tennessee - $300 minimum
Recurring Fees - $300 Annual Report Fee minimum
Filing Time - It normally takes around 1 week for the LLC paperwork to be approved in Tennessee when filing by mail or immediately when filing online.
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The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in Tennessee. The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Tennessee without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting for the business owner’s personal assets.
Related: How Does an LLC Protect You?
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration and management flexibility.
Forming an LLC in Tennessee is fairly straightforward, but it’s nice to have some support in case you have questions or get stuck. IncFile and Inc Authority provide LLC formation guidance for only the cost of the state fees!
To form a Limited Liability Company in Tennessee, file the Articles of Organization with the Tennessee Secretary of State. The LLC filing fee $300 for 1-6 members and $50 per member after the first six.
Approval for the LLC is made instantly when filing online and around a week when filing by mail.
HOW TO FILE THE ARTICLES OF ORGANIZATION AND FORM A TENNESSEE LLC
The steps for filing online or by mail are largely the same. The screenshots show how to file online.
- Begin by visiting the Tennessee Secretary of State’s website and select “Start Now”. If you prefer to fill out and mail the application, download the Articles of Organization (Form SS-4270).
- Next select in the “Business Entity Type” field, select “Limited Liability Company”.
- You will also have to check the box and agree to the statement “I attest that
Step 1: Name the LLC
Business Entity Name – Enter the name you want for the LLC. The name of the LLC also has to differ from other entity names registered with the Secretary of State. You can check on available LLC names in Tennessee before going through the filing process to be sure the one you want is available.
The name of the LLC must also include a designator at the end of the business name. A designator describes what type of business entity it is. Available designators include:
- Limited Liability Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
Through this screen, you won’t be able to know if the name you want is available until clicking on “Continue” If the name you want is taken a message pops up saying it isn’t available. If you are able to move to the next section, it is available.
Before settling on a name, you may want to do a domain name search to try and match your business name and website address.
Formation Locale –
Domestic Tennessee Business – A “Domestic LLC” is one that originates and is based in Tennessee. Most filers select domestic.
Foreign Business – If the LLC was originally formed in another state and is wanting to do business in Tennessee, select “Foreign Business”
Business Type – This is an optional section for the Series LLC designation. A Series LLC provides liability protection across multiple asset groups or businesses, each of which would be protected from liabilities from the other series. The Series LLC is not a common choice and is more commonly used with real estate investment companies.
Enter the name along with the designator you would like to use and click on “Check Name Availability” A new page will open indicating whether the name is available or not. Even if the search comes back with the name is available, the Secretary of State’s office will also review it to be sure it isn’t being used by someone else or that it is too similar to another name.
Step 2: Business Entity Properties
Period of Duration – In this section, you can indicate how long the LLC intends to remain in existence. Most LLCs will choose a Perpetual duration, however some businesses (usually investment related) will have a specific closure date.
Fiscal Year Close – Select the last month of the fiscal year for the LLC. Most LLCs will choose December. Single-Member LLCs and LLCs taxed as a partnership will automatically choose December.
Delayed Effective Date – If you want the LLC to start immediately, leave this field blank. If you want the LLC to start on a lated dare, enter a date less than 90 days in the future. The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year and the business isn’t going to have any activity until the start of the year. By delaying until the following year they will reduce the number of end-of-year filings.
Managed By – This section asks if the LLC is Director-Managed, Member-Managed or Manager-Managed.
- Director-Managed LLCs have a board of directors that have the power to make decisions for the business
- Member-Managed LLCs have an active involvement in the management and have authority to act on behalf of the LLC.
- Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation. This is generally used when there are passive members in the LLC and the members do not actively manage or operate in the affairs of the business.
Most LLCs are member-managed.
Enter the number of managers and confirm the today.
Obligated Member Entity – This is an optional section. An OME is exempt from Tennessee franchise and excise tax but are offered no liability protections, which is one of the major benefits of having an LLC. If you are considering this selection, be sure to consider the legal aspects.
Other Provisions – This is an optional section and not used by most LLCs. Here you would include additional rules for the operation of the LLC.
Step 3: Registered Agent
To have an LLC in Tennessee, a Registered Agent must be identified. The Registered Agent can either be the LLC representing itself (select the checkbox for “This business entity will represent itself”), a resident of Tennessee (Select “Individual”) or a Registered Agent service (Select “Organization”) who is registered with the Secretary of State (you must have their SOS Control Number before filing). The agent must have a physical address in the state (PO Boxes are not allowed) and act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc on behalf of the LLC.
Even though the business owner can be the registered agent, their name and address become public record and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.
You can also select to use the address for the Registered Agent as the Principal Office. If you are using a Registered Agent service, first check that they allow receiving mail as many don’t or will charge extra.
Step 4: LLC Address
Principal Office Address -In this section, enter the street address, city, state and zip code of the initial principal office. This address can be the physical address of the LLC or it can be the address where the business records are stored. You may not use a PO Box for the designated office.
Mailing Address – If correspondence from the Secretary of State should go to a different address from the Principal Office, enter that information in this section. If the address is the same as the Principal Office, click on the “Use this address as the Mailing Address also” box to copy the Principal Office address.
Step 5: Confirmation
Review that all the information is correct. If there are no corrections, continue.
Step 6: Signature
Have an individual forming the LLC to sign and check the “I certify” check box. Click the “Continue” button to save the information and proceed.
Step 7: Pay and File
Pay and file the Articles of Organization.
Professional services like IncFile and IncAuthority help guide you to make sure it’s done right and you only pay the normal state fees.
Check out our reviews of popular LLC formation services to learn more.
Tasks After Forming Your LLC
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare an Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed and more.
Most states do not require an LLC to have an operating agreement but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit
- Member’s personal liability protection may be diminished
- Members may not have a full understanding of their roles and responsibilities which could lead to costly disputes in the future
Obtain an EIN
The EIN or Employer Identification Number is a unique 9-digit number for a business. Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.
The EIN will be needed in order to open a bank account, register for business licenses and permits, file tax returns, pay payroll taxes and more.
Related: How to Apply for an EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Depending on the age of the LLC, a Tennessee Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be a variety of business licenses and permits to register for before starting. Some common registrations include:
- Business License – Most businesses in Tennessee (even home-based businesses occasionally) need to purchase an annual business license with the County Clerk in the county where the business is located and possibly with the Municipal Clerk if the business is located within city limits.
- Professional License – Certain services such as barbershops, accountants, salons and others must be licensed.
- Sales Tax Permit – In order to sell products and certain services, registration with the Tennessee Department of Revenue will be necessary.
File Annual Reports
LLCs are required to file an annual report with the Tennessee Secretary of State. The annual report updates ownership information and other details.