How to Start an LLC in Tennessee

Starting an LLC in Tennessee is not tricky, but it does require you to follow certain steps. This article covers everything you need to know about Tennessee LLCs so that opening one doesn't become a big headache.

By reading this article, you will learn:

• The exact steps you need to take to start an LLC in Tennessee
• What additional tasks you must complete after starting an LLC
• The cost of starting an LLC and how long it will take

If you want to form an LLC for your business in Tennessee but don’t know how to get started, you’ve come to the right place.

Step 1: Name your Tennessee LLC

The first step in the process of creating an LLC is choosing a name. 

Tennessee law sets the rules for naming an LLC. For instance, LLC names must all contain specific words. Тhere are also some words that aren’t allowed.

You must follow the naming rules when you pick an LLC name. If you don’t, you won’t be able to register that name. 

Words You Have to Use

Tennessee Code Section 48-249-106 says that an LLC must indicate that it is an LLC by including one of the following in its name:

• “limited liability company,”
• “L.L.C.”
• “LLC” 
• Words or abbreviations of the same meaning in another language

Words You Can’t Use

Section 48-249-106 also limits the words you can use when naming an LLC. For example, you cannot include the words “corporation” or “incorporated” or an abbreviated form of these. Additionally, an LLC name cannot imply that the business is related to an organization when it is not. 

You also can’t use other words or phrases that make it seem like your LLC is a government agency. If you identify a purpose for your LLC when you register it, your name can’t imply that your business does something else.

The statute also says that your name can’t imply your LLC does something illegal or something it is not licensed to do.

Finally, your LLC’s name must be different or “distinguishable” from all other registered names. This prevents consumers from confusing one business for another. 

Research the LLC Name You Want

Once you’ve chosen a name, you can use the Tennessee Secretary of State's business name search to find out if your desired name is available. 

If someone else has already registered the name you want, you can only use the name if:

• The other business agrees in writing that you can use the name, and you both agree to use the same registered agent.
• The other business agrees in writing that you can use the name and changes its name.
• You obtain a court order that says you have a right to use the name.

If your chosen LLC name is available, Tennessee Code Section 48-249-107 lets you reserve it for four months. To reserve a name, you must submit an Application for Reservation Of Limited Liability Company Name (Form SS-4228) and a $20 filing fee to the Tennessee Secretary of State.

You can only submit an LLC name reservation form by mail. You should complete the application, print it, and mail it to the Secretary of State at the following address:

Don’t forget to include a check for the $20 filing fee when you mail your name reservation application!

Tennessee DBA: Using an Assumed Name

One thing to keep in mind when choosing a name for your LLC is that you aren’t stuck using it when running your business. LLC owners often decide to use a DBA (“doing business as”) instead of their LLC’s official legal name.

A DBA is what your business “goes by” out in the real world. It’s the name you will use for your business cards, website, signage, and marketing. With a DBA, you can run your LLC using a name that is not its legal name.  

In Tennessee, DBAs are known as “assumed names.” Tennessee Code Section 48-249-106 requires LLCs that use DBAs to register them. To comply with this law, you can apply through the Secretary of State’s online business services portal. 

There is a $20 filing fee. There may also be an additional service fee for online applications.

Using a DBA is a common practice among LLC owners. One advantage of a DBA is that you aren’t required to include “limited liability company” or an abbreviation in your assumed name. 

Another reason to use a DBA is to rebrand your business as it grows and changes.

Step 2: Appoint a Registered Agent for your LLC

A “registered agent” is a person or legal entity that receives documents and legal papers on behalf of an LLC. 

Tennessee Code Section 48-249-109 requires all LLCs to choose a registered agent to receive service of process for the business.

A Tennessee registered agent must have a Tennessee address. They must also be able to accept papers during business hours. 

The law lets any person or business entity with an office in Tennessee serve as a registered agent. Often, new business owners think it makes sense to name themselves as their LLC’s registered agent. Unfortunately, this is usually not a wise decision.

Experienced LLC owners often use a professional registered agent service. For a fee, you can list one of these businesses as your registered agent and use its address to receive service of process.

You might not think you want to spend the money to pay for a registered agent service. Being your LLC’s agent can seem like a good choice for several reasons: 

• It’s cheap: You’re not paying someone else to do it for you.
• It’s easy: The only address and contact information you have to keep current is your own.
• It’s reliable: You will receive all important documents personally.

Despite these benefits, we strongly advise against naming yourself as the registered agent for your Tennessee LLC. Some reasons why this is a bad idea include:

• No privacy: Your name and address will be published on the Secretary of State’s website. This means that anyone with an internet connection can find your personal information. 
• Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
• No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
• Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
• It’s your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.

Naming a third-party business as your registered agent is the better choice. A professional registered agent service will immediately let you know if you receive any documents. Plus, it only costs about $100 annually.

Using a registered agent service is a smart decision when your LLC will do business outside of Tennessee. To do business in other states, you must register as a foreign LLC and keep a registered agent in that state. If you hire a national service, one company can take care of all your LLC’s registered agent duties in every state.

Step 3: File Your Tennessee LLC Articles of Organization

Articles of organization are the legal documents that must be filed to create an LLC. They list general information about your business. You must file articles of organization with the Tennessee Secretary of State to form an LLC.

What to include in my Tennessee Articles of Organization?

Tennessee Code Section 48-249-202 requires your LLC’s articles of organization to include: 

• The LLC’s name.
• The registered agent’s name, address, and county.
• The address and county of the LLC’s principal executive office.
• The organizer’s name and address.
• Whether the LLC will be board-managed or member-managed.
• The number of members at the time of filing.

The statute also lists additional information that the articles might need to include. However, these provisions are not always required.

You can file articles of organization for your LLC online. You can also submit Articles of Organization (Form SS-4270 by mail).  We recommend that you submit your articles online so they will be processed faster. 

Tennessee LLC Filing Fee

The filing fee for Tennessee articles of organization is $50.00 for each member. There is a minimum fee of $300.00 and a maximum fee of $3,000. If you file online, you must also pay a small convenience fee.

Tennessee LLC Processing Time

If you file online and there are no issues, they will be immediately approved. If you file by mail, the processing time usually ranges from three to seven days.

Step 4: Draft your Tennessee LLC Operating Agreement

An operating agreement is a legal contract that explains the structure of your LLC. It also lays out each member’s rights and obligations. 

Tennessee Code Section 48-249-203 says that Tennessee LLCs can create operating agreements, but they do not have to. However, we strongly suggest creating an operating agreement for your LLC. 

Operating agreements ensure that all members agree about how the business will run. This can help you avoid future disagreements between members. 

For example, say an LLC member wants to exit the business. An operating agreement will control the process. It will explain the procedures for buying out the leaving member’s interest in the company. It will also govern the transfer of their duties.

Operating agreements can be helpful in many other situations. For example, they can:

• Determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so. 
• Say what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
• Outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
• Say how new members can join the company. They also have rules about how exiting members can leave and how to handle their membership interest.
• Set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
• Say whether members or managers are in charge. They also say how to hire and fire managers.
• Say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
• Say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.

An operating agreement is essential to running an LLC. It establishes the rules your business will follow.  Each member should participate in creating the contract and carefully review the final version before signing. You should also keep a copy for your business records.

Step 5: Get an EIN (Employer Identification Number) for Your Tennessee LLC

An Employer Identification Number (EIN) is a nine-digit tax ID number that the IRS assigns to LLCs and other business entities. An EIN functions like a social security number for your LLC. You will use it to file taxes and conduct other necessary business with the federal government. 

Here are the most common times when you need an EIN:

• Does your LLC have more than one member? 
• Does your LLC have any employees? 
• Is your LLC taxed as a C corporation or S corporation?

If you answered yes to any of these questions, you will need to obtain an EIN for your LLC.

EINs aren’t required for single-member LLCs because you can use your SSN to file taxes. However, having an EIN can still be helpful. For example, it can protect you from identity theft and help to keep your business and personal finances separated. 

In addition, most banks will also require an EIN to open a business bank account.

You can apply for an EIN using the IRS website or by filing IRS form SS-4 by mail. We recommend that you apply online so you can receive an EIN instantly. 

It only takes a couple of minutes to apply for an EIN, so you shouldn’t hire a business to do it for you unless it’s part of a larger service package.

First Tasks After Registering your Tennessee LLC

Once you have registered your Tennessee LLC, you must handle some other essential jobs. Completing these tasks will ensure you comply with the law and follow best practices for your business.

Open a Business Bank Account

Tennessee law does not require LLCs to have business bank accounts. Still, opening an account for your LLC will help you manage your business finances. It will also maintain the personal asset protection provided by creating an LLC. 

Opening a bank account for your LLC has several important benefits:

• Convenience: Keeping things separate makes your LLC’s bookkeeping much simpler.
• More business opportunities: Your LLC can only receive credit card payments through a business account. You can also do business with people who won't take personal payments. 
• Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC's debts. 

The third benefit, asset protection, is essential.

One of the most important reasons for using an LLC is to protect your personal assets from business creditors. For example, if your business is sued, only the assets belonging to the LLC can be accessed. Your personal assets won’t be at risk. The idea that you and your LLC are separate is known as the “corporate veil.” 

If you “commingle” your business and personal assets, the corporate veil can be “pierced” in a lawsuit. This means that if you use the LLC’s assets like they are your personal property, you might lose your liability protection, and your personal assets could be taken to pay business creditors.

A business bank account can keep your personal assets separate from your LLC’s assets. This will stop the corporate veil from being pierced, which protects your personal assets. 

Get Business Insurance For Your Tennessee LLC

Getting insurance for your LLC is essential to protecting your business. You should keep in mind your specific industry risks when choosing the proper coverage.

Some insurance types you may want to invest in include:

• General liability insurance: You’ll need this if there's an injury on your property. It pays for damages and a lawyer if you need one.
• Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
• Workers compensation insurance: Tennessee Code Section 50-6-102 requires LLCs with at least five employees to carry workers’ compensation coverage. However, if you work in certain industries, your LLC must have workers’ compensation insurance if you have at least one employee. 
• Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
• Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
• Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.

Keep Your Tennessee Company Compliant

As an LLC owner, there are certain rules you must follow to comply with the law. For example, you might need to get a business permit or pay state or federal taxes. Obeying these legal requirements is essential for running an LLC, so you must remain informed about legislative changes that may affect your business.

Tennessee Business Permits and Licenses

You might need to obtain a business license or permit for your LLC. You can check the Tennessee state government’s Licenses and Permits page for more information about what your business needs to do.

Tennessee Tax Requirements

If your LLC conducts business in Tennessee, you will need to pay state and city business taxes. You can register as a new business online using the Tennessee Taxpayer Access Point (TNTAP).

Federal LLC Tax Filing Requirements

Your Tennessee LLC will be considered a “pass-through entity” for federal tax purposes. This means that, much like a sole proprietorship, your LLC’s profits and losses will be reported on Schedule C of your personal tax return.

You must also pay federal Social Security and Medicare taxes, whether or not your LLC has employees. If you have employees, your LLC must also withhold taxes from their pay.

Annual Report and other Filing Requirements 

Tennessee Code Section 48-249-1017 requires all LLCs to file an annual report with the Secretary of State to update their business information. You can file your annual report online or by mail.

You will also need to pay an annual filing fee of $50 per member, with a minimum fee of $300 and a maximum of $3,000.

Tennessee Business Formation Quick Links

• IRS — apply for an EIN online
• IRS information regarding the federal tax treatment of LLCs
• Business name search (SOS) 
• Register a new business (SOS)
• File an annual report (SOS)
• Licenses and Permits
• Tennessee Taxpayer Access Point 
• Tennessee SmartStart Guide

Statutes:

• Naming Requirements: Tennessee Code Section 48-249-106
• Name Reservation: Tennessee Code Section 48-249-107
• Registered Agent: Tennessee Code Section 48-249-109
• Articles of Organization: Tennessee Code Section 48-249-202
• Operating Agreement: Tennessee Code Section 48-249-203
• Annual Report: Tennessee Code Section 48-249-1017