Budgeting is crucial when you’re forming a Tennessee limited liability company (LLC). But figuring out how much it will all cost is not always simple.
That’s why we’re here to help. This article will help you learn about the costs of starting a Tennessee LLC.
Keep reading to find out:
- The cost of creating an LLC in Tennessee
- Optional expenses that you may want to consider
- The benefits and disadvantages of various LLC formation methods
Once you’ve finished this article, you will have a good idea of how much you can expect to pay when starting an LLC.
Total Tennessee LLC Cost – Starting at $315
According to the Tennessee Secretary of State’s Business Forms & Fees, the bare minimum cost to start an LLC in Tennessee is $315.
- Articles of Organization filing fee: $300 to $3,000
- Business license registration fee: $15
You may also need to get professional licenses or business permits to run an LLC in certain industries and locations.
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Tennessee LLCs – the Basic Costs
The cost to start your Tennessee LLC will depend on a few different factors. The minimum price is $315, but we’ve explained your possible costs below.
Articles of Organization Filing Fee — $300 to $3,000
Articles of Organization are the legal documents that people use to form LLCs. In order to start a Tennessee LLC, you will need to submit articles of organization to the Secretary of State. But don’t let this scare you. All you need to do is provide some basic facts about your business.
The filing fee is $50 for each member that will be a part of your LLC. However, the minimum fee is $300, even if you have one member. Likewise, the maximum is $3,000. If you file online, a small convenience fee will be assessed.
Business License Registration Fee — $15
With only a few exceptions, every business that sells goods or services in the state must register with the Tennessee Department of Revenue to pay business taxes. You can register as a new business online using the Tennessee Taxpayer Access Point (TNTAP).
In order to register, you must pay a $15 state business license registration fee. You may also need to pay a city fee as well. For instance, Nashville charges businesses within city limits $30 for a business license – $15 for the state and $15 for the city.
Professional Licenses and Business Permits — Various
Some LLC owners will also need to obtain an additional license or permit to legally operate their business. The costs vary based on the license or permit that you need. You can learn more about professions that require licenses from the Department of Commerce and Insurance.
Tennessee LLCs – Optional Costs to Consider
In addition to the necessary costs explained above, you may want to consider setting aside some extra cash for a few more expenses. While these are not required, they can be greatly useful for your LLC.
Expedited LLC Filing Fees — N/A
Tennessee does not offer expedited filing for LLC documents. But, if you file your Tennessee LLC articles of organization online, they will be processed and approved instantly.
Registered Agent Fee — about $100 per year
Tennessee law says that every LLC must have a registered agent to accept legal documents in the state.
You will list details about your registered agent in your Tennessee articles of organization with no extra fee. But if you ever need to change your agent, there is a $20 fee.
New business owners often want to serve as the registered agent for their LLC. But many don’t understand that this would require them to always be present to receive documents during normal business hours. Registered agents must also agree to have their addresses listed online.
To avoid these problems, we suggest that you hire a professional registered agent service for your LLC. The average fee is only about $100 per year, and the service will handle all of your registered agent tasks for you.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
An operating agreement is a type of contract that establishes how an LLC will run. They cover essential info like the members’ privileges and responsibilities and how members can enter or exit the business. While Tennessee does not require you to have an operating agreement for your LLC, we strongly recommend creating one.
You are allowed to write your own LLC operating agreement. But unless you have a legal background or experience with previous LLCs, we don’t suggest this method.
Another option is to hire an attorney to write an LLC operating agreement for you. While this alternative is pricier, you will get a superior product that prepares you for all possibilities. But if you want to save some money, a professional LLC formation service will create an operating agreement for as little as $39.
DBA Fee — $20
Even if you like the name you chose for your LLC, there are various reasons you might want your business to go by something else. For example, you could drop the “LLC” from your day-to-day business name to make things more casual. Or, you may want to change the LLC name entirely as your business evolves.
Just know that if you want to market your LLC under something other than its legal name, you must register a “doing business as” or “DBA” name. Tennessee calls DBAs “assumed names.”
You can submit your Tennessee DBA by filing an application with the Secretary of State and paying a $20 filing fee. We suggest filing online for quicker processing.
Name Reservation Fee — $20
If you have chosen a name for your business but aren’t quite ready to form your LLC, Tennessee law lets you reserve an LLC name for 120 days. This will prevent anyone else from claiming the name during this period.
To reserve a limited liability company name, you must submit an Application for Name Reservation to the Secretary of State. There is a $20 filing fee, and you can only submit this document by mail.
Domain Name — about $20 per year
In the current economy, you need a website if you want your business to succeed. And to make a website, you must buy a domain. Luckily, domain names have never been more reasonably priced.
We suggest getting your domain as soon as possible once you register your LLC. If someone buys it before you, you won’t be able to use the domain. While you might not think anyone would want it, “domain squatters” monitor new LLC registrations and buy their likely domains to resell them at a substantial mark-up.
You can get a domain through GoDaddy.com or a comparable platform for about $20 to $50 annually. Even better, these websites often run sales that allow you to buy a domain for even less than that.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a 9-digit identification number assigned to businesses by the Internal Revenue Service. Think of it as a social security number for your LLC. While some LLCs are legally required to apply for an EIN, others do not have to.
Even if the IRS doesn’t mandate that your LLC obtain an EIN, we still suggest that you get one. Most banks require you to have an EIN to open a business bank account. And as an added bonus, using an EIN can help you protect against identity theft.
You can get your EIN online or by mailing in Form SS-4. The process is free and easy no matter what, so you don’t need to pay a business to get your EIN for you.
Read More: How to Get an Employer Identification Number in Tennessee
Foreign LLC Qualification Fees — about $100 per extra state
Many business owners hope to expand to other states. Just know that, if you do, you will need to invest some more money. While you won’t need to form a new LLC, you will need to register as a foreign limited liability company in every state where you plan to do business.
Foreign LLC filing fees differ among states, but you should prepare to spend at least $100 per state.
Writing Formation Costs Off
The money you spend on starting a Tennessee LLC can usually be deducted as business startup costs from your income taxes. The IRS provides substantial guidance on this issue, so we recommend consulting the IRS website to determine which of your expenses are deductible.
You should also know that LLCs are typically classified as “pass-through” tax entities. As such, LLC owners can generally deduct up to $5,000 in startup expenses in their first year.
Cathy decides to form a single-member LLC and open a cleaning service in Nashville, Tennessee. Her formation costs are as follows:
- Tennessee LLC Articles of Organization: $300
- Nashville Business License Registration Fee: $30
- Operating Agreement: $50
- Registered Agent Fees: $120
- Name Reservation Fee: $20
- DBA Fee: $20
- Web Domain Costs: $30
Because LLCs are pass-through entities, her company won’t have to pay income taxes. Rather, Cathy will report the income she earns from the LLC and any business deductions as her personal income for her federal taxes. (Tennessee has no state income tax.)
Cathy’s total startup costs were $570. Before she deducted these expenses, her total taxable income was $36,000. But by deducting these costs, she lowers her taxable income to $35,430. This will drop her 2023 federal income tax from $4,115 to $4,046.
Although this is not a large reduction, LLC owners who consistently deduct their business expenses can realize tremendous tax savings over time.
Cheapest Way to Start an LLC in Tennessee
When starting a Tennessee LLC, you want to choose the right formation method for your business based on the specific needs of your situation. We’ve laid out some of your various options below.
Formation Service – $39 + state fees
These companies will take care of the entire LLC formation process for you. They understand how you must file the necessary forms to register and will ensure that your business is compliant with all the rules.
An LLC formation service is an excellent option for many new business owners. This is because:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
Still, while formation services work well for many people, they are not the best option for everyone. Some weaknesses of this method include:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Hiring an attorney lets you rely on the knowledge of an experienced professional with expertise in Tennessee LLC laws. But it’s good to remember that lawyers can be costly. Many attorneys bill an hourly rate for their services, often several hundred dollars an hour.
Even though it’s pricey, retaining an attorney has some important advantages:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
However, for the typical LLC, the drawbacks of hiring a lawyer often outweigh the benefits:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
When starting an LLC, you can always choose to do it yourself. But keep in mind that time is money. If you’re spending hours filling out LLC formation paperwork, you’re losing time you could spend working on growing your business.
Nonetheless, there are definitely clear advantages to a DIY approach:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
Just make sure you consider the disadvantages as well:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Tennessee LLC Fees: How Much Will it Cost to Maintain your LLC?
In order to maintain your Tennessee LLC in good standing, you will need to file an annual report and pay an annual filing fee. Like the initial filing fee for your articles of organization, your annual fee will be $50 per member at the time of filing, with a minimum state fee of $300 and a maximum of $3,000.
You may also need to pay some optional expenses on an annual basis, such as:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Tennessee
Every LLC that conducts business in Tennessee must pay state and city business taxes. The business tax is assessed based on your gross sales and the applicable state and local tax rates. There are several different business tax rates, so you will likely want to hire an accountant to handle these taxes for you.
The amount you will be required to pay will vary depending on the details of your business. You can learn more in the Tennessee Business Tax Manual.
Tennessee LLC Formation Costs Quick Links
- Tennessee Business Entity Registration
- Tennessee Assumed Name Registration
- Tennessee Business Forms & Fees
- Tennessee Taxpayer Access Point
- Tennessee Licensing and Regulations
- Tennessee Secretary of State
- Tennessee Department of Revenue
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Tennessee LLC Formation Costs FAQs
How much does it cost to start an LLC in Tennessee?
The minimum cost is $315. But depending on the type of business you are starting, and how many members your LLC will have, it may cost you more.
What is the cheapest way to start an LLC in Tennessee?
The do-it-yourself approach is the cheapest in terms of cash out the door. But, it’s not the most cost-effective choice if you can’t spare the time. The most reasonable option for most LLCs is an affordable business formation service.
Do I need to hire an attorney to form an LLC in Tennessee?
No. Most LLCs can be formed without a lawyer, using either a DIY approach or an LLC formation service.
Can I pay to form an LLC more quickly in Tennessee?
No. Tennessee does not offer expedited service, but online filings are processed immediately.