Want to learn how to form an LLC in Tennessee? Then this is the article for you.
We will walk you through every step you need to take to get your LLC off the ground, as well as the optional ones that can benefit your business, like creating an operating agreement. We have also included our top recommendation for LLC formation packages if you find the formation process time-consuming and daunting.
Ready to get into business? Then let’s dive in!
Pick a Name for Your Tennessee LLC
When choosing a name for your LLC, it is vital to consider things like brand identity, legal requirements, and availability. A strong LLC name can help your business stand out and attract more customers. So, please don’t rush to choose your business’ name.
Once you’ve got a name in mind, check it’s available. You can check the availability of your chosen LLC name on the Tennessee Secretary of State’s website using their online LLC name search tool.
If it is available, then make sure your name also meets the following guidelines and requirements in mind:
- Your chosen LLC name must contain “Limited Liability Company” or its acronyms “LLC” or “L.L.C.”
- The chosen LLC name must not include any word that suggests it is a partnership or corporation. For example, “LLP,” “Inc,” or “Corp.”
- The chosen name must confuse or mislead the public. For example, it must not imply that your LLC is associated with any government agency or charity.
If you meet these requirements, you can reserve your business name with the Secretary of State. The fee for reserving an LLC name is $20.
Hire a Registered Agent
All LLCs in Tennessee are legally required to nominate a registered agent to act on its behalf.
A registered agent is an individual (age 18+ years old) or company that acts as the official point of contact for the LLC. Specifically, a registered agent will receive and forward official and legal documents, such as tax forms, service of process, and official government correspondence, on behalf of your LLC.
The registered agent you choose must have a physical street address in Tennessee. They must also be available to receive and forward documents during traditional working hours.
You can nominate yourself or any other LLC member to be a registered agent. However, the name and address of the registered agent will be public information. That is why we recommend hiring a commercial service provider to act as your LLC’s registered agent. Here are our three recommendations for the best registered agent in Tennessee:
Our top registered agent service provider we strongly recommend is ZenBusiness. They have helped over 300,000 businesses over the years. Their registered agent package includes services such as fast turnaround times, document scanning, mail alerts, mail forwarding, and access to a custom digital dashboard.
The yearly fee for a ZenBusiness registered agent package is $199. However, you can upgrade it to include additional perks, including annual support notifications.
IncFile is another reputable and popular registered agent company in Tennessee. Its registered agent package includes services such as automatic mail forwarding, tailored email and SMS alerts, and access to a custom dashboard. The user interface is friendly and intuitive, making it a perfect option for users trying out this service for the first time.
Its annual fee is very transparent and affordable, starting at just $119 per year. In addition to registered agent services, IncFile offers a vast range of other LLC services, such as drafting an Operating Agreement and filing an Article of Organization.
Northwest is another great recommendation for the best Tennessee registered agent service provider.
It offers every tool you require to remain compliant with the state laws. Northwest’s registered agent package costs only $125, and includes scanned documents, pre-filled state forms, annual report reminders, document storage, compliance notifications, and scanned documents. You will also get access to its Corporate Guides, which will help you overcome any compliance obstacle that might come your way.
File Your Article of Organization
The next step in forming your LLC in Tennessee is to file your LLC’s Article of Organization with the Tennessee Secretary of State.
When filing your Article of Organization, be sure to include the following information:
- The name of your LLC
- Your hired registered agent information
- The effective date of your LLC
- The principal office address of your LLC
- The LLC’s management structure (manager-managed or member-managed)
- The duration of your LLC
You can choose to file your Article of Organization online or by mail. Online filing is the most preferred option, as it is faster and easier. You just need to access the Tennessee Online Business Formation portal, file your Article of Organization and pay the $300 fee.
If you prefer to file your Article of Organization by mail, you must download the Article of Organization form. Then, fill in the required information and send it together with a check for $300 to the following address:
Business Services Division
Tre Hargett, Secretary of State
State of Tennessee
312 Rosa L. Parks AVE, 6th FL
Nashville, TN 37243
After filing your Article of Organization, the Tennessee Secretary of State office will contact you by mail once they have processed the payments and forms. The processing time is usually 24 hours for online filing and three to five business days for mail filing.
Draft an Operating Agreement
An operating agreement for your LLC in Tennessee is a legal document/contract describing the organization, administration, and ownership structure of your LLC. It serves as a guide for internal management and administration of the business.
LLCs in Tennessee are not legally required to have an operating agreement. However, we strongly recommend reading one, as it offers several advantages. For example, an operating agreement can be used to establish the structure and existence of the LLC. It can also prevent disagreement and misunderstanding among LLC members in case of a legal issue.
A well-written operating agreement must include the following clauses:
- The names and addresses of the LLC members
- Provisions for resolving conflicts and impasses among members
- Provisions for sharing profits and losses among members
- Rules for disposing and acquiring ownership interest and adding/removing members.
- The ownership percentage of each member.
You can easily create your operating agreement by downloading an operating agreement sample template online and filling in the required information. You can also hire an LLC formation company to draft one for you.
Obtain Tennessee Licenses and Permits
All LLCs in Tennessee are subject to permitting and licensing regulations. Most licenses are issued at the county level. The Tennessee Business Licensing portal provides detailed information about the licensing requirements and fees you need to know to get started.
The common business licenses and permits acquired by most LLCs in Tennessee include the following:
- Minimal activity license: All Tennessee LLCs with annual gross receipts of between $3,000 and $10,000 must acquire a minimal activity license from their county offices. The registration fee for this license is $1.
- Standard business license: All LLCs in Tennessee with annual gross receipts exceeding $10,000 must acquire a standard business license from their county offices. The registration fee for this license is $15.
- Sales tax certificate: Tennessee LLCs must collect tax on taxable services and merchandise sold. To acquire a sales tax certificate in Tennessee, you must create an account on the Department of Revenue website and follow the on-screen prompts.
Depending on your industry and business activity, you may also require other licenses and permits. For example, LLCs that offer professional services, such as cosmetology, home inspection, accounting, insurance, architecture, etc, may require special certification to operate in Tennessee.
Acquire an EIN
Almost all Limited Liability Companies in Tennessee must acquire a Federal and State Tax ID from the IRS in the form of an Employer Identification Number.
The application process is straightforward and free of charge. You only need to visit the IRS (Internal Revenue Service) and submit your application.
Open a Business Bank Account
Before your Tennessee business starts generating money, you will need a place to keep it. That means opening a business bank account.
Opening your business bank and credit account is straightforward and similar to opening a personal account. Most financial institutions offer accounts tailored for businesses. Setting one up is easy, and you’ll only need to bring in your EIN, Article of Organization, and an Operating Agreement.
If you don’t know where to start, here are our three Tennessee banks to look at:
Purchase Tennessee Business Insurance
While purchasing business insurance isn’t a requirement when forming your LLC in Tennessee, it will give you peace of mind and allow you to focus on running your business entity.
Most LLCs purchase general liability insurance, a broad insurance cover to protect their LLC from lawsuits. Things like customer injury on your property and property damage caused by employees are common examples of claims covered by this insurance policy.
If your LLC provides professional services, then you will be required to purchase professional liability insurance coverage. It protects your LLC against claims of errors and malpractices done in the line of business.
In addition, Tennessee requires LLCs with five or more employees, including LLC members, to purchase workers’ compensation insurance.
Buy an LLC Formation Package to Speed Up the Process
It’s pretty straightforward to form a Tennessee LLC yourself by following the steps above. But if you get stuck, you can always purchase an LLC formation package and have all the hard work done for you.
Many companies offer LLC formation packages as part of their overall services. Some of these packages are even free of charge.
If you have a budget for it, purchasing an LLC formation package can save you a lot of hassle and speed up the LLC formation process.
One company that offers comprehensive LLC formation packages is ZenBusiness. They do not charge anything for their Starter package, excluding the state filing fee. With this package, you will get access to all the basic tools to form your Tennessee LLC in two to three weeks.
You may also want to consider their Pro package. At only $199, you will get all the Starter package features, plus an operating agreement and expedited filing speed of four to six business days.
In addition, the Premium package costs $299 and includes all the Pro LLC formation package features plus a faster filing speed of one to two business days. You will also get a customizable business website, domain name, and email address.
FAQs About Forming an LLC in Tennessee
How Long Will It Take to Form My Tennessee LLC?
You can get your Limited Liability Company (LLC) formed in Tennessee within 24 hours if you file your Article of Organization online (or two to three weeks if you file by mail).
How Much Does It Cost to Set Up an LLC in Tennessee?
The Tennessee Secretary of State charges an LLC formation fee of $50 per LLC member included in the filing of the Article of Organization, with a minimum total filing fee of $300. However, the Article of Organization filing fee can not exceed $3,000. There may be additional fees for hiring a registered agent, purchasing business insurance, etc.
Can I Act as my Own Registered Agent in Tennessee?
Any person, including yourself, can be a registered agent. However, you must meet the standard requirements for being a registered agent. For example, have a physical address in Tennessee and be at least 18 years old. You must also be available during the traditional working hours at your provided address.
Can I Form a Single-Member LLC in Tennessee?
Yes, Tennessee recognizes single-member LLCs, and their formation is permissible under the Revised LLC Act in Tennessee (T.C.A. §48- 249-501c). The formation process is similar to what we have discussed in this detailed guide.
Forming a Limited Liability Company in Tennessee is a straightforward process. You can certainly do it yourself, but to ensure that you fully comply with the state laws, you might want to purchase an LLC formation package or consult an attorney. Best of luck!