When forming an LLC in Tennessee, filing articles of organization is required. This costs at least $300, and the company must have a registered agent.
In addition, it's recommended that you reserve your LLC business name to ensure no one else will snatch it while you’re preparing other company formation documents. New business owners must also obtain an Employer Identification Number (EIN) and create an LLC operating agreement.
This guide further breaks down all the costs of creating and operating an LLC in Tennessee.
Table of contents
- Tennessee LLC formation cost
- Extra Tennessee LLC costs to account for
- Does Tennessee have an annual LLC fee?
- What taxes do LLCs pay in Tennessee?
- Conclusion: How much does an LLC cost in Tennessee?
Tennessee LLC formation costs: $300
Tennessee has a curious pricing structure for LLC articles of organization, depending on the number of LLC members.
- Single-member LLC articles of organization — minimum fee of $300
- Multi-member LLC articles of organization — $300 + $50 for each extra member
The maximum fee for LLC articles of organization is $3,000. This cost structure is the same for domestic LLCs and foreign LLCs.
However, all foreign LLCs will have to pay an extra $20 to register their name in the state. If filing fees are paid online, a service fee will be charged by credit card or debit card (2.29% of the amount of the transaction) or e-check ($0.95 per transaction).
Requesting certified copies of documents for your Tennessee LLC may be done in-person or via mail. The Request for Copy of Documents form should be hand printed in dark blue or black ink or typed.
Mailed requests must include the $20 fee and be sent to:
Tennessee Secretary of State
ATTN: Certifications
312 Rosa L. Parks Ave FL 6
Nashville, TN 37243
Extra Tennessee LLC formation costs to account for
State filing fees represent the main spending line when creating a Limited Liability Company (LLC) in Tennessee. But there are other costs you should account for.
Registered agent and name reservation, as well as licenses, state taxes, and annual maintenance costs, can add up quickly.
Registered agent fees
A registered agent is required for every LLC operating in Tennessee.
The LLC's registered agent is a person or business entity designated to receive business and service of process documents on its behalf. Your registered agent’s name and physical street address must be on file with the Tennessee Division of Business Services.
As a small business owner, you have the option to appoint yourself or another individual as a registered agent.
When you serve as your own registered agent, there are drawbacks, such as dealing with more junk mail. If your home is the principal place of business, then people will know where you live. You could potentially be served legal papers at your home, which could be embarrassing.
Another option is to hire a registered agent service. On average, expect to pay $100 per year for professional services.
The state lets you change your registered agent details at any time. However, to do that, you’ll need to file a form and pay a $20 fee.
Name reservation
When choosing an LLC name, you should search the Tennessee business services database to determine if a business name is available.
If it’s unused, you can request to reserve a business name for up to 4 months for $20. It’s ideal for businesses in the startup phase where you’re still ironing out other operational details.
After the 4-month period expires, you’ll need to reserve your desired business name again. Otherwise, it’s available for others to use.
Assumed name registration
When business owners want to operate under a name different from the legal name of the business entity, they need to register an assumed name (file for “doing business as,” DBA).
If you want to get an assumed name for your LLC in Tennessee, you’ll need to file a form and pay a $20 state filing fee.
Trademark and service mark applications
To protect your company’s IP (intellectual property) and brand, you should consider a trademark or service mark.
These impose a higher degree of the legal protection of your brand asset usage, such as name, logo, slogans, etc. Words, characters, and designs or logos are eligible for trademark or service mark.
Applications can be submitted in person or mailed to the Tennessee Secretary of State’s office. Each class is $20, and fees are only payable by check or money order.
Business permits and licenses
In Tennessee, all businesses have to obtain a business license and pay respective state-administered business tax.
The state-administered business tax is a tax based upon business gross receipts throughout the year. It’s due to the state authorities, not the federal government, within 45 days after the fiscal year ends.
- Domestic LLCs: If your gross receipt is between $3,000-$10,000 annually, apply for a minimal activity license from your county clerk.
- If your gross receipts are over $10,000, a standard business license is needed. You’re not allowed to operate until your required license is obtained and posted in your business’ location.
- Foreign LLCs must register with the department and remit business tax on any gross receipts from sales of $10,000 or more annually in any county in Tennessee. Foreign LLCs do not need a local business license issued by a county.
A separate $15 business license registration fee must be paid to the county or municipal clerk for each new LLC.
On top of the above, many regulated industries and professions need to obtain an occupational license. Tennessee emphasizes holding professionals to a certain standard when providing services to the public.
Some professions that must be licensed by the Department of Commerce and Insurance include:
- Barbers
- Accountants
- Court reporters
- Home inspectors
- Real estate appraisers
- Debt managers
Licensing fees vary by profession and can be a few dollars to several hundred dollars.
An esthetician, for example, pays $60 for a license while a Certified Public Accountant (CPA) pays more than $100, and those fees could double if late fees or penalties are included. These professions may also be subject to annual professional education requirements.
Does Tennessee have an annual LLC fee?
Yes, Tennessee applies a progressive annual report fee for LLCs based on the number of members.
The annual report fee for LLCs is $300 minimum and increases by an additional $50 per member for every member over 6 members up to a maximum of $3,000.
The company must submit its annual report by the first day of the fourth month following the fiscal year's close.
What taxes do LLCs pay in Tennessee?
Limited Liability Companies in Tennessee pay different taxes at different times of the year. Sales taxes are due monthly, while income tax and franchise taxes are due annually.
It’s important to have a CPA or compliance manager in your business to avoid penalties and fees for missed filings.
Here are specifics about tax requirements:
- Business tax — rates vary depending on your county and the type of taxable goods and services you provide.
- Gross receipts tax — applies only to specific activities such as vending machines, bottlers, and bars instead of a business tax.
- Annual franchise tax — Tennessee applies a franchise tax of 0.25% of the greater of (1) net worth or (2) real and tangible property with a minimum payment of $100.
- Excise tax — The excise tax is based on net earnings or income for the tax year. The rate is 6.5% of taxable income earned in Tennessee.
All franchise and excise tax returns must be filed and paid electronically. Refer to this manual by the TN Department of Revenue to learn more about your obligations.
Sales tax
The sales tax is made up of two portions, a state portion, and a local portion. The state-wide sales tax rate in Tennessee is 7%. Meanwhile, the local rates vary by county or city.
Generally, the sales tax applies to the sale of any property, service, digital products, and warranty contracts on physical goods. The sales tax applies to the sale price — whatever the cost of your taxable sale is, you'll have to tack on an extra percentage for state and local sales tax rates.
The seller is responsible for the tax either way, but it's a good idea to collect from customers at the time of the sale.
The collected taxes will then be paid to the Tennessee Department of Revenue.
Corporate income tax
With an LLC being a separate business structure, members must file and pay income taxes to the IRS. LLC members can elect to be taxed as a partnership or corporation, but the LLC itself does not pay taxes.
Single-member LLCs will show profits on Schedule C with their personal tax return. Multi-member LLCs elect a tax classification of:
- S-Corporation to reduce self-employment tax.
- C-corporation where business income is taxed twice at both corporate and individual shareholder levels.
In the latter case, your LLC will be subject to Tennessee corporate income tax of 6.5%.
Employee taxes
Tennessee requires all employers to fill out a form that determines the company's unemployment insurance status.
The information on this form, including the number and type of employees and wages paid per year, impacts whether or not an employer is required to pay into the fund for unemployed workers.
Tennessee uses the “Reserve Ratio” approach to determine the employer’s potential liability for benefits. A higher reserve ratio generally means a lower unemployment insurance premium rate.
Conclusion: How much does an LLC cost in Tennessee?
Forming an LLC in Tennessee will cost you at least $300, but there are more recurring expenses to account for, such as annual reports and business license applications and renewals.
Business owners must budget for the initial startup expenses and annual tax bills that will change according to their profits each year.
If you choose to use a professional LLC formation service, professional registered agent service, or request extra services from the state, your Tennessee LLC cost will go up.
Since it's easy to get carried away with spending money when starting your own company, weigh on whether you truly need each service before swiping your card.
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