Step 1: Come up with a name for your LLC
The Tennessee Secretary of State requires LLC business names to:
- Include the words ‘Limited Liability Company' or ‘LLC' (or their abbreviations, L.C. or LLC.) at the end of its name.
- Not contain any words prohibited by Tennessee law.
- Not be deceptively similar to another Tennessee existing business entity's name.
Business owners can use the name search tool to check if their intended name is available. If that’s the case, you can also opt in to reserve a business name for 120 days. It costs $15 to do so.
The Tennessee name reservation form can be completed online, by mail, or in person at the Tennessee Secretary of State's office in Nashville.
Also, you may choose to register an assumed name (doing business as “DBA” name) on top of your LLC name. It makes sense if you plan to operate several types of brands or just want to brand your business under a name different from your legal one.
The cost of DBA in Tennessee is $15 per name.
Step 2: Appoint a registered agent
The good news is that you can pick anyone to serve as your registered agent, and it doesn't necessarily have to be someone affiliated with your LLC.
Whether you name a corporation or an individual as your registered agent, you’ll need to list their physical street address (not a P.O. box) on the company formation documents. Most LLC owners designate either an employee or a trusted third party to act as their registered agent.
Alternatively, you may want to hire a registered agent service in TN instead. Registered agents charge fees, but they also offer other statutory compliance assistance like annual registration renewals and business document processing. Using a professional service also ensures your registered agent is available during business hours to receive service of process on your LLC’s behalf.
Step 3: File for articles of organization & obtain certificate of Registration with Tennessee Secretary of State
The official step to forming an LLC is to file Form SS-4720, the Articles of Organization for a Limited Liability Company, with the Tennessee Secretary of State (SOS).
Tennessee has a peculiar fee structure where articles of organization cost has a base fee of $300 + an extra $50 for each LLC member:
- Minimum fee is $300 for single-member LLC.
- Maximum fee is capped at $3,000.
This cost structure applies to both domestic and foreign LLCs.
The registration form can be filed online or mailed with the fees to:
The Tennessee Secretary of State
Business Services Division
312 Rosa L. Parks Avenue | Snodgrass Tower, 3rd Floor
Nashville, TN 37243
After registering your LLC, request a certification of LLC registration from the state of Tennessee. Submit Form SS-4232 and $20 to the state in order to receive the Certificate of Formation.”
Step 4: Prepare an LLC operating agreement
An operating agreement legally specifies your LLC’s management structure, members’ duties and responsibilities, capital investment and profit distribution provisions, and any other operational tidbits you may want to include. Having an operating agreement can protect you from future disagreements among members.
Multi-member LLCs benefit the most from having an operating agreement. Single-member LLCs need not worry about an operating agreement until you decide to scale your business and bring in another member on board.
Step 5: Get an EIN (Employer Identification Number) from the IRS
LLC members can apply for an Employer Identification Number (EIN) on the IRS website. The EIN is a 9-digit number that uniquely identifies your business structure for federal tax purposes. It’s similar to an individual’s social security number.
Once the application is complete, you can immediately use the EIN to register with state tax authorities, apply for business credit, or add employees to your payroll.
Costs to set up an LLC in Tennessee
Setting up an LLC in Tennessee is more expensive than in many other states due to the $300 (minimum) registration fee. Additional costs that a business owner could incur in Tennessee include name registration fees ($15), fictitious name registration fees ($15), annual franchise and excise taxes, and the option of hiring a registered agent (approximately $100/year). While there are several positives to starting your business in Tennessee, the high start-up costs are not among them.
One of the next steps is to open a business bank account for your LLC. Business owners must separate business transactions from personal finances. Failure to do so can lead to legal consequences and loss of good standing with the state.
Doing business in Tennessee means that you’re bound to pay different types of local state taxes such as: Business tax, Gross receipts tax, Annual franchise tax, Excise tax, and Sales tax. Every LLC earning over $3,000 annually from the state of Tennessee has to register and pay the business tax. Business tax is managed by the state and paid annually, on the 15th of the 4th month after your fiscal year ends. You can learn more about your business tax obligations from a series of manuals published by the Tennessee Department of Revenue.
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