How to Start an LLC in Tennessee
If you are considering starting an LLC in Tennessee, don’t be overwhelmed by the process! With some information and guidance, establishing your business can become a viable reality. Understandably intimidating for first-time entrepreneurs, let’s break down those barriers step by step. Get started on creating your vision today- get ready to launch that LLC with confidence.
What is an LLC?
LLC, or Limited Liability Company, is a business structure that combines the taxation of a corporation with the simplified management of a partnership or sole proprietorship. LLCs offer limited liability protection for their owners, meaning they are not personally liable for any debts or obligations incurred by the company. If someone were to sue the LLC, they could not come after the owners’ personal assets or income.
LLCs also have fewer formalities and regulations than corporations, making them simpler to manage. With an LLC, owners can divide profits and losses as they choose and only pay taxes on their personal share of the company’s earnings. All this makes the LLC a popular choice for small business owners and entrepreneurs.
With the right guidance, setting up an LLC can be a straightforward process that protects your personal assets while allowing you to manage your business as you see fit. In addition to limited liability protection, LLCs also provide certain tax advantages over corporations. They don’t pay federal income taxes at the corporate level, so profits and losses pass through to the owners.
LLCs also have more flexibility regarding how they are taxed, allowing them to choose between being taxed as a partnership or sole proprietorship. This means that owners can take advantage of their personal tax rates rather than paying corporate taxes at higher rates. With all this in mind, an LLC in Tennessee can be a great choice for entrepreneurs looking to protect their personal assets while getting the best tax benefits.
Advantages Of an LLC In Tennessee
Are you looking to start a business in the great state of Tennessee? If so, forming an LLC is one of the best things you can do. An LLC offers entrepreneurs and small business owners several distinct advantages. Let’s discuss some of the major benefits of starting an LLC in Tennessee.
Limited personal liability
LLCs in Tennessee offer their owners the benefit of limited personal liability. Members of LLCs are not personally liable for debts and obligations created by the LLC itself, meaning that creditors can only seek repayment from the business’s assets and not from its members. This is an important advantage as it limits the risk posed to business owners.
Exemption from income tax
LLCs in Tennessee are exempt from paying income taxes at the state level, which can save business owners significant amounts of money compared to being taxed as a corporation or sole proprietorship. The only taxes that need to be paid by LLCs in Tennessee are those imposed by the federal government.
Easy tax filing
LLCs in Tennessee are not required to file separate tax returns and must include their income earnings with their personal taxes. This greatly simplifies the filing process as it eliminates the need for separate business taxes, making it easier to understand and manage overall tax obligations.
The costs associated with forming an LLC in Tennessee are relatively low compared to other states. There is no minimum capital requirement, and the filing fee for the Articles of Organization is very reasonable. This makes it a cost-effective option for business owners who want to start their ventures.
LLCs in Tennessee can raise funds from private investors and venture capital firms. This makes it easier for businesses to secure the necessary financing to expand their operations and pursue new opportunities. Accessing these funding sources is a major advantage for business owners who want to grow their businesses.
Disadvantages of an LLC in Tennessee
Starting a Limited Liability Company (LLC) in Tennessee can have its disadvantages as well. Before starting an LLC, it is important to understand the implications of this business structure and how it might affect you and your business down the road.
Complicate investor tax situations
One of the possible disadvantages of an LLC in Tennessee is that it can complicate investor tax situations. LLCs are not officially recognized as separate entities by the IRS, so investors must report income earned through the LLC on their individual returns. This can be complicated and time-consuming for investors to do correctly.
Cost of registration
Forming an LLC in Tennessee can also be costly. An LLC must pay filing fees to the state and ongoing annual maintenance fees. There are also additional costs associated with hiring a lawyer or accountant to assist with setting up the LLC and ensuring it complies with all applicable laws.
Another disadvantage of an LLC in Tennessee is that the ownership structure is not as easily transferable as with a corporation. For example, if a member decides to leave the LLC, it can be difficult for another person to take their place without going through extensive paperwork and legal proceedings.
Finally, some investors may not find an LLC in Tennessee appealing because of its limited liability structure. Since there is no double taxation, investors may not find the LLC as attractive as other corporate structures with more tax benefits. Additionally, some investors prefer a straightforward ownership structure that does not require additional paperwork and paperwork fees.
How to Form an LLC in Georgia
Here are five key steps to get you started if you’re looking to form an LLC in Tennessee:
- Choose a unique name for your business
- Choose a registered agent in Georgia
- File your Georgia LLC articles of organization
- Create an operating agreement
- Apply for an EIN
Choose a unique name for your business
Choosing a name for your LLC can seem daunting when you are trying to start a business in Tennessee, but it is an important step in forming your LLC. When selecting a name for your LLC, you should ensure that it is available and not already taken by another business. Your chosen name must include the “Limited Liability Company” or one of its abbreviations (LLC or L.L.C.). It cannot contain words restricted, such as Bank, Attorney, University, or Insurance by the state.
Additionally, the name should be memorable and identify the business’s purpose. To ensure the desired name is not already taken, perform an online search to see if it’s already been registered with the Secretary of State. Once you’ve settled on something original, all that remains is submitting Form SS-9425: Application for Name Reservation along with a $20 filing fee – either by post or via their convenient digital platform. Don’t forget; whatever moniker you choose must feature “Limited Liability Company,” “LLC,” or “L.L.C.”
Choose a registered agent in Tennessee
Tennessee requires all businesses to have a registered agent who serves as the point of contact for official correspondence from the state and other third parties. The registered agent must have a physical address in Tennessee and be available during regular business hours to receive any important documents served on your company’s behalf. This could be you or another individual, such as an attorney or CPA.
It is important to note that this person will not have any decision-making authority over your business; they simply serve as a point of contact for legal matters and official notifications from the state government.
File your Tennessee LLC articles of organization
Once you’ve selected a name and registered agent for your LLC Tennessee, it’s time to file your Articles of Organization with the Secretary of State’s office. Most information required on this form includes basic details about your business, such as its name and address, as well as information about its members and managers (if applicable). You will also need to designate how profits and losses will be allocated among members, if applicable.
Filing an article for an organization in Tennessee can potentially cost anywhere from $50 per member, with filing fees ranging between $300 to $3,000 depending on the number of members – both managing and non-managing. After filing your Articles of Organization with the Secretary of State’s office, you will be issued a state control number for future business filings like Annual Reports at that same initial fee structure.
So whether starting or maintaining your company, knowing how many members you’ve got is important when budgeting costs. After submitting this information, your LLC will be fully registered with the state, and you’ll be ready to start!
Create an operating agreement
A Tennessee operating agreement is essentially a contract between members (or managers) outlining their duties within the company and how profits/losses will be distributed amongst them (if applicable). This document should include details on how decisions are made within the company and how disputes are handled if they arise between members/managers.
While this document is not required by law in LLC Tennessee, it does provide additional protection for all parties if disputes arise down the line—so it is highly recommended that you create one when forming your LLC in TN.
Apply for an EIN
Finally, once your company has been formed, you’ll need to apply for an Employee Identification Number (EIN) with the IRS so that you can open bank accounts under your business name and handle financial transactions legally. This number is essentially like a Social Security Number for businesses —it serves as identification when dealing with financial institutions or filing taxes with government agencies like the IRS. Applying for an EIN is free and easy—all you need do is fill out some basic information about yourself and submit it online through their website.
Types of LLC
Which type of LLC is ideal for me?
In Tennessee, there are several types of LLCs you can choose from, depending on your needs and preferences. Here’s a quick rundown of the options available to you:
- Single-Member LLC: This is perfect if you’re a solo entrepreneur or a small business owner. As the name suggests, it has only one owner (called a member). You’ll enjoy limited liability protection, and your business profits and losses will be reported on your personal tax return.
- Multi-Member LLC: If you’re starting a business with partners, this is the way to go. A multi-member LLC is owned by two or more members who share the profits, losses, and management responsibilities. Each member’s share in the business and the management structure should be outlined in a well-drafted operating agreement.
- Series LLC: This unique structure allows you to create multiple “series” or “cells” under a single LLC umbrella. Each series operates independently, with its own assets, liabilities, and management structure. This is ideal for businesses with multiple ventures or investment properties, as it provides additional liability protection between the series.
- Professional LLC (PLLC): If you’re a licensed professional (e.g., doctor, lawyer, architect), forming a PLLC may be required by your state. A PLLC operates similarly to a standard LLC but is specifically designed for professionals providing a licensed service.
- Foreign LLC: If you’ve already formed an LLC in another state and want to do business in Tennessee, you’ll need to register as a foreign LLC. This involves filing an application for a certificate of authority with the Tennessee Secretary of State.
Before you decide on the type of LLC to form, it’s essential to consider factors such as the nature of your business, ownership structure, tax implications, and liability protection needs. Consulting with a business attorney or a tax professional can be helpful in making an informed decision.
Applicable LLC taxes in Tennessee
Forming a Limited Liability Company (LLC) in Tennessee is a great way to start your business, but there are other costs associated with it besides the filing fee. These include Franchise Tax, Sales Tax, and Corporate Tax.
Tennessee LLCs must pay an annual franchise tax, calculated by assessing 0.25% of the greater net worth of real and tangible property in Tennessee. This minimum annual fee is $100 regardless of net worth or revenue. LLC owners must remember that this fee is due each year, as failure to submit it on time can result in late fees or fines from the state government.
As with other types of businesses, LLCs in Tennessee are responsible for collecting sales tax from customers and remitting it back to the state. Merchandise sales are subject to a 7% tax rate across the state, but many local municipalities add their own additional taxes, bringing the average rate up to 9.55%. This high rate makes it even more important for businesses operating in Tennessee to understand their sales tax obligations—failure to comply can lead to significant penalties from the government.
LLCs can be taxed as corporations rather than individuals if they wish, although this is not a requirement by law. In this case, an excise tax of 6.5% will be applied instead of income tax—but businesses must ensure they understand all applicable regulations before opting into this kind of taxation system.
Cost of forming an LLC in Georgia
When forming an LLC in Tennessee, the formation cost will vary depending on a few factors. First and foremost is whether you are using an online service provider or filing directly with the Secretary of State. If you choose an online service provider, the final cost can range from $99 to over $400, depending on your selected services. If you file directly with the Secretary of State, the cost is $300 for domestic LLCs and $750 for foreign LLCs.
Additionally, there are other costs associated with forming an LLC Tennessee that should be considered when budgeting. These include publishing a notice in the newspaper, obtaining a business license from local government agencies, purchasing an EIN from the IRS, and setting up a registered agent to receive important correspondence. The fees can add up quickly, so it is important to research each step in the process before starting your LLC formation.
In terms of taxes and other financial obligations after forming your LLC, there are a few things to keep in mind. LLCs in Tennessee are required to pay an annual franchise tax of $300 if their total gross income is over $10,000, and they also must submit an Annual Report every year with the Secretary of State that costs $20.
Additionally, depending on the size and type of the LLC, it may also be subject to other taxes like income or property tax. It is important to research the applicable laws and regulations in Tennessee before forming your LLC, so you can accurately budget for all of these costs.
Overall, forming an LLC in Tennessee can be a relatively straightforward process. However, it is important to budget for all the associated fees and other costs before starting. By researching each step of the formation process, you can ensure that your final cost remains within your desired range.
Annual report fee
Registered agent fee (up to)
Business permits and licenses
State and local taxes
Operating Agreement (up to)
Employer Identification Number (EIN)
Starting A Business
Business Opportunities to Explore in Georgia
From technology to real estate and service departments, Tennessee offers an abundance of business opportunities. With its vibrant culture, strong work ethic, and diverse economy, Tennessee is ideal for entrepreneurs to explore new venture options. Let’s look at some of the top business opportunities you can explore in Tennessee.
Tennessee is home to numerous tech-related businesses, such as software development companies and IT consulting firms. With more and more people relying on technology for their day-to-day activities, entrepreneurs can capitalize on this trend by starting a tech-related business in the state. Additionally, the state has numerous resources to help tech startups get off the ground.
Real estate is another great business opportunity for investing in Tennessee. The real estate market in the state is booming thanks to its population growth rate and a strong economy. For those looking to get into real estate investing, there are plenty of options available, including residential rentals, commercial properties, vacation homes, and investment properties.
Tennessee’s service industry is also thriving with a wide range of services available, from hospitality services to professional services like accounting or legal advice. There are plenty of opportunities for entrepreneurs interested in taking advantage of this growing industry by providing essential services such as cleaning or repair services or even setting up a restaurant or bar.
Additionally, with many colleges and universities in the state offering degrees related to service industries such as hospitality management or culinary arts, there are ample opportunities for entrepreneurs with these qualifications.
Finally, tourism is one of the biggest industries in Tennessee, with millions of tourists visiting every year due to its natural beauty and southern charm. For entrepreneurs looking to capitalize on this booming industry, many business opportunities are available, including hotels, restaurants, tour companies, adventure centers, etc., that can be successful if managed well.
Additionally, with many tourist attractions throughout the state, there are ample marketing opportunities too, which can help your business reach out to potential customers both locally and internationally!
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.