Tennessee Small Business Statistics

Though not the largest territory in the US (36th by area), Tennessee is a densely populated state, with over 7 million people residing in it. Not only does it have diverse terrain and landscape but also it has a diverse economy.

Currently, the Tennessee economy is fueled by healthcare, finance, automotive, chemical, electronics, and tourism industries. Agriculture also stays strong. It’s focused on cattle, poultry, soybeans, corn, and cotton production.

The Volunteer State is no stranger to manufacturing as well. It hosts General Motors, Volkswagen, Nissan, and Mitsubishi assembly lines and welcomes onboard such huge electronics producers as Whirlpool, Electrolux, and LG Electronics.

Tennessee ranks 6th in the CNBC “Top States for Business” 2022 rating which is no wonder given a friendly regulatory environment and favorable business climate. Reduced tax burden and lower living costs are meant to maintain existing small enterprises (SMEs) and attract new ones.

Key Tennessee Small Business Stats

• Based on Statista data, the state's real GDP in 2021 increased by nearly 10% from 2020 when it stood at $316. 33 billion after a dramatic pandemic drop;
• Tennessee's economy is the 24th most impacted by the COVID-19 crisis out of 50 states;
• In 2022, the gross domestic product shows further growth hitting the $350.7 billion mark and demonstrating a stable and confident recovery of the local economy;
• Despite the negative impact of economic stagnation, an annualized GDP growth rate in TN is 1.9% within a 5-year period (IBISWorld) which verifies a promising potential and safety margin of the local economy;
• The biggest Tennessee revenue earners fall within hospitals, medical, and property insurance sectors;
• The biggest GDP contributors are manufacturing, real estate, and healthcare sectors generating nearly 40% of the entire state GDP;
• Maintaining 99.5% of business activity in the state, 652.795 small enterprises are the major driving force of the TN economy;
• A 5-year survival rate for SMEs in Tennessee is over 50%;
• In 2020, private firms accounted for 82% of the state exporters which ensured $4.2 billion out of the entire $26 billion export;
• The highest SME count is observed in the service and construction sectors that enlist over 30% of all SMEs in the state;
• The lowest SME count is reported in the utility sector, with 249 entities operating in it;
• For 12 months (March 2020 - March 2021), the private employment market in TN was reduced by 25.576 net jobs while the SME pool has gained 5.200 net new establishments;
• SMEs maintain 42.2% of the Tennessee labor market and employ 1.2 million TN residents overall;
• While only 15% of SMEs are employer entities, the most active of them are the following five sectors:
  • Accommodation and food services: 169.895;
  • Health care and social assistance: 162.647;
  • Manufacturing: 108.193;
  • Retail trade: 108.188;
  • Construction: 98.586.
• In 2021, the per capita personal income in TN was $56.560 while per capita consumption expenditure was $37.499;
• The average annual income of self-employed owners of registered entities is $56.000 while that of unregistered business owners is more than twice lower;
• The state unemployment rate of 3.5% is very close to the federal minimum of 3.7%.

Top 10 Industries for Small Businesses in TN

TN Small Business Demographics

• 42.9% of SMEs in the state are owned by women which stands for 243.863 entities, and 92% of them are non-employers;
• Men control 352.442 small private firms, and 17% of them have employees on their payrolls;
• Companies equally owned by men and women account for 21.032, and more than 50% of them are work givers;
• Female workers represent over 48% of the total private sector labor pool in the state;
• 7.8% of private entrepreneurs and 6% of state employees are military veterans;
• 21% of small businesses belong to racial minorities, with the following ownership division (Census data):
  • Black Americans: 83.539;
  • Hispanics: 23.675;
  • Asians: 19.453;
  • American Indians and Alaska Natives: 1.011;
  • Ethnic groups ensure 26.2% of the workforce in the state.

TN Small Business Formation

• To launch your venture in the state under the roof of a corporation, you need to file the Corporation Charter with the state and pay a compulsory $100 registration fee;
• To register an LLC in Tennessee, you should submit the Articles of Organization to the Secretary of State and appoint a Tennessee registered agent;
• Notably, an LLC filing fee in TN is not a flat rate. It’s charged at $50 per member, yet, a minimum fee is $300 even if you are a single member. And the maximum rate is $3.000 for any number of co-owners above 60;
• The state law calls LLCs to file an annual report to stay compliant. A reporting fee is calculated in the same manner as the filing fee;
• With no individual income tax in place, the state taxes corporate incomes under a flat 6.5% rate;
• Licensed professionals in the state are exposed to a professional privilege tax of $400, which is paid annually;
• The state has a franchise tax for registered entities. It’s calculated based on book value at $0.25 per $100, and a minimum payable sum is $100;
• An excise tax is levied at a flat rate of 6.5%;
• The state sales tax rate is 7%. With a maximum local sales tax of 2.75%, the combined average rate is quite high at 9.55%.

References 

1. Tennessee - Wikipedia
2. Tennessee Small Business Economic Profile 2022
3. Tennessee - State Economic Profile
4. Tennessee Small Business Statistics (2022)