It might seem like a daunting task at first, but starting a Tennessee LLC can be accomplished entirely on your own provided you carefully follow every formation step. In this review, we will cover the basics of Tennessee LLC formation, as well as some initial tasks you might have to take care of after the registration itself, including:
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The first major step of business formation is finding a good LLC name for your Tennessee entity. Much like other states, Tennessee has specific naming regulations when it comes to most businesses. Filing your formation documents with an uncompliant LLC name will likely get your application rejected.
Under Tennessee Code Section 48-249-106, every domestic and foreign LLC must contain an indicator of its business structure such as:
The same applies to professional LLCs that have to include indicators like PLLC/PLC.
In subsection (2) of the Tennessee Code Section 48-249-106, you will also find naming restrictions for LLC entities. They state that an LLC name can’t use words that indicate:
If you don’t know whether your LLC needs a license, contact the Secretary of State office and your local county/city rep to ensure your business remains compliant.
Perhaps the most pertinent naming rule has to do with uniqueness. In Tennessee, an LLC name must be sufficiently distinguishable. This means that even if an LLC name is not identical to an already existing business name but is still deceptively similar, such a name won’t be considered valid.
When you narrow down your options, don’t rush with the actual filing just yet. Each of your potential LLC names must first be checked for validity. You can see whether your preferred name is sufficiently distinguishable by using the nifty business name search tool on the Tennessee Secretary of State’s website.
If your name is a close match with another business, there are a few ways to resolve this:
Should your name be deemed distinguishable, you have an option to reserve it for up to four months. Under the Tennessee Code Section 48-249-107, available names can be reserved for up to four months but it’s possible to renew the reservation after the initial period expires.
Reserving an LLC name costs $20 per filing. To do so, you have to submit an Application for Reservation Of Limited Liability Company Name (Form SS-4228) along with the fee.
Unfortunately, the state of Tennessee accepts only paper applications at the following address:
Corporate Filings312 Rosa L. Parks Avenue
6th Floor, William R. Snodgrass Tower
Nashville, Tennessee 37243
You can also transfer or cancel the reservation by filing a form with the Secretary of State.
Remember that it’s not the end of the world if you can’t get the perfect LLC name during your formation. In fact, many businesses, even the ones that got lucky with their registration, eventually use one or multiple DBA names.
A DBA (“doing business as'') is a fictitious name assigned to a specific business entity that allows them to do transactions under a name other than their registered LLC name.
In Tennessee, DBAs are called assumed names. According to the Tennessee Code Section 48-249-106, assumed names can be registered for five-year periods after which you will have to renew DBAs for another five years and so on. The renewal application must be submitted no later than 2 months before the DBA’s expiration date.
For faster processing times, you might want to submit your DBA forms online. However, you can also send the application by mail in which case there will be no service fee added to the $20 filing fee.
To register a DBA, company owners must file the application online using the Secretary of State’s registration form. You will be asked to provide the following information:
If you choose to pay online, the DBA filing fee is set at $20 plus service fees that vary based on the payment method (for credit/debit cards at least 2.29% and $0.95 for e-checks).
There are plenty of reasons for using DBAs, all of them valid. Many LLC owners choose to transact under DBAs to avoid the issue of name unavailability, while others simply need to expand their product lines or services beyond the narrow scope of the LLC’s initial name.
Additionally, you will be able to omit the business structure designation if you use a DBA, so there won’t be any need to tack on an “LLC” to the assumed name.
If you registered your company under the name “Cheatham Excavations LLC,” a DBA allows you to simply go by “Cheatham Excavations”.
For instance, you could use “Cheatham Construction” or “Cheatham Landscaping and Woodwork” or “Cheatham Electrical and Heating Services”.
Moreover, if the main purpose of your business was initially demolition and excavating services, but your company has expanded since then to providing residential constructions and adjacent services, you might want to get an assumed name that reflects these ancillary services.
Under the Tennessee Code Section 48-249-109, assigning a registered agent is mandatory for LLCs of all types, either domestic or foreign. A registered agent takes on the responsibility of receiving and managing the company’s correspondence and legal documents such as service of process.
The service of process refers to the legal practice of serving court summons to the defendant by the representatives of the plaintiff. When you are involved in a lawsuit as an individual, the summons is delivered to you personally. For LLCs, these documents go to your registered agent first.
Tennessee registered agent can be almost anyone, including:
Regardless of who is appointed as your registered agent, they are obligated to register a physical Tennessee address as their business office which should be identical to their registered office.
Subsection (b) of the Tennessee Code Section 48-249-109 also states that if a registered agent resigns or is no longer in your employ, it’s your duty to find a new registered agent as soon as possible. Tennessee businesses must maintain a registered agent at all times, otherwise, your LLC could be fined and stripped of its good standing.
Some entrepreneurs choose to act as their own registered agents. And while this method has its own merits, for the most part, it’s not the best course of action you could take for your entity management. But let’s look at the pros and cons of this method more closely.
Quite evidently, the disadvantages of being your own registered agent are more numerous than any benefits it can bring. The best thing you could do in this case is to hire a professional registered agent service.
TipIf you don’t know how to choose a good registered agent service, be sure to check out our Best Registered Agent ranking to get a better idea of your options.
Annual fees for these registered agents aren’t that high, amounting to about $100/year on average. Some LLC formation companies offer registered agent subscriptions for free for up to a year.
The articles of organization is the main formation document used for LLC registration. For business entities, their official status can only be confirmed when the secretary of state approves their formation documents. No Tennessee entity can legally operate without this authorization.
If you prefer outsourcing your LLC filings, we recommend using professional services that specialize in LLC formation. You can find out more about these providers in our Best LLC formation services article.
Under the Tennessee Code Section 48-249-202, the articles of organization must contain key information about the business in order for a company to do business in Tennessee. These items include:
In subsection (b) of the Tennessee Code Section 48-249-202 you will also find recommendations for other provisions you might want to include in your articles of organization.
Tennessee articles of organization can be submitted online. Alternatively, you can do this filing by mail by sending Form SS-4270 to the secretary of state. Online applications are typically processed faster.
While all states have a mandatory service fee for this filing, in Tennessee, this amount is calculated differently. Here you will have to pay $50 for each LLC member at the time of filing with the caveat that the total amount is no lower than $300 and no higher than $3,000. In theory, this means an LLC must have at least 6 but no more than 60 members.
Online applications are typically processed immediately upon submission. Mail applications might take between 3-7 days to review.
The operating agreement is an internal document designed for outlining the LLC’s standard operating procedures, general business conduct, and to regulate the affairs between LLC members and other key participants.
According to the Tennessee Code Section 48-249-203, LLC members can create an operating agreement at any time before, after, or during the filing of the company’s articles of organization.
In Tennessee, an operating agreement may be verbal. However, it’s strongly recommended to create it in writing. That said, the items you choose to include in the operating agreement don’t have to be in a single document.
This step of Tennessee LLC formation is essential for maintaining order among the company’s members, directors, officers, and managers. If you don’t draft a clear set of rules before or even after you start your LLC, it would be much harder to run your business in the future.
Operating agreements usually include the following provisions:
What you must remember is that the operating agreement cannot go against nonwaivable provisions of the Tennessee Code. An operating agreement takes effect when each participating member has signed it. There is no need to file a Tennessee LLC operating agreement but it’s a good idea to always keep a copy on hand.
The same way individuals use SSN to report income taxes, LLC owners might also need a number similar in function for business tax filings, and this is where the Employer Identification Number, or EIN, comes into play.
The EIN is a nine-digit code assigned to a business entity by the IRS to track its financial activities. Although this filing is not strictly mandatory, obtaining an EIN is still something we highly recommend for every multi-member LLC.
If you aren’t sure whether your LLC requires an EIN, consider the following:
If any of this rings true, then you will likely need to get an EIN for business tax purposes. One of the most common exceptions is single-member LLCs whose sole owners can use their Social Security Numbers to file tax returns.
In Tennessee, you can obtain an EIN online through the IRS website or you can mail the IRS form SS-4 at least 4-5 weeks before using the EIN. Naturally, online filings are much faster. The IRS tends to process them immediately upon submission.
It’s worth keeping in mind that while some formation services charge for EIN filings (usually about $50), this service is entirely free. The IRS has no service fees or hidden charges for EIN applications.
Although at this point, your LLC formation is technically complete, there’s still more to be done for business maintenance and long-term compliance. Below, we will discuss some of the most essential tasks that should be taken care of before your LLC could conduct business.
It’s not mandatory for LLCs to have business bank accounts, but it’s generally recommended to open one anyway to make the financial aspect of your LLC management considerably easier.
There are a few major benefits to opening an LLC bank account, including:
What you need to remember is that it’s nearly impossible to retain the LLC’s inherent personal liability protection if you use your individual bank account to conduct your company’s activities.
There has to be a clear legal line of separation between yourself as an individual and your LLC as a separate entity. To do that, your LLC’s transactions have to go through its own bank account with enough proof to show for it.
If the LLC is sued by creditors and you cannot provide sufficient proof that you and the company are two separate entities, then the court has full right to “pierce” the corporate veil and requisition your personal assets to pay the debt.
While insuring your business against every possible incident is impossible, it’s still within your power to protect the LLC against some very common risks. You might want to look into the following insurance policies for businesses:
Ensuring that LLCs are fully compliant with the Tennessee law is the only way for business entities to maintain their good standing and operate smoothly on a day-to-day basis. Let’s look at the key filings you might want to do for LLC maintenance.
Every business is unique in how it relates to the Tennessee license requirements. This means that even if you don’t need a general business license, you might require other forms of permits depending on your LLC’s location, industry, and other factors. You can find out more about this policy on the Tennessee License & Permits page.
Every LLC that plans to conduct business activities in Tennessee qualifies for state taxes, as well as specific taxes applied by the city the LLC is registered in. You can register your LLC for tax using the Tennessee Taxpayer Access Point (TNTAP) where you can also find more information about other tax regulations.
As for tax regulations on the federal level, Tennessee LLCs are classified as pass-throughs by default and do not have to pay federal income tax. The company’s profits and losses are to be reported on the owners’ personal returns using Form 1040, Schedule C.
All businesses must also pay FICA tax, which extends even for LLCs without employees. However, businesses that do employ workers must also withhold the Medicare and Social Security taxes from their paychecks.
Every LLC must inform the state if any changes have occurred since the date of its formation or previous annual report filing. Even if no changes occurred, an LLC must still file an annual report. According to the Tennessee Code Section 48-249-1017, an annual report must include:
The fastest way to file your annual report is to submit it online. You can also file it by mail. The annual report filing fee works similarly to the initial formation fee in the sense that you have to pay $50 for every member the sum of which should be $300 or higher but should not exceed $3,000.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.