Starting LLC in Tennessee: Peculiarities & Detailed Manual
Want to start an LLC in Tennessee? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Tennessee, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Tennessee LLC: The Notion & Essence
Many Tennessee business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Tennessee puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Tennessee’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Tennessee obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Tennessee’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Tennessee and will help you to start an LLC. The agent can be an Tennessee resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner. The State of Tennessee notifies:
A corporation running a business in Tennessee must appoint an individual or legal entity situated in the state. They must receive correspondence and legal claims on its behalf. Their name, as well as street address, is to be permanently registered in the Division of Business Services.
A registered agent guarantees an excellent reputation for your Tennessee LLC. Also, if your business gets worse, Tennessee can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Tennessee, you must file the Articles of Association with the Tennessee State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
The fee to launch an LLC: Tennessee levies a $300 minimum fee to ground an LLC.
Processing Time: If you mail the forms, the state will need 4-5 business days to handle the paperwork and it back. With online filings, it will take 2-3 business days to process them. If you have a chance to directly bring them to the office yourself, then your documents will be ready within one business day. You must pay a fee – $50 per member of a company; however, the minimum payment amounts to $300. Be aware processing won’t start until you’ve submitted all documents duly filled.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Tennessee, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
The legal nature of your business determines the way you’ll pay state taxes in Tennessee. Generally, LLCs must cover income taxes, but the state levies those taxes only from companies dealing with stocks or bonds and other investments. Nevertheless, every LLC registered in Tennessee must make payments to the state’s Franchise Tax. You’ll access more information on the fee here.
LLCs operating in retail sales are expected to cover the streamlined sales tax. It currently amounts to 7%; the comprehensive instruction on dealing with the tax is available here.
LLC owners with staff are also obliged to pay several taxes dedicated to the labor force. For instance, Tennessee employers should fund the state’s unemployment insurance. The payment isn’t a tax per se, yet, it must be dealt with regularly. You can access more information on the fund at the Tennessee Department of Labor and Workforce Development.
Besides the general taxes in question, Tennessee also charges payments relevant only to particular industries. For instance, these taxes apply to LLCs operating in sports and alcoholic beverages, and others. Here you’ll get additional information on Tennessee business taxes and have an opportunity to submit them.
Local Tax Business Demands
The exact location of your LLC influences its taxation as well. Thus, several counties charge additional sales taxes on top of the state ones. Municipalities also levy some other fees, which you can study here. We advise you to attend a local government office, so you’ll get a full picture of local requirements.
Stage №6: Getting Business Licenses & Permits
You have to acquire a business license if your company owns more than $10,000 in annual sales subjected to taxation. You’ll access more data on a business license in Tennessee here.
The state also requires all LLC owners to obtain permits for the federal government if their business operates in specific occupations like fishery, mining, transportation, and more. The full list of federally-regulated industries with obligatory permits is provided by the Small Business Association.
Since Tennessee upholds industry-specific requirements to taxation, it naturally requires industry-related licenses. The state issues a great variety of business permits, so you’ll find the one, which applies to your company. We advise you to check the licensure database provided by the state here and keep in mind that a local municipality may also demand specific licenses.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Tennessee Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Generally, LLCs must submit a report on the profits they make. It’s worth mentioning that the report must be presented regardless, even if your company bears losses. Since Tennessee doesn’t levy income taxes reports on your profits will be rather simple. Still, additional information, as well as forms, are available here.
Referring to the services of a qualified accountant
Every LLC presents an annual report. Entrepreneurs can submit it per Internet here. The report must be filed within four months before your LLC date of establishment.
The cost of presenting the document equals the one for launching an LLC – $50 per member with a minimal sum amounting to $300 and maximal payment reaching $3,000. The report is a means of keeping the state updated on any vital data regarding your LLCs and crucial changes it has undergone over a fiscal year.