How to Start your LLC in Tennessee

The taxation of LLCs is also done as pass through entities, i.e., the profits and losses are directly transferred to the personal tax returns of the members, eliminating the possibility of taxation twice. Also, LLCs have a high level of management flexibility, tax choice, and other features, which makes them the right choice of business owners in Tennessee. The following is a stepwise process of establishing an LLC in Tennessee.

1. Name Your Tennessee LLC

The process of naming your LLC is a crucial process since it forms your brand name and also forms a positive first impression. The first thing you should do is to explain what your business is - know what your business does and what message you actually want to get across. Get recommendations with reputed friends or mentors and do online research to find out whether domain names are available and whether the names contradict other businesses.

Name generators On-line business name generators are more inspirational, but should depend on your judgment and knowledge of your business.

Once you have made your search to a narrow, search the US Patent and Trademark Office (USPTO) and make sure that the name is not federally trademarked, then you have to search the Secretary of State Tennessee.

Office of the Tennessee Secretary of State
ATTN: Corporate Filing
312 Rosa L. Parks Ave, 6th Floor
Nashville, TN 37243

Doing Business As (DBA)

In case you would use a different name than you are called within your LLC, Tennessee would demand you to apply an assumed name (also referred to as a DBA). This gives you the ability to open bank accounts as well as do business under the name. Registration is registered online through the portal of the Secretary of State involving the use of LLC control number with a filing fee amounting to 20 dollars.

2. Select a Registered Agent

According to the Tennessee law, all LLCs are required to have a registered agent, who serves as the representative point of contact in terms of legal, tax and business communication. Your LLC may have a member of the LLC, another person, or a professional service which complies with state requirements as your registered agent.

A registered agent must:

• Be at least 18 years old
• Be located in Tennessee (P.O. boxes are not permitted)
• Have to be available within regular working hours.
• Be incorporated to carry on business in Tennessee in case of an entity.

To make sure that compliance is achieved, many business owners use professional services of a registered agent without violating privacy and flexibility. You can do it by being an agent of yourself, but you need to be available during business hours in the address listed.

3. Decide Your Management Organization

Tennessee LLCs may be organized in either member-managed or manager-managed. Member-managed LLC: All the members are involved in day-to-day operations and decision-making. Manager managed LLCs enable some of its members to assume a passive role as some managers, who are or are not members, run the day to day operations of the company.

Members-managed LLC are less complicated and more prevalent in smaller businesses whereas manager-managed LLC are applied in larger LLCs or investors who prefer to be silent. In case you fail to specify in your Articles of Organization, Tennessee will revert to a member-managed organization.

4. Articles of Organization

The formal filing of your LLC would be done through Articles of Organization to the Tennessee Secretary of State. This is done either online or through mail. The Articles include:

• LLC name and designation
• Trigger information of registered agents.
• Principal office mailing address and address.
• Member and manager data.
• Fiscal year close month
• Any additional provisions

Contact Information:
Tennessee Secretary of State
312 Rosa L. Parks Avenue, 6th floor, Nashville, Tennessee 37243.
Phone: (615) 741-2286

5. Create an Operating Agreement

Even though the state of Tennessee does not enforce an operating agreement, it is highly advisable to have one. This is an internal document that clarifies who owns what, managements, voting role, sharing of profits, processes of joining or quitting membership, and resolving disputes.

Operating agreement is advantageous even to single-member LLCs because it allows the establishment of the formal structure of the company and gives a legal understanding of the company. Online templates are important since one can have a lawyer review the template and make sure it is accurate and enforceable.

6. Register an Employer Identification Number (EIN)

Taxes, the employment of workers, opening bank accounts, and business credit are requirements that need an EIN issued by the IRS. In case a company has more than one member or employs some people, EIN is obligatory.

Applications must include the name of the responsible person that is a natural person and that controls or manages the funds in the LLC and their Taxpayer Identification Number. The form may be filled and submitted on the IRS web site to be processed immediately.

7. Acquire Business Licenses and Permits

The Tennessee businesses are expected to adhere to the federal, state, and local requirements of the licenses. Certain licenses are industry specific e.g. construction, food services, healthcare (OSHA) childcare, finance or liquor. Others consist of zoning, fire safety and signage permits.

The greater part of the Tennessee businesses is required to obtain a business tax license and possibly the licenses of other cities, based on the locality of operation. Failure to comply may lead to fines or even shut down.

A business attorney or professional licensing service will help you take all of the requirements into consideration in an efficient manner.

8. Determine Your Tax Status

Tennessee defaults to pass-through LLCs, although the state levies taxes on LLCs inconsistent with those levied in many other states. The members of LLC pay personal income taxes on profits, the LLC pays franchise and excise taxes.

Single-Member LLCs

Default tax In the same manner as sole proprietorships. Record the income on Schedule C and pay the self-employment taxes.

Multi-Member LLCs

The partnerships are taxed in default. File form 1065 to IRS; and profits and losses are transferred to personal returns of members.

Non-Compulsory Corporate Taxation

C-Corp or S-Corp CLLs may choose to be taxed as a C-corporation or S-corporation by filling the necessary IRS forms. The taxation of C-Corp can be advantage to retained earnings whereas S-Corp as a member can help to lower or reduce self-employment tax liability in case reasonable salaries are paid to the members.

Other Tennessee LLCs Steps

Open a Business Bank Account

Isolating business and personal finances limits your liability coverage as well as makes accounting easier. You will be required to have your EIN and Articles of Organization.

Business Credit Card

Helps create credit in the business, and pays up start-up costs without combining personal money.

Business Insurance

Most businesses need general liability insurance, professional liability insurance, workers compensation insurance, property insurance, commercial auto insurance, equipment breakdown insurance or a business owners policy (BOP) which is a combination of various types of insurance.

Record Keeping

Keep all formation documents, contracts, tax filings and correspondence in a safe place.

Annual Reporting

LLCs are required to submit an annual report by the first day of the fourth month of the end of the fiscal year. The filing fee is $300.

Tennessee LLC FAQs