Tennessee is a popular location for entrepreneurs, with unprecedented growth in company registrations over the past few years. If you're interested in taking advantage of the state's reduced income tax and other benefits, here's what you need to know about starting a limited liability company (LLC) in Tennessee.
4 Steps to Start an LLC in Tennessee
A limited liability company provides protection for your personal assets in case someone sues your business. If you don't limit your personal liability, the court can order you to sell valuable items to pay a legal judgment. When you have an LLC, only business assets can go toward this type of expense.
You can complete the steps to start your Tennessee business through the official StartSmart portal. However, the state also supports in-person and online applications.
1. Find the Right Name
When you form an LLC, you need a business name that's not already taken by another Tennessee business entity. You can search the Secretary of State's registration database to see if the names on your list are still available. It also makes sense to check whether you can register a corresponding domain name.
Once you land on a top contender, you'll need to add either LLC, L.L.C., or Limited Liability Company to identify your business entity.Under Tennessee's naming rules, you can't use words that suggest a financial business (credit union, bank), law office (attorney, lawyer), or government agency (Treasury, FBI) without the proper documentation.
If you aren't quite ready to complete your LLC paperwork but you want to hold the name, you can reserve it for 120 days. To take this route, fill out Form ss-4228, Application for Reservation of Limited Liability Company Name. You can submit it to the Secretary of State either online or by mail along with a $20 fee.
You might also want to do business in Tennessee under a name other than your LLC's official registered name. In this case, you'll need to complete Form ss-4230, Application for Registration of Assumed Name, also available through the Secretary of State. You may also hear an assumed name called a trade name or doing business as (DBA) name.
2. Select a Registered Agent
Your LLC needs someone with a Tennessee mailing address to accept official legal paperwork, like service of process, for your business. You can act as your company's registered agent, designate an employee for this role, or hire a professional from an agency.
The individual or agent service agrees to be available at the stated physical address (not a PO box) during regular business hours. A registered agent must be at least 18 years old. You'll typically pay a few hundred dollars each year if you hire someone for this service.
3. Submit the Articles of Organization
This official legal document registered your LLC with the Secretary of State as long as you meet the necessary criteria. Form ss-4270, Articles of Organization, requires:
- The name of the entity
- Whether you're a new domestic business entity or a foreign entity registered in another state and expanding to Tennessee
- The purpose of the new LLC
- The name and Tennessee address for your registered agent
- The schedule for your company's fiscal year
- The intended duration of your LLC unless you plan for it to exist indefinitely
- The address of your main business office
- The numbers of owners, known as members when you form an LLC
- The date you want the LLC to take effect (or immediately)
- Whether members will run the LLC or you'll hire managers for this purpose
- The signature of the person who completed the form
You also need to pay a fee of $50 per member, with a minimum charge of $300 and a maximum of $3,000. You can use a credit card if you file online. If you submit your form in person or by mail, you can pay by cash, check, or money order to 6th floor - Snodgrass Tower, Attn: Corporate Filing, 312 Rosa L. Parks Ave., Nashville, TN 37243.
4. Write an Operating Agreement
Although this step isn't strictly necessary, it's strongly recommended if your LLC has more than one member. The operating agreement establishes operational protocols, procedures, and policies for your business, which can help prevent and resolve disagreements down the line. Having this document allows you to make decisions based on your existing agreement rather than the default state laws, which may not fit your specific situation.
Generally, LLC operating agreements include the following information:
- The name and main business address of the LLC
- The purpose of the LLC
- A copy of the Articles of Organization
- The management structure of the LLC
- The plan for dividing profits and losses among members
- How each member will operationally and financially contribute to the LLC
- The protocol for adding and removing LLC members
- Liability and indemnification language
The Next Steps After Forming an LLC in Tennessee
Once the state approves your Articles of Organization, you'll receive an official certificate of formation in the mail. You can use this document to complete the next steps in setting up your brand-new Tennessee business.
Sign up for an EIN
Your employer identification number (EIN) identifies your LLC with the IRS. You'll use it to pay taxes and take care of other financial matters like opening business bank accounts. It's free to get an EIN online and you can fill out the form in just a few minutes. Even if you're a single-member LLC with no employees, using an EIN allows you to keep your Social Security number private.
Start a Business Bank Account
Even if you're the only LLC member, you still need separate accounts to preserve your limited liability protection. You can use your EIN to establish a checking account, savings account, and credit card for your business. As your LLC grows, you will be able to apply for loans and other forms of funding, and you'll need organized finances to make expansion a reality.
Set Up a Way for Customers to Pay
With Pay.com, you can start taking multiple methods of payment even before your LLC has a full website. Our comprehensive payment infrastructure is designed to fit businesses of all sizes. When you first start out, you can send secure Pay Links that connect customers directly with their invoices. Once you've established an online presence, you can easily create a personalized checkout page that reflects your company's unique brand image and voice.
Other advantages of using Pay.com include:
- High-level security measures so you benefit from our compliance with ecommerce industry guidelines
- Robust reporting through our Pay Dashboard where you can track transactions and analyze trends
- Easy yet powerful setup for new tech users along with API and other advanced options for a fully customized interface
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Get Business Licenses and Permits
The Tennessee Department of Commerce and Insurance manages state business licensing, permits, and insurance. If you plan to sell products in Tennessee, you need to register with the state Department of Revenue to pay sales tax. Some LLCs require permits from regulatory agencies such as the Department of Health for restaurants.
In addition to state-level licenses, you'll likely need a local business license from the Tennessee town or city where you set up shop. You can learn more about these requirements from the municipality's tax authority or county clerk.
The Bottom Line
It's simple to start a Tennessee LLC with this four-step guide. Even if you've been successfully doing business without a separate legal entity for some time, putting this structure in place provides valuable protection for your personal assets. Many small business owners prefer the LLC to other business types because it has few operational requirements and beneficial tax treatment.
No matter what type of business you decide to form, Pay.com has the solutions you need for a payment process you and your customers can trust. We focus on providing a seamless experience so your audience can expect reliability when they buy from your business, discouraging abandoned carts and encouraging conversions and return customers.