How to start a Tennessee LLC

An LLC is a type of business that helps protect its owners (called members). This means that if the business owes money or gets sued, the members’ personal assets, like their house or car, are usually safe. 

In the state of Tennessee, an LLC is defined as “a limited liability company formed under [Chapter 249], or a limited liability company formed under the Tennessee Limited Liability Company Act [...] that has elected to be governed by this chapter, or, where expressly indicated, a limited liability company formed under and governed by the Tennessee Limited Liability Company Act” (§ 48-249-102). That means an LLC in Tennessee is a company created within the state or a company that becomes subject to Tennessee’s current state regulations surrounding LLCs (Title 48 Chapter 249) or prior regulations.

If that sounds like a lot of legal jargon – that’s because it is! What you need to know is that LLCs are popular with business owners because they are simple and flexible to run. They have fewer rules compared to comportations and the owners can choose if they want to manage the business themselves or appoint managers to do it. 

Another benefit is how taxes work: LLC owners can pay taxes through their own personal tax returns, or they can choose to have the business pay taxes separately, like a corporation. This gives owners more choices in how they handle taxes as their business grows.

Why should I register for an LLC in Tennessee?

You may want to register for an LLC in Tennessee when:

• You own or want to start a business in Tennessee, or want to expand an existing business into Tennessee, and want to stay legally compliant. 
• You own or want to start a business, and want more flexibility on how you will manage the business or pay taxes than a corporation would provide.
• You want to protect your personal assets from potential liability resulting from business you conduct in the state of Tennessee. 
• You own or want to start a business, and want to register in Tennessee to open accounts, lease or buy property, secure funding, or hire employees.

Do I need to file my LLC in Tennessee if I live in another state?

Any LLC that does business in Tennessee must register with the State of Tennessee. LLCs based in Tennessee are called "domestic LLCs," and out-of-state LLCs are called "foreign LLCs." If your LLC was organized and operates outside of Tennessee, establishing a foreign LLC within Tennessee will allow for you to conduct business there.

Foreign LLCs and domestic LLCs may have different filing and compliance requirements -- Rocket Lawyer can help you navigate foreign LLC registration, regardless of where you live.

How to start an LLC in Tennessee

1. Find a unique name for your Tennessee LLC

The state of Tennessee requires that the names of all LLCs in the state:

• Must contain the words "limited liability company," or the abbreviation "L.L.C." or "LLC," or words or abbreviations of like import in another language, provided that they are written in roman characters or letters.
• Not imply a different business purpose than is authorized for an LLC.
• Are not too similar to existing LLCs in the state. You can search the state of Tennessee's database of business entities in the state to ensure your business' name is unique.

Rocket Lawyer can help you determine whether your business' name is eligible for registration in Tennessee and may be able to help you reserve the name before you file your LLC.

2. Include your other LLC members (if any)

In Tennessee, you can in fact form as a one-person LLC. In this case, the LLC would be referred to as a single-member LLC (SMLLC), whereas if there is more than one owner, the LLC may be called a multi-member LLC. 

The main difference between single-member and multi-member LLCs lies in ownership structure and management. With a single-member LLC, you have full control over the business. In contrast, a multi-member LLC has multiple owners, each with a specific percentage of ownership as defined in the operating agreement. This means that in a multi-member LLC, owners share profits, losses, and tax responsibilities based on their ownership percentage.

3. Provide a Tennessee address

This will be used as your official LLC address. The address that you list may either be your home, an office, or another physical location, but it cannot be a PO box.

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have a Tennessee address) or choose one to do that service for you (if you are not located in Tennessee or would like an extra layer of privacy).

5. Register your LLC with the state of Tennessee

Once you have a business name and registered agent, you can register your business as a Tennessee LLC with the state of Tennessee by filing your Articles of Organization. This document may be referred to informally as an LLC's "Articles," or in other states, it may be called a "Certificate of Organization," "Certificate of Filing," or "Certificate of Formation."

6. Get an Employer Identification Number (EIN)

Tennessee LLCs are required to have a Federal EIN tax number. Think of your tax ID as the social security number for your company. It will be important for business contracts, tax filings, and all manner of documents down the line. Every company should have one to remain in good standing.

7. Pay the state filing fee

Every state has different fees for forming an LLC, which can also vary from one year to another.

Congratulations! After you have completed all these steps, you have formed your Tennessee LLC.

What to do after forming a Tennessee LLC

There are a few steps you need to take to maintain your Tennessee LLC:

1. Create an Operating Agreement: Tennessee requires companies to create an Operating Agreement. We can help you create your Tennessee LLC Operating Agreement online.
2. Hold a meeting: a first meeting with members of an LLC is not required by law, but it is highly suggested in order to get organized. Also, unlike corporations, LLCs are also not required to maintain Meeting Minutes, but these documents are also recommended as they provide records for important decisions made.
3. Pay taxes according to how you chose to be taxed: traditionally, LLCs are "pass-through entities." This means that you pay your business taxes on your personal tax form. That said, you can elect to be taxed like a corporation, if you choose to do so.
4. File an Annual Report: this is due in the fourth month following the closure of the LLC's fiscal year.
5. Pay the Franchise and Excise tax: this happens annually and is due four and a half months after the LLC's fiscal year closes.

What is needed to keep records for my Tennessee LLC

The State of Tennessee requires the following information to be kept:

• A full list of current members, managers, directors and officers, where applicable, along with the person's full name and last known business address. A tax identification number of each member must also be provided.
• A current list, including full names and addresses, of each financial rights holder of an LLC along with the holder's rights held and tax identification number.
• A copy of the LLC's articles and amendments executed.
• A copy of any effective Operating Agreements.
• Copies of the last three years federal, state and local income tax returns.
• Copies of any financial information regarding the LLC's financial condition for the three most recent fiscal years.
• Records of proceedings of members and holders.
• A copy of all written consents of members or holders.
• Records of all proceedings, for the last three years, of managers or board of directors.
• Statements of all contributions made to the company, the value of the contribution and the identity of the contributor.
• A copy of all contribution agreements.
• A copy of the most recently filed annual report.

Still have questions? Rocket Lawyer can help you with the process of forming a Tennessee LLC. Get started today!

  

Key takeaways Registering an LLC in Tennessee can give you a lot more flexibility than a corporation, as well as protection for your personal assets from potential liabilities. Even if you live in another state, you must register your LLC in Tennessee if you do regular business there, like selling things or having employees. After starting your LLC, it is advisable that you create an Operating Agreement and hold a first meeting. You will also need to file an Annual Report and pay franchise and excise taxes every year. Keep records of your Tennessee LLC, like the names of all members, tax documents, and your business rules. These help you stay organized and follow the law.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is an LLC
• How are LLCs taxed
• How to start an LLC
• Do I Need a Registered Agent?
• How and when to file an Annual Report