How to Start an LLC in Tennessee

A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps you need to take to form an LLC in Tennessee. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.

1. Choose a Name for Your LLC

Under Tennessee law, an LLC name must contain the words "Limited Liability Company" or the abbreviations "L.L.C." or "LLC."

Your LLC's name must be distinguishable from the names of other business entities already on file with the Tennessee Secretary of State. Names may be checked for availability at the Tennessee Secretary of State business name database.

You may reserve a name for four months by filing an Application for Reservation of Limited Liability Company Name (Form ss-4228) with the Tennessee Secretary of State. The filing fee for a reservation is $20. The reservation may be filed online or by postal mail.

2. Appoint a Registered Agent

Every Tennessee LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf if it is sued. The registered agent may be a Tennessee resident or a business entity authorized to do business in Tennessee. The registered agent must have a physical street address in Tennessee.

3. File Articles of Organization

A Tennessee LLC is created by filing Articles of Organization (Form ss-4270) with the Secretary of State. The articles must include:

• the LLC's name
• a name consent if the LLC's name is similar to an existing name in Tennessee
• an additional designation for the LLC's name--applicable to certain types of LLCs, such as professional LLCs, series LLC, banks, and others
• the name and address of the LLC's registered agent
• the end month of the LLC's fiscal year--usually December
• the effective date of the articles, if not effective upon filing
• whether the LLC will be member-managed or manager-managed
• the number of LLC members on the date of filing
• the LLC's duration, if not perpetual
• the address of the LLC's principal office
• check boxes if LLC is a non-profit LLC, professional LLC, or series LLC
• check box if LLC is an obligated member entity--members will be personally liable for LLC's debts (rare)
• check box if LLC is prohibited from doing business in Tennessee, and
• the signature of a member, organizer, or other authorized person.

The articles may be filed online or by postal mail. The filing fee is $50 per LLC member. The minimum fee is $300; the maximum fee is $3,000. An additional convenience fee must be paid for online filings paid by credit card.

4. Prepare an Operating Agreement

An LLC operating agreement is not required in Tennessee, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.

5. Comply With Tax and Regulatory Requirements

Additional tax and regulatory requirements may apply to your LLC. These may include:

EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.

Business Licenses: Most Tennessee businesses are required to have business licenses, which are issued by the local county clerk. A city business license may be required as well. Check with the county and city clerks for the location of the LLC's primary place of business. For state license information, check the Tennessee Smart Start guide. For more information, see Nolo's article How to Get a Small Business License in Tennessee.

Department of Revenue: In some cases, for example if you will be selling goods and collecting sales tax, you'll need to register with the Tennessee Department of Revenue. (Tennessee also imposes a franchise tax and an excise tax on most LLCs.) You can register online or complete a paper form (Application for Registration). For more information on Tennessee LLC tax registration, see Nolo's article Tennessee LLC Annual Filing Requirements.

6. File Annual Reports

All Tennessee LLCs and foreign LLCs authorized to do business in the state must file an annual report with the Tennessee Secretary of State and pay a $50 filing fee per member (minimum of $300 and maximum of $3,000). Annual reports are due on or before the first day of the fourth month following the LLC's fiscal year closing. For example, if your LLC's fiscal year closes on June 30, your annual report is due by October 1. If your fiscal year is the calendar year, the report is due by April 1. Annual reports may be filed online or by postal mail.