If you want to start and run a Tennessee limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Tennessee LLCs.
The State of Tennessee requires you to file an annual report for your LLC. You can mail in the report or complete it online at the Secretary of State website. You can download an annual report form already containing key information for your LLC from the SOS website. To complete the annual report, you'll need to provide some basic information, such as:
The annual report is due by the first day of the fourth month following the close of the LLC's fiscal year. 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. The filing fee is $50 per member with a minimum fee of $300 and maximum fee of $3,000.
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay federal income taxes, only their members do.
Tennessee, however, imposes a franchise tax and an excise tax on most LLCs. You must register for this tax through the Department of Revenue (DOR). You can register by mail or in person at a DOR location. In general terms, the franchise tax is calculated as a small percentage of an entity's net worth and the excise tax is calculated as a percentage of net earnings from business done in Tennessee. Check the DOR website for more details.
In some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) Tennessee's franchise and excise taxes also apply to LLCs taxed as corporations.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Tennessee employers also may have to pay taxes to the state.
More specifically, you'll probably need to register to pay state unemployment insurance (UI) taxes. These taxes are handled through Tennessee's Department of Labor and Workforce Development (LWD). You can register for these taxes using Form LB-0441. Then, each quarter, use Form LB-0456 and Form LB-0851 to report on wages and pay the UI taxes. For more information, check the LWD website.
If your LLC will sell goods to customers in Tennessee, you will need to collect and pay sales tax. This means you'll have to register for this purpose with Department of Revenue and then make periodic sales tax payments for goods sold. You can register online or complete a paper DOR form (Application for Registration). After you've registered, you'll receive a sales tax permit. Then, on a periodic basis (for example quarterly), you must submit sales tax returns to the DOR. Pay sales tax using Form SLS 450 or file online. For more information, check the DOR website.
If you will be doing business in states other than Tennessee, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Tennessee, see Nolo’s article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.