How to Qualify as a Foreign Business in Tennessee

Learn the rules for qualifying your LLC to do business in Tennessee.

By , Contributing Author

If you own a business that was created in a state other than Tennessee, you will need to qualify or register that business in Tennessee if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Tennessee) limited liability company (LLC) to do business in Tennessee.

What is a Foreign LLC?

For Tennessee purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Tennessee. In other words, foreign doesn't mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in North Dakota is a foreign LLC in South Dakota.

Transacting Business in Tennessee

According to Tennessee's LLC Act, you are required to register your foreign company with the state of Tennessee if you are "transacting business" in Tennessee. What does this mean? Well, like most states, Tennessee's LLC Act does not specifically define what the phrase "transacting business" means in relation to foreign registrations.

However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state's residents. Generally speaking, physical presence and nexus are synonymous, and mean having:

  • a warehouse in the state
  • a store in the state
  • an office in the state, or
  • a sales representative in the state.

Certain exceptions may apply and the rules get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state.

For more details, including some possible distinctions between physical presence and nexus, check Nolo's articles on Internet Sales Tax: A 50-State Guide to State Laws.

Certain Activities Are Exempt

Like most states, Tennessee's LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:

  • defending or settling a lawsuit
  • dealing with internal business affairs such as holding member or manager meetings
  • having a bank account in the state
  • having an office, agency, or persons in the state for handling your company's own securities
  • selling through independent contractors
  • soliciting or obtaining orders where the orders require acceptance outside the state before they become contracts
  • creating or acquiring indebtedness, deeds of trust, mortgages, or security interests interest in real or personal property
  • securing or collecting debts
  • owning, without more, real or personal property; provided, that for a reasonable time the management and rental of real property acquired in connection with enforcing a mortgage or deed of trust also will not be considered transacting business if the owner is attempting to liquidate the investment and if no office or other agency therefor, other than an independent agency, is maintained in Tennessee
  • conducting an isolated transaction that is completed within one month and is not in the course of similar, repeated transactions; and
  • transacting business in interstate commerce.

For the actual legal description of each of these items, check this Tennessee Secretary of State (SOS) FAQ page or Section 48-246-102 of the Tennessee Code. If your LLC's only activity in Tennessee is one or more of the listed items, you should not need to register with the state.

Certificate of Authority

To register your foreign business in Tennessee, you must file an Application for Certificate of Authority: Limited Liability Company with the SOS. You can download a copy of the form from the SOS website.

To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. However, since every state is a little different, there may be items that Tennessee asks for that you did not need to provide when you first organized your LLC. More specifically, for a Tennessee Certificate of Authority, you need to provide:

  • the name of your LLC (and, if different, the name under which you want to obtain your Certificate of Authority)
  • the name of the state where your LLC is organized
  • the date on which you formed your LLC
  • the date you started transacting (doing) business in Tennessee
  • any additional name or designation for your LLC (such as an assumed or fictitious name)
  • the month in which your LLC's fiscal year closes
  • the effective date for the Certificate of Authority
  • how your LLC is managed (member-managed, manager-managed, director-managed, etc.)
  • the number of LLC members at the date of filing
  • the duration of your LLC (which may be perpetual)
  • the address of your LLC's principal office, which must be a street address
  • your LLC's mailing address if different from the principal office address
  • additional information if your LLC is a professional or non-profit LLC
  • an indication of whether LLC members are to be held personally liable for LLC debts, obligations, and liabilities, and
  • an authorized signature.

Your LLC's name must be distinguishable from other business entities already registered in Tennessee. You can submit the application by mail or by walk-in at the Secretary of State's office. The filing fee is $50 per member based on the number of members on the date of the filing, with a minimum fee of $300 and a maximum fee of $3,000.

What If You Don't Register?

If your LLC transacts business in Tennessee without a Certificate of Authority, it cannot bring a lawsuit in the state. Moreover, if your LLC transacts or conducts business in Tennessee without authority, it is liable for fines, and no Certificate of Authority will be accepted until the fines are paid. However, not having a valid Certificate of Authority does not invalidate any of your LLC's contracts or stop your LLC from defending a lawsuit in the state.

Registering a Foreign Corporation

If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Tennessee are similar. You will, however, have to use a different application form,Application for Certificate of Authority For-Profit Corporation(SS-4431). See theTennessee Secretary of State websitefor forms, information, and filing instructions for registering a foreign corporation in Tennessee.

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