Here’s an overview of the key steps you’ll need to take to start your own business in Tennessee.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Tennessee Secretary of State (SOS). You can check for available names by doing a business information search on the SOS website. You can reserve an available name for four months by filing an application for reservation of name form with the Tennessee SOS. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Tennessee and How to Form a Corporation in Tennessee for more information.
If your business is a sole proprietorship or partnership that uses a business name that is different from the name of the business owner (for a sole proprietorship) or individual partners (for a partnership), Tennessee does not require you to register a fictitious business name.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Tax Registration. If you will be selling goods in Tennessee, you must register with the Department of Revenue tocollect sales tax. There are also other business-related taxes for which you may need to register with the DOR.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Regulatory licenses and permits. These cover areas such as:
Different licenses and permits are issued by different agencies. Some of the most important issuing agencies are:
For information about local licenses and permits, check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. The Department of Commerce & Insurance (TDCI) oversees many (but not all) of the regulatory boards and commissions for licensed professions and occupations.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Because Tennessee does not have a personal income tax, owners of some forms of business will not owe state tax on their business income. See Tennessee State Business Income Tax for more information on state business taxes in Tennessee.
Sole proprietorships. Pay federal taxes on business income as part of their personal federal income tax returns.
Partnerships. Partners in general partnerships pay federal taxes on partnership income. Partners in other kinds of Tennessee partnerships, such as Limited Liability Partnerships (LLPs) also must pay an excise tax and a franchise tax. LLPs also must file an annual report.
LLCs. Members pay federal taxes on their share of LLC income on federal tax returns. In addition, LLCs themselves must pay an excise tax and a franchise tax. Tennessee LLCs also must file an annual report with the Tennessee SOS. See Tennessee LLC Annual Report and Tax Requirements for more information.
Corporations. A shareholder-employee with a salary must pay federal income tax on his or her personal federal tax return. The corporation itself is subject to Tennessee corporation taxes. Corporations also must file an annual report with the Tennessee SOS.
Apart from Tennessee taxes, there are federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.