Get all of the information you need to start and run a small business.
Here's an overview of the key steps you'll need to take to start your own business in Tennessee.
Take time to explore and research ideas for your business. At this stage, take into consideration your own interests, skills, resources, availability, and the reasons why you want to form a business. You should also consider the likelihood of success based on the interests and needs of your community. Read our article for more tips on how to evaluate business ideas.
After you select an idea, consider drafting a business plan to determine your chances of making a profit. When you create a plan, you will have a better idea of the startup costs, your competition, and strategies for making money. Investors and lenders might ask to review your business plan before providing financial assistance. To learn more about the benefits of business plans, and how to create one for your enterprise see Why You Need to Write a Business Plan.
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. Read our article for 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 name 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 to collect 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. 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. Before you commit to a location, take time to calculate the costs of running your business in the desired spot, including rent and utilities. You can refer back to your business plan to evaluate whether you can afford your desired location during your company's early months.
It is important to verify that the spot is zoned for your type of business. You might find zoning regulations for your town or city by reviewing your local ordinances and contacting your town's zoning or planning department. Read our article for more tips on picking a location.
One alternative to opening your business at a new location is running your company out of your home. If you decide to run a home-based business, again check your local zoning laws. In addition, review your lease (if you rent your home) and homeowners association rules (if applicable), either of which might ban some or all home businesses.
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. Sole proprietors 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.
Business insurance can protect your company and your personal assets from the fallout of unexpected disasters, such as personal injury lawsuits or natural catastrophes. An insurance agent can help you explore the different coverage options for your business, such as general liability insurance to protect you against claims relating to bodily injury or property damage. To learn more, see Nolo's article, What Types of Insurances Does Your Small Business Need?
No matter the type of business you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, like LLCs and corporations, a separate bank account is necessary to maintain your liability protection. To learn more, see Opening a Business Bank Account.