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How to File an LLC in Tennessee: Tennessee and its Many Business Benefits

There are many requirements that go into getting your Tennessee LLC up and running, some of which can be overwhelming when you’re focusing on growing a new business.

However, with the right support, you’ll be able to successfully form your Tennessee LLC so you can start doing business as a limited liability company. Below you will find an overview of each step:

The Tennessee LLC formation process has nine easy steps:

1. Complete an LLC Name Search

2. Select a Registered Agent

3. Obtain a Certificate of Formation

4. Create an LLC Operating Agreement

5. Get an EIN Number

6. Open a Business Bank Account

7. Complete an Annual Report

8. Obtain a Business License

9. File Your LLC Taxes

What is an LLC?

Starting a business in Tennessee takes a lot of hard work, but it can be made much easier by organizing your business as a limited liability company, or LLC. Operating as an LLC is a smart way to protect your personal assets such as property, boats, and personal bank accounts.

Structuring your business as an LLC protects your personal finances by keeping them separate from the business. If you are subjected to debts and lawsuits because of your limited liability company, you will not be personally responsible. Being free from liability allows business owners to take necessary risks when doing business.

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The Steps to Forming Your Tennessee LLC

1. Name Your Tennessee LLC

The first step of forming your Tennessee LLC is choosing a business name. This business name should represent your business or service in a unique way, and the LLC name should also indicate what your LLC offers. No other business in Tennessee can have a similar name.

You need to make sure that the name is available before filling out the forms for your LLC name. To check if the name has been taken by another limited liability company, you will need to conduct a name search through the Tennessee SOS Business Search on the Tennessee Secretary of State Website. You can find the information here. You can also apply for a name reservation to keep your name options available while you decide.

Once your LLC name is approved, you will need to register your Tennessee limited liability company and pay the $300 state LLC filing fee. The filing fee is paid by the business owner in order to start the LLC. You pay this state filing fee one time, but every year after, you will have what is known as an annual report fee, which will cost you $300 yearly.

2. Appoint a Tennessee Registered Agent

Next, you will need to name a registered agent in the state of Tennessee. Your registered agent will be the person who has agreed to accept mail on the behalf of your business. The registered agent will give you a general point of contact when it comes to payment reminders, tax notices, and other important documents.

Additionally, your registered agent can provide you with the physical street address needed when operating a Tennessee LLC from another state. This means that in order to represent your business entity, your chosen representative must be a resident of Tennessee.

All of the legal documents and correspondence will go through your registered agent at the provided street address, who can then file and organize information on the behalf of your LLC. It’s important that you name a registered agent who is reliable and responsible since important information about your LLC will be sent to this person. Some people want to represent their own LLC, but some people prefer to hire a service that operates in the state of Tennessee.

Who Can Be a Registered Agent?

For someone to become a registered agent, they will have to be a resident of the state, and they will be authorized to do business in Tennessee for liability purposes. You might also choose to elect someone within the company, and it could even be yourself. To be a registered agent, the person will need to have an address within the state, and they must be available for regular business hours.

What Benefits Come with Each Registered Agent Option?

You have a few benefits that come with each option of choosing a registered agent for your limited liability company. If you choose to name yourself as the registered agent when you form an LLC, you know that you will be responsible and reliable for your own LLC formation and business.

If you choose to use a commercial registered agent to help you form an LLC in Tennessee, these services offer professional people to help you with your LLC formation. Regardless of your number of members, it’s always easier to have support when forming an LLC. The service can help your business structure with all of the paperwork, and they will always be available during business hours.

Contact LLC Formations to see how we can help your business entity.

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3. File the Articles of Organization

The Articles of Organization is an important document that you must file with the Tennessee Secretary of State through the division of business services. You can choose to file the Articles of Organization either in person, online or via mail to the Tennessee Secretary of State. You must file the Articles of Organization in order to be approved for an LLC in Tennessee.

When you first go to file the Articles of Organization, you will have to state if you will choose to do this as a manager-managed or member-managed LLC. To file this document, it starts at $50 per member fee. At a minimum, you will pay a minimum fee of $300, and on the higher end, you will pay a maximum of $3,000 depending on if you have one member or many members to include in the Articles of Organization for your Tennessee LLC.

4. Create Your LLC Operating Agreement

When you form a Tennessee LLC, you should also have an Operating Agreement. You don’t necessarily need to have this form in the state of Tennessee, and you won’t have to file an annual report, but it is highly advised that include this when you form your business structure.

Operating Agreements look at the operating procedures and ownership and describe an overview or specific details of how the organizers want to handle the LLC. Operating Agreements can be beneficial for one-member LLCs, or for an LLC with any number of members.

Keeping a Copy with Your Business Documents

You should keep a copy of your Operating Agreement with your business records. The purpose of this form is to spell out who the members are of the agreement, how the daily business operations are handled per member, and how you plan to pay taxes on your Tennessee LLC. It will also look at how the profits and losses get distributed per member.

Who Needs an Operating Agreement?

Some cases do require an Operating Agreement, and it makes a lot of sense to get one. The reasons that you may want to get one include the following businesses:

  • Accounting
  • Financial lending
  • Title company for buying real estate
  • Lawyers
  • Investors of your business

How to Complete the Operating Agreement

You’ll need to keep documentation of when you first started the LLC. You will also need to keep the mailing address and the name of your registered agent since your registered agent will have access to almost all of your business information.

In addition, you will need to state the general purpose of your Tennessee LLC, the ownership percentages of the members, and the names of your members and their addresses. If any disputes arise, you can always refer to this document as a way of dealing with the issue. Of course, your company name must be included as well as all relevant information about the services you offer.

If you have any questions about how to write up an Operating Agreement for your LLC in Tennessee, contact the professionals at LLC Formations.

5. Get Your Tax ID Number

Next, you will need to apply for your tax ID number for creating your Tennessee LLC. A tax ID is also called an employer identification number (EIN). When you form an LLC in Tennessee, this number acts as the social security number for your business. There are many reasons to apply for an EIN:

  • For federal and state taxes
  • To open a business bank account for your Tennessee LLC
  • Hiring employees for your LLC

To acquire an EIN, you apply to the IRS after you have formed your Tennessee LLC. You can choose to do this either by mail or online, and this service is free.

When you have an EIN, this enables you to have a separate account for your LLC in Tennessee. You will be able to apply for the permits and business licenses required for your Tennessee LLC, and it will also handle the employee payroll through this system.

Why You May Want to Have an EIN as a Tennessee LLC

Having an EIN helps businesses to prevent identity theft that can harm your Tennessee LLC. Additionally, you can obtain a line of credit for your business loans under your LLC, or you might want to open a business credit card for your LLC. You can also apply for the necessary business licenses that allow your company to operate and expand.

If you have any questions about how to obtain an EIN when you form an LLC, contact the professionals at LLC Formations.

6. Set Up a Tennessee LLC Bank Account

You will normally need a couple of documents to open up a bank account for your LLC in Tennessee. Some of the documents needed include:

  • Passport or driver’s license
  • EIN confirmation letter
  • LLC approval
  • LLC operating agreement

The service should be free, but some banks will charge a fee for opening a business account. It depends on the bank, but you may also have to show further information to open an account for your Tennessee LLC. For example, some might want to see that you have proof of address in Tennessee. In addition, a non-US citizen may have to show the bank two documents in order to open the account for the LLC.

You can contact the professionals at LLC Formations for an overview of how to open up a business account for your LLC.

7. Understand Taxes for Your Tennessee LLC

Based on a default tax law, Tennessee LLCs are taxed based on how many members you have. If you first formed your LLC in Tennessee, you could be held liable for paying a franchise tax and registering with the Tennessee Department of Revenue for your Tennessee LLC. The franchise tax will cost you 0.25 percent of your revenue, and you will have to make a minimum payment of $100.

Then there are excise taxes. An excise tax is applicable to certain products, so consider this when forming an LLC. Additionally, you will also need to consider state taxes and sales tax. For the excise tax, you can expect to pay 6.5 percent of your income that you have made within this state. You should have a tax specialist to help you with calculating your taxes because this can be tricky, and if taxes are done incorrectly, the Tennessee Secretary of State could dissolve your LLC.

You want to hire a tax professional after you have formed your LLC because they should keep you in compliance with the various tax laws, and they will make sure that you follow through with what is required by the Department of Revenue for your LLC. Not to mention, this will give you an advisor that will allow you to ask other questions about your LLC. Every year, whether you have made money or lost money, you still have to file your tax returns for each fiscal year.

8. Get Business Insurance

As you continue to develop and expand as an LLC in Tennessee, you will want to have insurance because this helps you to manage many of the risks associated with operating an LLC. You have a few different forms of insurance that can be helpful to business owners depending on the type of business services offered in the state.

These insurance types include:

  • Professional liability insurance
  • General liability insurance
  • Workers’ compensation insurance

Single-member LLCs and multi-member LLCs should both be insured. Although LLCs protect your personal assets in the case of debts and lawsuits, this may not be applicable in cases of malpractice so insurance is important to consider when you form your limited liability company (LLC).

9. File Annual Report for Tennessee LLCs

As stated before, the annual filing fee in Tennessee will normally be a minimum fee of $300 if you have between one to six members. If you have over six members, you will have to pay an additional $50 filing fee for each member. The due date for the filing fee comes around at the same time each year.

You have to pay your annual report fee on the 1st of April. You have to watch carefully for this date because the consequences of not filing annual reports can mean that your LLC gets dissolved. To avoid this, it is recommended that you scratch it down on the calendar so that you can remember it more easily.

If you filed online, you should see a message that says you succeeded in the filing. Once this pops up, be sure to keep this important document for your own records. This is a better method in some ways because if you were to choose to file by mail, the state will not send you documents or a receipt and you could be in trouble if a dispute arises.

10. File for the Necessary Business Permits and Licenses

It depends on the type of business you have. However, some businesses will have to get the proper permits and licensing for a Tennessee LLC. For example, let’s say that you have a grocery store, food service, or a restaurant. For all of these businesses, you will need to register for a permit from the health department. You may also need construction permits if you plan to build the LLC.

You want to make sure that you followed the proper protocol and have the correct permits because it could result in you having to pay more in fees otherwise. Contact the professionals at LLC Formations for more information about specific licenses and permits for your LLC.

How to Know if an LLC is the Correct Choice for You

Knowing how to form a limited liability company (LLC) in Tennessee could be helpful, but you also want to make sure that you will receive all of the LLC benefits available to you. The startup cost of an LLC is low, and you don’t have to do too much paperwork when starting an LLC. Operating as an LLC can help you to get your business off the ground and in good standing.

The LLC has become one of the most popular business forms that you will find within the United States. You will be in good company if you decide to form one. You have plenty of advantages of choosing to go with an LLC. Some of the things that you can do with it include:

  • Cost-effectiveness
  • Savings
  • Flexibility
  • Autonomy
  • Tax choices
  • Less paperwork
  • Given some legal protection
  • Property ownership

With all of this said, you also have some negatives associated with forming an LLC, and you have to look at the downsides as well to determine if this is the right choice for you. The biggest downside of an LLC is that you have a lot that you will have to figure out on your own if you don’t hire an LLC Formation service to help you form an LLC.

Many of the benefits mentioned above could turn into negatives for some people. Another problem comes from how the termination of an LLC is quite simple for businesses. Any member who chooses to depart from the LLC can dissolve it. Shareholders in a company will come and go. Regardless, when you set out to form an LLC, you should make sure that each member entity in the group will be willing to make it work over the long term. It may not always be easy to keep businesses going long-term, so you have to consider this well in advance.

Limited liability companies will also be exposed to capital values tax or franchise tax. You want to check your jurisdiction to see if this will apply to you and your business. Another thing to consider is that the renewal of your filing fees can sometimes be just as harsh as if you had formed a corporation. While you may find it less expensive to have an LLC in the beginning, it doesn’t always make sense over the long term because it could wind up costing you more.

However, when you form an LLC, you are granted many benefits, such as liability protection, and the ability to open up a business bank account. Our list provided an overview of the many benefits of offering your services as an LLC instead of a sole proprietorship. It’s up to you if you think that it’s best to form an LLC in the state of Tennessee.

How Can LLC Formations Help You?

For small business owners, in particular, you can derive the most benefits from hiring a service that will help you form an LLC without having to worry about too much for the complexities of it. LLC Formations can help you choose a unique name for your LLC, we can explain how sales tax and other types of taxes will affect your LLC, and we provide other helpful services that handle the hardest parts of forming an LLC.

These are some of the ways that you would go about forming an LLC in the state of Tennessee. You may find it useful to speak with an expert on the subject because they can help you to navigate some of the trickier parts of the process to have the most success with opening your own Tennessee LLC. Having someone who understands how to form LLCs can also lead to you getting the best results from it because they can help you to avoid the pitfalls. If you need help setting up a Texas LLC, be sure to check out our next guide.

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