How to set up a new business in Tennessee
Tennessee offers many advantages for starting a service business. The Volunteer State is renowned for low business fees, a business-friendly atmosphere, and straightforward procedures. We're here to guide you through launching your business in Tennessee.
If you plan to open your service business, there are a few steps for you to follow.
- Choosing a business name
- Deciding on a business form
- Registration & legal steps
- Practical tips and information
- & more
Are you from another state?
Check out other guides if you need more detailed information about different states. You can click the state you are interested in on our map or choose it from the list below.
Choose a business name
Picking a great name for your business is the first fun step in your journey as an entrepreneur. It's like giving a name to a ship before it goes on an adventure. Your business name should match your vision and show what you're all about.
Remember, your chosen name has to follow the rules of your state. You can't use a name that's already taken. Also, make sure it has the right label, like "LLC" or "Inc.," based on how your business is set up. Avoid using words that are not allowed, and you'll have a unique name that's also legal.
Register your Assumed Business Name
Once you have decided on a name for your company, it is important to take the necessary steps to register and secure it. To begin the registration process, apply to register assumed name by Tennessee Secretary of State website. There is a fee of $20 associated with this registration.
It is also possible to reserve your chosen business name in the state of Tennessee. This ensures that no one else can use the same name while you are in the process of establishing legal structure for your business. To do this, you must file Application for name reservation with the Tennessee Secretary of State's office. There is a fee of $20 and the reservation will remain valid for a period of 120 days.
Decide on business structure
Choosing how to set up your company is a big decision that forms the base of your business. It affects things like what laws you follow, how you pay taxes, who's in charge, and how you grow. Let's look at three common choices:
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Sole Proprietorship: This is the easiest way to run a business, especially if you're on your own. You're the boss, but you're also responsible for any money problems your business has.
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Limited Liability Company (LLC): This is a good mix of simple and safe. It's kind of like being a sole proprietor, but your personal stuff is protected if the business has trouble. Lots of small businesses like this option.
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Partnership: If you're in business with someone else, you're in a partnership. You can either share all the responsibility and problems (general), or only some of them (limited). Partnerships mean you make decisions together, but it can get tricky with lots of rules.
Each way has its good points and things to think about. You need to pick the one that matches what you want for your business.
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Register your business
Registering your business is fundamental in giving it legal recognition and ensuring adherence to state requirements. The procedure can vary based on your chosen business structure. Below is an overview of the registration process for Tennessee 's sole proprietorships, LLCs, and partnerships. Choose the option that suits your business type to dive deeper into the registration specifics.
Tennesse Secretary of State prepared a helpful site to help you register a new business online.
How To Start A Sole Proprietorship:
Starting a sole proprietorship in Tennessee is a straightforward process. There are no complex formalities or fees involved, making it an ideal choice for entrepreneurs looking to launch their own ventures. To begin, simply start working.
However, while the process is simple, there are additional steps that can be beneficial. Although not strictly required, many sole proprietors find them advantageous.
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First, consider acquiring a "Doing Business As" (DBA) name. A DBA allows you to use an assumed business name rather than your personal name, which can enhance professionalism and customer trust. It also enables you to open a business bank account under your DBA name.
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Additionally, determine your tax obligations. Sole proprietors often use their Social Security Number for tax purposes, but obtaining an Employer Identification Number (EIN) is advisable for privacy. Be aware of sales tax obligations if you sell products and research other applicable state taxes.
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Finally, be aware of licenses and permits. You need a general business license in Tennessee. If your business income is over $3,000 but less than $100,000, you must obtain a minimal activity license from your county or municipal clerk. The License will cost 15$. Specific industries may need licenses or permits. Always ensure compliance with local regulations as well.
Three primary partnership models exist:
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General Partnership: No complex formalities or fees are involved, but you don't have limited liability, which means you are responsible for all debts and losses.
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Limited Partnership (LP): LPs feature limited and general partners. Limited partners hold no liability beyond their investment, while general partners maintain full liability.
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Limited Liability Partnership (LLP): LLPs safeguard partners from uninvolved debts, particularly favored by high-liability professionals. LLPs adhere to general partnership taxation.
Commencing a Partnership:
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Register the Business Name: Verify availability in the state's Business Database and register it with Tennessee's government.
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Complete Necessary Paperwork: For GP, you don't need any documents, but you can consider filling out DBA; LPs should submit a Tennessee Certificate of Limited Partnership ($100 filing fee); LLPs must file a application for registration limited liability partnership (filing fee : $50 for each member minimum $250)
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Secure an EIN and Licenses: Secure an Employer Identification Number (EIN) from the IRS when hiring employees. Explore additional state licenses and tax obligations based on your business activities. If your business income is over $3,000 but less than $100,000, you must obtain a minimal activity license from your county or municipal clerk.
Establishing an LLC:
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Articles of Organization: To establish your LLC officially, you must file Articles of Organization with the Tennessee Secretary of State. This document includes essential details about your LLC, such as its name, registered agent, and company address. The filing fee for this document is $50 for each member (minimum $300)
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Registered Agent Appointment: Designating a registered agent is mandatory for all Tennessee LLCs. This agent accepts legal documents and official mail on behalf of your LLC. You can choose an individual or a business entity to serve as your registered agent.
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Operating Agreement: While not filed with the state, drafting an Operating Agreement is recommended. This internal document outlines the rules and structure of your LLC, including member roles and responsibilities. Legal fees for creating this document can vary.
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Annual Report: Tennessee requires LLCs to file an annual report, which includes updated information about your business.
To begin an LLC in Tennessee, you'll need to fill out some documents and pay fees. The exact cost depends on your situation. It's a good idea to talk to experts or use online services to make the process easier and make sure you follow the state's rules.
Consider creating operating agreement
Making an operating agreement is a good idea for specific business types in Tennessee, like LLCs, LLPs, and LPs. This agreement helps set up how your business works on the inside, like who owns what and how things run. For LLPs, it's important to decide how partners share profits and make decisions. LPs might also need this agreement to plan partner roles, profits, and how the business ends.
Obtain EIN
Getting an Employer Identification Number (EIN) is an important part of registering your business. Think of it as a special nine-digit number that's a lot like your business's own ID, just like individuals have Social Security numbers.
You need an EIN for a few key reasons:
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Taxes: You use it to file your business taxes, take out taxes from employees, and report what money your business makes.
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Hiring Workers: If your business hires employees, you must have an EIN for things like payroll and tax withholding.
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Bank Accounts: Most banks want you to have an EIN to open a business bank account. This helps keep your personal and business money separate.
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Legal Stuff: It's also important for legal documents, contracts, and some business licenses.
Getting an EIN is usually a simple process, and you can do it online through the IRS website. After you get your EIN, you'll use it for different money and legal things to keep your business running smoothly and follow tax rules.
Obtain licenses and permits
This process includes figuring out the permits your business requires, following local zoning laws, and meeting state regulations. Making sure you have these licenses and certificates is important for your business to run legally and prevent potential problems in the future.
In Tennessee, you need a general business license if your business income is over $3,000 but less than $100,000. You can obtain it from a county or municipal clerk, which costs 15$. Additionally, Tenessee imposes specific state-level licenses and permits on various business types and industries. These may include professional licenses, retail permits, and contractor certifications. It's essential to identify which licenses and permits pertain to your business operations at the state level. Ensure you complete the necessary applications and meet all requirements to maintain compliance and avoid any legal complications.
Obtain licenses and permits
This process includes figuring out the permits your business requires, following local zoning laws, and meeting state regulations. Making sure you have these licenses and certificates is important for your business to run legally and prevent potential problems in the future.
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