Starting a business is an exciting journey, but it comes with a host of important decisions. One such decision is deciding on the type of business structure that best suits your needs. Many entrepreneurs in Tennessee choose to form a Limited Liability Company, or LLC. Why? Because an LLC offers a great balance of flexibility, simplicity, and protection for personal assets. Here we walk through the process of starting an LLC in Tennessee, breaking down each step into manageable tasks.
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Choose a Name for Your LLC
Your LLC’s name is your first official introduction to potential customers and clients. It’s important to choose a name that’s not only catchy and easy to remember but also clearly reflects what your business does. However, Tennessee has some rules when it comes to naming your LLC.
Guidelines for Naming Your LLC
- Your LLC name must include the phrase “Limited Liability Company” or one of its abbreviations (LLC or L.L.C.).
- The name should be distinct from all registered businesses in Tennessee. To check if your desired name is available, you can use the Tennessee Secretary of State’s online database.
- Your name should not contain words that could confuse your LLC with a government agency, like “Treasury,” “State Department,” or “FBI.”
Once you have a name picked out, it’s wise to reserve the name for 120 days while you prepare your paperwork. This can be done online through the Tennessee Secretary of State’s website.
Appoint a Registered Agent
A registered agent is the official contact for your LLC. This person or business will receive all legal papers—like lawsuits—sent to your company. Tennessee law requires every LLC to have a registered agent, so choosing someone reliable is crucial.
Who Can Be a Registered Agent?
- The agent must be a resident of Tennessee or a business licensed to do business in the state.
- This can be someone within your company, including yourself, or an outside service.
- It’s important that the agent is available during normal business hours to receive important documents.
File the Articles of Organization
Filing the Articles of Organization is a crucial step that officially forms your LLC in Tennessee. This document includes necessary details about your LLC and must be filed with the Tennessee Secretary of State.
What Information is Required?
- The name of your LLC
- The name and physical address of the registered agent
- The management structure of your LLC (either member-managed or manager-managed)
You can file the Articles of Organization online or by mail. The filing fee is currently $50 per member, with a minimum of $300 and a maximum fee of $3,000. Keep in mind that processing times can vary, so it’s good to plan accordingly.
Create an Operating Agreement
Although not legally required in Tennessee, having an Operating Agreement is highly recommended. This document outlines the ownership and operating procedures of your LLC, helping to prevent misunderstandings down the line.
Key Elements of an Operating Agreement
- An outline of the management structure and roles of each member
- Details on how profits and losses will be distributed
- Guidelines for adding or removing members
A well-crafted Operating Agreement can offer valuable protection by clearly defining the operational structure and rules for the business.
Obtain an EIN
Once your LLC is formed, you’ll need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is essentially a Social Security number for your business and is required for tax purposes, opening a business bank account, and hiring employees.
How to Apply for an EIN
Applying for an EIN is simple and can be done online through the IRS website. It’s a quick process and, best of all, it’s free.
Register for State Taxes
Depending on the nature of your business, your LLC may need to register with the Tennessee Department of Revenue for sales and use tax, employer taxes, or other specific business taxes. This step ensures your business operates legally within the state and remains in good standing with tax authorities.
Comply with Additional Local Regulations
In addition to state requirements, check with your local city or county administration for any additional licenses or permits needed to operate your business. This ensures that you won’t run into any legal headaches once your business is up and running.
Annual Report and Ongoing Compliance
After your LLC is registered, remember to file an annual report with the Tennessee Secretary of State. This is required to keep your business in good standing. The filing is due on the first day of the fourth month following the closing of the LLC’s fiscal year, with a filing fee that currently stands at $300.
What to Include in the Annual Report
- Current LLC contact information
- Details of registered agent
- List of members and their respective stakes
Submitting this yearly report is vital to maintaining your LLC’s status and avoiding any penalties.
As your LLC in Tennessee moves from an idea to a functioning business entity, keep in mind the ongoing responsibilities you will face as an owner. Beyond establishing and registering your LLC, consider financial management, marketing strategies, and maintaining regulatory compliance as key aspects of your business operations.
