Forming a Limited Liability Company (LLC) or Corporation in Tennessee can be a straightforward process if you follow the necessary steps and understand the legal requirements. This guide will help you navigate the formation process, whether you’re starting a small business or a more complex venture.

Step 1: Choose Your Business Structure

The first decision you need to make is whether to form an LLC or a Corporation. Both have their advantages:

  • LLC: An LLC provides flexibility in management and less stringent compliance requirements. It also offers liability protection for its members.
  • Corporation: A Corporation is ideal if you plan to issue stock or raise capital from investors. It offers liability protection for its shareholders and has a more rigid management structure.

Step 2: Choose a Name for Your Business

Your business name must be unique and distinguishable from other registered businesses in Tennessee. You can check the availability of your desired business name through the Tennessee Secretary of State’s website. The name should also comply with Tennessee’s naming rules, such as including an indicator like “LLC” for Limited Liability Companies or “Inc.” for Corporations.

Step 3: Appoint a Registered Agent

Tennessee requires every LLC or Corporation to have a registered agent. This is an individual or business entity authorized to receive legal documents on behalf of your business. The registered agent must have a physical address in Tennessee and be available during normal business hours.

Step 4: File the Formation Documents

  • For an LLC: You need to file the Articles of Organization with the Tennessee Secretary of State. The filing can be done online or by mail. The form requires basic information such as the LLC’s name, principal office address, registered agent’s name and address, and the management structure (whether it’s member-managed or manager-managed).
  • For a Corporation: You need to file the Charter of Incorporation with the Tennessee Secretary of State. The form will ask for the corporation’s name, number of authorized shares, the purpose of the corporation, the registered agent’s details, and the names and addresses of the initial directors.

Step 5: Create an Operating Agreement or Bylaws

While not required by law, it’s highly recommended to create an Operating Agreement (for LLCs) or Bylaws (for Corporations). These documents outline the management structure, operating procedures, and the roles and responsibilities of the members or shareholders. They help prevent disputes and clarify the governance of your business.

Step 6: Obtain an EIN

An Employer Identification Number (EIN) is necessary for tax purposes. It’s issued by the IRS and is used to identify your business entity. You can apply for an EIN online through the IRS website. The process is free and takes only a few minutes. An EIN is required if you plan to hire employees, open a business bank account, or file taxes.

Step 7: Register for State Taxes

If your business will be selling goods or services, you’ll need to register for a sales tax permit with the Tennessee Department of Revenue. Depending on your business type, you may also need to register for other state taxes, such as franchise and excise taxes.

Step 8: Obtain Necessary Licenses and Permits

Tennessee may require certain businesses to obtain specific licenses or permits before they can operate legally. The type of licenses required will depend on your business’s industry and location. Check with local county or city authorities for any additional licensing requirements.

Step 9: File Annual Reports

Both LLCs and Corporations in Tennessee are required to file annual reports with the Secretary of State. The report is due on the first day of the fourth month following the business’s fiscal year-end. Failure to file the annual report can result in penalties and the potential dissolution of your business.

Conclusion

Forming an LLC or Corporation in Tennessee involves several key steps, from choosing your business structure and name to filing the necessary documents and obtaining the required permits. By carefully following these steps and understanding the legal requirements, you can successfully establish your business and ensure it operates smoothly within the state of Tennessee. Always consider consulting with an attorney or a business advisor to ensure full compliance and to address any specific legal concerns related to your business.

If you questions or need help, reach out! We provide business formation services as well as other legal needs for the entrepreneur. The initial consultation is no charge.