How to Form an LLC in Tennessee 2026: Complete Guide

Tennessee offers a business-friendly environment with no state income tax on wages, low cost of living, strategic central location, and growing industries in healthcare, automotive, and logistics. Forming an LLC in Tennessee provides liability protection while benefiting from the state's favorable tax climate. This guide covers everything from filing with the Secretary of State to understanding Tennessee's unique franchise and excise tax requirements.

Why Form an LLC in Tennessee?

• No Personal Income Tax on Wages: Tennessee has no state income tax on wages or salaries
• Limited Liability Protection: Personal assets protected from business debts
• Pass-Through Federal Taxation: LLC profits taxed once at member level
• Flexible Management: Member-managed or manager-managed options
• Low Cost of Living: Affordable operations compared to coastal states
• Central Location: Strategic logistics hub with access to major markets
• No Annual Report Fee: Annual report required but costs $0 to file
• Business-Friendly: Pro-business policies, growing economy
• Growing Industries: Healthcare (Nashville), automotive manufacturing, logistics

Step-by-Step Formation Process

Step 1: Choose Your LLC Name

Your Tennessee LLC name must comply with Tenn. Code Ann. § 48-249-106:

• Be distinguishable from existing Tennessee business names
• Include "Limited Liability Company," "LLC," or "L.L.C."
• Not contain restricted words ("bank," "trust," "insurance," "university") without proper licensing
• Cannot imply government affiliation
• Cannot include "Corporation," "Incorporated," or "Corp." (those are for corporations)

Name Search: Check Tennessee Business Search

Name Reservation (Optional):

• Reserve name for 120 days
• File Name Reservation online
• Fee: $20
• Can be extended for additional 120-day periods

Step 2: Appoint a Registered Agent

Every Tennessee LLC must have a registered agent (Tenn. Code Ann. § 48-249-109):

• Has physical Tennessee street address (no P.O. boxes)
• Available during normal business hours (8am-5pm CST)
• Can be an individual Tennessee resident OR business entity authorized in Tennessee
• Receives legal documents, state correspondence, and service of process

Options:

• Self-serve: You can be your own registered agent if Tennessee resident
• Another Member: Designate another member with Tennessee address
• Professional Service: Hire registered agent company ($100-$300/year)
• Benefits of professional: Privacy, reliability, professional handling, compliance reminders

Step 3: File Articles of Organization

Submit Articles of Organization (Form SS-4270) to Tennessee Secretary of State:

Filing Options:

• Online: TN Business Services (2-5 business days) - $300
• By Mail: Send to Nashville office (5-10 business days) - $310
• Processing Time: 2-5 business days for online, 5-10 business days for mail

Mailing Address:

Tennessee Secretary of State
Corporate Filings
6th Floor, Snodgrass Tower
312 Rosa L. Parks Ave
Nashville, TN 37243

Required Information:

• LLC name
• Principal office address (can be out of state)
• Registered agent name and Tennessee street address
• Registered office address (agent's address)
• Purpose of LLC (can be "any lawful business")
• Management structure (member-managed or manager-managed)
• Duration (perpetual or specific end date)
• Organizer name, address, and signature
• Effective date (immediate or future date within 90 days)

Step 4: Create an Operating Agreement

Not required by Tennessee law, but strongly recommended:

• Defines ownership percentages and capital contributions
• Outlines management structure and decision-making authority
• Profit and loss distribution rules
• Voting rights and procedures
• Buy-sell provisions and transfer restrictions
• Dissolution and winding up procedures
• Helps establish LLC as separate legal entity for liability protection
• Required by banks for business accounts
• Prevents disputes among members

Step 5: Obtain an EIN

Get free Employer Identification Number from IRS:

• Online: IRS.gov (immediate) - recommended
• By Fax: Form SS-4 (4 business days)
• By Mail: Form SS-4 (4-6 weeks)

When Required:

• Multi-member LLCs (always required)
• Opening business bank account
• Hiring employees
• Filing federal tax returns
• Tennessee franchise and excise tax registration

Step 6: Register for Tennessee State Taxes

Register with Tennessee Department of Revenue:

• File Business Tax Application online
• Register for Franchise & Excise Tax (required for all LLCs)
• Register for sales tax if selling goods or taxable services
• File online through TNTAP (Tennessee Taxpayer Access Point)
• No fee to register

Complete Cost Breakdown

Ongoing Requirements

Annual Report (Required - No Fee)

Tennessee requires annual report filing (Tenn. Code Ann. § 48-249-1009):

• Fee: $0 (NO filing fee)
• Due Date: By the first day of the fourth month after the close of LLC's fiscal year
• Default Due Date: April 1 if using calendar year (December 31 fiscal year-end)
• First Report: Due the year AFTER formation
• How to File: Online through TN Business Services
• Information Required:
  • LLC name and control number
  • Principal office address
  • Registered agent and office address
  • Names and addresses of members or managers
• Late Filing: $50 penalty if filed late
• Reminder: Secretary of State sends email/mail reminder

Update Changes

If your registered agent or principal office changes:

• File Statement of Change online
• Fee: $20
• Update within reasonable time of change

Franchise and Excise Tax

Tennessee's most important ongoing tax (Tenn. Code Ann. § 67-4-2007, § 67-4-2101):

Franchise Tax

Annual privilege tax for doing business in Tennessee:

• Tax Base: Greater of (1) net worth, OR (2) real/tangible property value in Tennessee
• Rate: $0.25 per $100 of tax base
• Minimum Tax: $300 (even if LLC has no profit or negative net worth)
• Exemption: None for LLCs - all LLCs pay minimum $300
• Example: LLC with $100,000 net worth = ($100,000 ÷ $100) × $0.25 = $250, but minimum is $300, so pay $300
• Example 2: LLC with $500,000 net worth = ($500,000 ÷ $100) × $0.25 = $1,250

Excise Tax

Tax on net earnings (profit):

• Rate: 6.5% of net earnings (net income)
• Applies to: LLCs taxed as corporations (C-corps or S-corps)
• Pass-Through LLCs: Most LLCs are NOT subject to excise tax (profits taxed on members' personal returns)
• Filing Fee: $15 (due even if no excise tax owed)

Filing Requirements

• Form: FAE170 (Franchise & Excise Tax Return)
• Due Date: 15th day of 4th month after close of fiscal year (April 15 for calendar year)
• Extensions: 6-month automatic extension available
• How to File: Online through TNTAP
• Payment: Electronic payment required for amounts over $200

Who Must File Franchise & Excise Tax?

• ALL Tennessee LLCs (domestic and foreign)
• Minimum $300 franchise tax applies to all
• Excise tax only applies to LLCs taxed as corporations
• Even inactive LLCs must file and pay $300 minimum + $15 filing fee

Sales and Use Tax

If selling goods or taxable services:

• State rate: 7%
• Local rates: Vary by location (1.5% - 2.75%)
• Combined rates: Typically 8.5% - 9.75%
• Highest rate: 9.75% (several cities)
• Registration: Free through Department of Revenue via TNTAP
• Filing: Monthly, quarterly, or annually based on volume
• Due Date: 20th of month following collection period

Other Tennessee Taxes

Business Tax (Local)

• City/county business tax may apply
• Varies by locality
• Typically based on gross receipts classification
• Cost: $15-$200+ annually depending on business type and location
• Example: Nashville charges business tax based on gross receipts tier

Employer Taxes (If You Have Employees)

• Unemployment insurance (SUTA)
• Workers' compensation insurance (required if 5+ employees, or 1+ in construction)
• No state income tax withholding (Tennessee has no wage income tax)

Property Tax

• Real property tax (land and buildings)
• Tangible personal property tax (equipment, furniture, inventory)
• Assessed by local county
• Rates vary by county

Business Licenses and Permits

State Business License

• No general state license: Industry-specific licenses only
• Check Department of Commerce & Insurance for professional licenses
• Examples: Contractors, real estate, healthcare, food service

Local Business Licenses

• City/County license: Required in most Tennessee cities
• Cost: Varies by locality ($15-$200+ annually)
• Based on classification: Different tiers based on business type and gross receipts
• Contact: City/county clerk's office for requirements

Professional Licenses

• Contractors: Board for Licensing Contractors
• Healthcare providers: Department of Health licenses
• Real estate: Tennessee Real Estate Commission
• Food service: Health department permits

Professional LLCs (PLLCs)

Tennessee allows certain licensed professionals to form PLLCs (Tenn. Code Ann. § 48-249-302):

Who Must Form Professional LLC

• Attorneys
• Physicians and healthcare providers
• Dentists
• Veterinarians
• Architects
• Engineers
• Accountants
• Chiropractors
• Optometrists
• Other licensed professionals as defined by statute

Additional Requirements

• All members must be licensed in same profession
• Name must include "PLLC" or "Professional Limited Liability Company"
• May require certificate or letter from licensing board
• Does not shield from professional malpractice liability
• Same filing fee ($300) and annual requirements

Operating an Out-of-State LLC in Tennessee

If formed in another state but doing business in Tennessee, must register as foreign LLC:

When Required

• Maintaining an office in Tennessee
• Regularly conducting business in Tennessee
• Owning or leasing real property in Tennessee
• Hiring employees in Tennessee

Foreign LLC Registration

• File Application for Certificate of Authority online
• Fee: $300
• Designate Tennessee registered agent
• Submit Certificate of Existence from home state (issued within 90 days)
• Annual report: $0 (same as domestic LLCs)
• Franchise & Excise Tax: $300 minimum annually (same as domestic)

Dissolving a Tennessee LLC

To officially close your Tennessee LLC:

1. Vote to Dissolve: Members approve per operating agreement or statute
2. Wind Up Business: Pay debts, settle obligations, distribute assets
3. File Articles of Dissolution: Online with Secretary of State
4. Fee: $20
5. File Final Tax Returns:
   • Federal (Form 1065 or Schedule C)
   • Tennessee Franchise & Excise Tax (FAE170 - mark "final return")
   • Sales tax final return (if applicable)
6. Close TNTAP Account: With Department of Revenue
7. Cancel Business Licenses: State and local
8. Close Bank Accounts: After all obligations settled

Frequently Asked Questions

How much does it cost to form an LLC in Tennessee?

The filing fee is $300 (online) or $310 (by mail). First-year total costs are approximately $615 including the $300 minimum franchise tax and $15 excise tax filing fee. Annual ongoing costs are $315 ($300 franchise tax + $15 filing fee) plus the free annual report. If you hire a registered agent, add $100-$300/year.

Does Tennessee require an annual report for LLCs?

Yes, Tennessee requires an annual report, but there is NO filing fee - it's completely free. The report is due by April 1 (if using calendar year) and updates your LLC's registered agent, principal office, and member/manager information. Don't confuse this with franchise tax, which is separate and costs $300 minimum annually.

What is Tennessee franchise tax?

Tennessee franchise tax is an annual privilege tax for doing business in Tennessee. It's calculated as $0.25 per $100 of the greater of net worth or real/tangible property value. ALL Tennessee LLCs must pay a minimum of $300 franchise tax annually, even if the LLC has no profit or negative net worth. This is separate from the free annual report.

How long does it take to form an LLC in Tennessee?

Online filings through the Tennessee Secretary of State typically process within 2-5 business days. Mail filings take 5-10 business days. Tennessee does not currently offer expedited processing, so all filings are processed in the order received. Plan accordingly, especially if you need your LLC formed by a specific date.

Do I need a Tennessee address to form a Tennessee LLC?

Yes, you need a Tennessee registered agent with a physical Tennessee street address. However, your principal office can be anywhere. If you're out of state, hire a Tennessee registered agent service to provide the required Tennessee address (typically $100-$300/year).

Can one person form an LLC in Tennessee?

Yes. Tennessee allows single-member LLCs. The process is identical to multi-member LLCs, and you still receive full liability protection. Single-member LLCs are taxed as disregarded entities (sole proprietorships) for federal tax purposes unless you elect corporate taxation. You still must pay Tennessee's $300 minimum franchise tax annually.

Does Tennessee have state income tax for LLC owners?

No. Tennessee has no state income tax on wages, salaries, or pass-through business income. LLC members pay NO Tennessee state income tax on their LLC profits. However, the LLC entity itself must pay franchise tax (minimum $300/year) and potentially excise tax (6.5% on net earnings if taxed as corporation). Tennessee repealed its Hall Income Tax on investment income in 2021.