Starting an LLC in Tennessee: A Step-by-Step Guide

Introduction

An LLC, or limited liability company, is a popular choice for entrepreneurs looking to start a business. An LLC offers many of the same benefits as a corporation, such as limited personal liability and pass-through taxation, but with fewer formalities and paperwork. In this article, we’ll discuss the steps you need to take to form an LLC in Tennessee.

Overview of LLCs

A limited liability company (LLC) is a business structure that combines aspects of both a corporation and a partnership. It is a separate legal entity from its owners, which means that the LLC’s debts and liabilities are not the responsibility of the owners. Business owners also benefit from limited personal liability, meaning that their personal assets are protected from lawsuits against the business.

Additionally, LLCs offer pass-through taxation, which means that the profits and losses of the business “pass through” to the individual owners and are reported on their personal tax returns. This eliminates the need for double taxation, which is common with corporations.

Benefits of Forming an LLC

Forming an LLC has many advantages, including:

• Limited Liability: The LLC is a separate legal entity, so the owners have limited personal liability.
• Pass-Through Taxation: Profits and losses are passed through to the owners and reported on their personal tax returns.
• Flexible Management Structure: LLCs can be managed by one or more members, and there is no requirement to hold regular meetings.
• Easy to Set Up: The process for forming an LLC is relatively straightforward.
• Less Expensive: LLCs require less paperwork than corporations and cost less to form and maintain.

Research Requirements for Starting an LLC in Tennessee

Before you can form an LLC in Tennessee, you must research the legal requirements and best practices for forming an LLC in the state. Here are some of the questions you should answer before filing the Articles of Organization:

What are the legal requirements to form an LLC?

In order to form an LLC in Tennessee, you must file Articles of Organization with the Secretary of State. These documents must include the LLC’s name, address, purpose, and member information. Additionally, all LLCs must have a registered agent in Tennessee who is authorized to receive legal documents on behalf of the LLC.

What information is needed before filing the Articles of Organization?

Before filing the Articles of Organization, you will need to choose a unique name for your LLC and create an Operating Agreement. You will also need to obtain an Employer Identification Number (EIN) from the IRS and open a business bank account.

What fees and taxes will I need to pay?

The filing fee for the Articles of Organization is $50. Additionally, LLCs are subject to annual franchise taxes and other taxes, such as sales and use tax and payroll tax. It is important to research the specific taxes and fees that apply to your business.

Choose a Unique Name for Your LLC

One of the first steps in forming an LLC is choosing a unique name for your business. The name must include “LLC” or “L.L.C.” and must be distinguishable from any other business name on file with the Secretary of State. To make sure your chosen name is available, you can search the Secretary of State’s database.

What can you name your LLC?

Your LLC’s name must include “LLC” or “L.L.C.,” and it must be distinguishable from any other business name already on file with the Secretary of State. Additionally, the name cannot imply that the LLC is organized for a purpose other than what is stated in the Articles of Organization. For example, if the LLC is formed to provide consulting services, the name cannot imply that the LLC is organized for banking or insurance purposes.

How to search for and reserve a business name

You can search the Secretary of State’s database to see if your chosen name is available. Once you have found an available name, you can reserve it for 120 days for a fee of $20. This ensures that no one else can register the name during that time period.

File an Articles of Organization with the Secretary of State

Once you have chosen a name and reserved it, you can file the Articles of Organization with the Secretary of State. The Articles of Organization provide basic information about the LLC and must include the following:

• Name of the LLC
• Name and address of the registered agent
• Purpose of the LLC
• Names and addresses of the members

Where to file the Articles of Organization

You can file the Articles of Organization online or by mail. If filing by mail, you must send the completed form and payment to the Secretary of State’s office in Nashville.

How much does it cost to file the Articles of Organization?

The filing fee for the Articles of Organization is $50. The fee must be paid when filing the Articles of Organization either online or by mail.

Create an Operating Agreement

An Operating Agreement is an internal document that outlines the rights and responsibilities of the LLC’s members. It is not required by law, but it is a good practice to create one as soon as possible after forming the LLC. The Operating Agreement should include the following:

• Name and address of the LLC
• Names and addresses of the members
• Rights and responsibilities of the members
• Procedures for admitting new members
• Voting rules
• Distribution of profits and losses
• Dissolution procedures

How to create an Operating Agreement

You can create an Operating Agreement yourself or hire an attorney to help you. There are also templates available online that can be used as a starting point. However, it is important to make sure that the agreement meets the specific needs of your business.

Obtain an EIN from the IRS

An Employer Identification Number (EIN) is a nine-digit number issued by the IRS for tax filing and reporting purposes. All businesses that have employees, pay taxes, or open a business bank account must obtain an EIN.

What is an EIN?

An EIN is a nine-digit number issued by the IRS for tax filing and reporting purposes. It is similar to a Social Security number and is used to identify a business for tax purposes.

How to apply for an EIN

You can apply for an EIN online or by mail. To apply online, you must provide basic information about the business, such as the name, address, and type of business. The application takes only a few minutes to complete and you will receive your EIN immediately.

Comply with Tax and Regulatory Requirements

Once your LLC is formed, you must comply with the applicable tax and regulatory requirements. This includes registering with the state and paying any applicable taxes and fees.

What are the tax and regulatory requirements for an LLC?

All LLCs must register with the state and pay any applicable taxes and fees. This includes annual franchise taxes, sales and use taxes, and payroll taxes. Additionally, LLCs may be subject to other taxes and fees, depending on the type of business and location.

What taxes must be paid?

LLCs are subject to annual franchise taxes, sales and use taxes, and payroll taxes. Additionally, LLCs may be subject to other taxes and fees, depending on the type of business and location.

What documents must be filed?

LLCs must file annual reports and other documents with the state. Additionally, they must file federal and state income tax returns and other tax forms, such as the W-2 and 1099. It is important to research the specific documents and deadlines that apply to your business.

Open a Business Bank Account

Once you have obtained an EIN and registered with the state, you can open a business bank account. This will allow you to keep your business finances separate from your personal finances and make it easier to track expenses and income.

What types of accounts are available?

Most banks offer a variety of business accounts, including checking, savings, and money market accounts. It is important to shop around and compare features and fees to find the best account for your business.

What documents do I need to open an account?

When opening a business bank account, you will need to provide proof of identity, such as a driver’s license, and your EIN. You may also need to provide Articles of Organization or other documents from the state.

What services are offered by the bank?

Most banks offer a variety of services, such as online banking, merchant services, and loan options. Be sure to ask about all of the services offered by the bank to determine which ones are best for your business.

Conclusion

Forming an LLC in Tennessee is a relatively straightforward process. To get started, research the legal requirements and best practices for forming an LLC in the state. Then, choose a unique name for your LLC, file the Articles of Organization with the Secretary of State, create an Operating Agreement, obtain an EIN from the IRS, comply with tax and regulatory requirements, and open a business bank account. Following these steps will ensure that your LLC is properly formed and in compliance with the law.

Summary of Steps

• Research the legal requirements and best practices for forming an LLC in Tennessee.
• Choose a unique name for your LLC and reserve it with the Secretary of State.
• File the Articles of Organization with the Secretary of State.
• Create an Operating Agreement.
• Obtain an EIN from the IRS.
• Comply with tax and regulatory requirements.
• Open a business bank account.

Resources for Further Information

The Small Business Administration website has a wealth of resources to help you navigate the process of starting an LLC in Tennessee: https://www.sba.gov/starting-business/how-start-business/business-structures/limited-liability-company.