Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Tennessee, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Tennessee LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
What’s the least amount I have to pay to form an LLC in Tennessee?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Tennessee LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
TN LLC Start-up costs
There are two primary start-up costs in Tennessee. The most important one (and most substantial one, really) is the Articles of Organization. The fees for it are a bit complicated, though. Technically speaking, Tennessee charges a fee of $50 per member (i.e., owner) of the business. However, there is a $300 minimum fee. The maximum fee is $3,000. But every LLC owner should anticipate paying at least $300 when starting out. And unfortunately, you can’t avoid this cost. After all, the Articles of Organization is what officially forms your business in the state. Without it, you’re not a recognized business.
A lot of Tennessee LLCs will also need to get licenses in order to run a compliant business. However, Tennessee doesn’t technically require them on the state level. Instead, general business licenses are administered by Tennessee’s cities and counties. But which general business license you’ll need will largely depend on your business’s gross receipts.
For example, if your business has between $3,000 and $10,000, you’ll be subject to the minimal activity license. Businesses with more than that will have the standard business license. Regardless of which license type you need, there’s a $15 fee.
Beyond that, there are also industry-specific licenses to consider. For example, Tennessee requires licenses for cosmetologists, massage therapists, psychologists, and more. You’ll have to do some research to learn if any of those licenses apply to you. Thankfully, Tennessee’s One-Stop Licensing App makes it easy.
Unfortunately, we can’t provide a comprehensive list of price tags for these licenses, but you can reasonably expect to pay an application fee when you get one.
Ongoing costs for an LLC in TN
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
In Tennessee, you can reasonably expect to renew both your state general business licenses and your industry-specific licenses. But each county and each Tennessee licensing board has its own policies for renewals, though, so we can’t really list them here. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
In Tennessee (or any state, for that matter), one of the biggest annual costs you’ll have will be taxes. Most LLCs will pay two primary taxes. First, there’s the business excise tax, which acts a lot like an income tax. The rate is 6.5%. The business franchise tax works a bit differently since it’s a tax on your business’s net worth.
There’s also a wide variety of miscellaneous business taxes that could apply to your LLC: beer, motor fuel, and tobacco taxes are just a few examples. But we won’t dig into all the nitty-gritty details here. If you think a miscellaneous tax might apply to you, we recommend checking out the Tennessee Department of Revenue.
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
Tennessee’s annual report acts a lot like the initial registration; the fees are the same. As a result, most LLCs will pay $300 (technically $50 per member, but that’s the minimum fee). Thankfully, filing the report is pretty simple. Just log in, fill out the required information, and pay the fee with a credit or debit card.
What are the discretionary costs to form a Tennessee LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Tennessee doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Business Name Availability Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing an Application for Name Reservation. You should only file this form if you’re not yet ready to file your Articles of Organization. Otherwise, you’d be wasting your hard-earned cash. Tennessee requires a $20 fee for this application, but it protects your chosen name for 120 days.
2. Obtaining an Assumed Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. An assumed name, sometimes called a DBA, fictitious name, or trade name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
An Assumed Name acts kind of like a nickname for your business; some LLCs and corporations also use Assumed Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use an Assumed Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: in order to register an Assumed Name in Tennessee, you need to ensure that your name is “distinguishable on the record” from other names in the state. The bad news is that this will require a little extra legwork on your part; the good news is that once you’ve registered, your name is (in a sense) protected because other businesses have to make their name distinguishable from yours.
Once you’ve determined that your desired name is available, you can register it using an Application for Registration of Assumed Name. There’s a $20 fee for this registration. Thankfully, the registration is good for 5 years. After that, you’ll need to renew for another $20 fee. For more information on this registration, check out our guide to Assumed Names in Tennessee.
3. LLC formation services
Paperwork is a massive hassle. And unless you’re starting an LLC to help other Tennessee residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Tennessee LLC: the Articles of Organization, the annual reports, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of packages, with basic options starting at low prices like $39 from Zen Business (one company, Incfile, even offers a starter package for $0). But if you’re willing to shell out some serious cash for comprehensive assistance, you’ll find package prices going as high as $799.
These services are completely optional; you can DIY your Tennessee LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. TN Registered agent services
Tennessee law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Tennessee allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Tennessee registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Tennessee business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Long story short: starting a Tennessee LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of the $300 Articles of Organization fee). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Tennessee LLC off on the right foot. We wish you and your new business the best!