How to Form an LLC in Tennessee
$300 filing, no state wage tax — but franchise and excise tax hit entities from dollar one. Plan for that before you file.
Contents 9 sections
ennessee is often sold as a "no income tax" state, and for individual wage earners that's true. For entities, it is not. Every LLC, corporation, and LP in Tennessee owes both a franchise tax (on net worth) and an excise tax (on net earnings) from the day it's formed. Budget for that before you confuse TN with South Dakota or Texas.
Before you file
- Understand the tax exposure. Franchise tax is 0.25% of the greater of net worth or the book value of real and tangible property in TN (minimum $100/year). Excise tax is 6.5% of Tennessee-apportioned net earnings. These are reported together on the FAE 170 filed with the TN Department of Revenue; not the Secretary of State.
- Confirm the name. Search the TN SOS business database. Name must include "LLC" or "Limited Liability Company" and be distinguishable from existing filings.
- Registered agent. A TN street address is required. Commercial RAs run $50–$150/year.
The Tennessee Secretary of State business services portal is the filing path; Tennessee's online system accepts Articles of Organization with same-day processing for most requests. The Tennessee Department of Revenue business tax section is the authoritative reference for the state's franchise and excise tax, which applies to every LLC regardless of federal tax classification.
Filing the Articles of Organization
File online through the TN SOS portal. The Articles are straightforward: name, principal office, registered agent, duration (default: perpetual), and whether it's member- or manager-managed.
| Item | Value |
|---|---|
| Formation fee (LLC) | $300 ($50 per member, $300 min / $3,000 max) |
| Annual report fee | $300 (flat, regardless of member count up to the $3,000 cap on formation) |
| Annual report due | 1st day of 4th month after fiscal year end |
| Franchise tax minimum | $100/year |
| Excise tax rate | 6.5% of apportioned net earnings |
| SOS portal | sos.tn.gov/business-services |
The $50-per-member fee is unusual. A two-person LLC pays $300 (the floor); a 10-member LLC pays $500; a 60-member LLC hits the $3,000 ceiling.
Tennessee looks like a no-income-tax state until you hit the franchise and excise tax on your LLC. The $100 minimum is not discretionary; budget for it the day you form.
After formation
- EIN from the IRS (free).
- Franchise & excise tax account at the TN Department of Revenue; register even if you expect zero net earnings your first year; the $100 minimum franchise tax still applies.
- Annual report with the SOS ($300) plus the FAE 170 with DOR. Two filings, two agencies, both mandatory.
- Business license at the county level if gross receipts exceed $10,000/year. Many founders miss this.
- Sales tax permit if selling taxable goods/services.
The franchise + excise trap
The single biggest mistake out-of-state founders make in TN: assuming "no income tax" means "no entity tax." Unlike Texas (which exempts entities under $2.65M in revenue) or South Dakota (which has no entity tax), Tennessee starts the meter running immediately. A break-even single-member LLC still owes the $100 franchise minimum. A profitable LLC owes both taxes simultaneously.
The "FONCE" exemption; family-owned non-corporate entities holding certain passive assets; and a narrow "obligated member entity" (OME) exemption are the main relief valves, but they require the LLC to elect to be treated like a corporation for liability purposes and meet specific ownership tests. Don't assume you qualify; confirm with a TN CPA.
What TN is good for
- Nashville / Chattanooga / Memphis operators. If your revenue is earned in TN and you employ TN residents, forming here aligns the tax home with the business reality.
- Real-estate holding companies using the FONCE election.
- Personal-income advantages. TN taxes wages at 0%. Owners who take distributions (not salary) through a properly-structured S-corp or LLC can reduce the personal-level take.
What TN is not good for
- Shell entities for out-of-state operations. You'll pay TN franchise + excise and your operating state's taxes.
- Cost-minimizing first-time founders. The $300 formation + $300 annual + franchise minimum makes TN roughly 3–5x more expensive annually than Wyoming, Montana, or South Dakota.
Bottom line
Tennessee works well for founders who actually live and operate in the state, especially owners taking distributions rather than wages. It is a poor choice of domicile for anyone trying to shop jurisdictions on price; the franchise and excise tax erases most of the "no income tax" headline.
Figures accurate as of April 2026. Verify on the TN Secretary of State and TN Department of Revenue sites before filing.
Post-formation: the first-year checklist
Formation is step one. The obligations that actually generate state and federal trouble if missed sit in the first twelve months after the Articles clear. Plan for:
- EIN. Apply at the IRS EIN portal. Free, instant if you have a US SSN or ITIN.
- Operating agreement. Not filed with the state, but every state presumes one exists for dispute resolution. A single-member LLC still benefits from a written one; banks routinely ask for it when opening a business account.
- Business bank account. Opens only after the state filing clears and the EIN is issued. Commingling personal and business funds is the fastest way to expose yourself to a piercing-the-corporate-veil argument; the SBA's guide to business structures covers the basics of why separation matters.
- BOI report. The FinCEN Beneficial Ownership Information reporting regime requires most new LLCs to report beneficial owners within 30 days of formation. Penalties are serious; the filing is free.
- State tax registration. Sales tax, withholding, unemployment insurance: each is a separate account in most states. Register early so you are not back-filing returns.
Additional primary sources
- Tennessee Secretary of State: https://sos.tn.gov/businesses
- Tennessee Department of Revenue, franchise and excise: https://www.tn.gov/revenue/taxes/franchise---excise-tax.html
- IRS EIN application: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online