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Choosing to start a business often means making important financial choices. If you plan to start an LLC in Tennessee, knowing all the costs involved is essential, not just the fees for filing the necessary forms. The process may look challenging initially, but with proper advice and tools, it can be more affordable than you think.
This article will explore the different costs of setting up an LLC in Tennessee and introduce helpful services like Northwest Registered Agent. These services make the process smoother and help you make smart decisions to save money.
Whether you’re experienced in business or new to owning a business, our information will help you understand the financial parts of forming an LLC in the Volunteer State.
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What Is the Cost of Forming an LLC in Tennessee?
The main Cost to Form an LLC in Tennessee is a fee starting at $39 + state fees. This fee pays for the online submission of your LLC’s Articles of Organization to the Tennessee Secretary of State.
Tennessee Foreign LLC Formation Costs
If you have an LLC registered in another state and wish to operate in Tennessee, you need to register it as a foreign entity within the state. This involves completing the registration process for foreign LLCs in Tennessee.
The registration fee for a foreign LLC in Tennessee is $50 per member, with a minimum fee of $300 and a maximum of $3,000. To register, you must file an Application for Certificate of Authority (Form SS-4233).
Annual Cost for LLCs in Tennessee
To keep a Tennessee LLC in good standing, it’s important to handle several ongoing compliance costs. Every year, you must file an Annual Report with a fee of $50 per member, with a minimum of $300 and a maximum of $3,000.
Also, you must pay an Annual Franchise and Excise Tax. The Franchise Tax starts at $100 and is based on the LLC’s net worth or tangible property, plus a 6.5% Excise Tax on the taxable income earned within the state.
Every five years, you need to renew assumed name registrations at a cost of $20, and it’s required to have a registered agent, which typically costs between $100 and $300 annually if you use a registered agent service. Planning for these costs will help maintain your Tennessee LLC’s compliance and good standing.
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How Much Does It Cost to Start an LLC in Tennessee With the Best LLC Service?
Northwest Registered Agent LLC Formation Cost
The starting cost to submit an LLC application in Tennessee is $39 + state fees, but this can change based on specific needs. Normally, processing takes 2 to 3 weeks. If you need it faster, you can pay an extra $50 for an expedited process that takes 4 to 6 days or pay $100 for rush processing, which takes 1 to 2 days.
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Additional Costs When Starting an LLC in Tennessee
Tennessee LLC Name Costs
Choosing a name for your Limited Liability Company (LLC) is free. When you file your Articles of Organization in Tennessee, the state approves your LLC name without extra costs. Contrary to some online claims, most states don’t require mandatory LLC Name Reservations to form an LLC.
However, if you want to secure your preferred name before officially forming your LLC, you can file an Application for Reservation of Name (Form SS-9425) with a $20 filing fee. This reservation keeps the name for you for up to four months before you establish your LLC.
Tennessee Registered Agent Costs
Tennessee requires you to appoint a Registered Agent when you form an LLC. The cost ranges from $0 if you act as your own agent to $125 per year. You don’t have to pay extra to include a Registered Agent’s details in your Articles of Organization.
A Tennessee Registered Agent handles legal papers and state communications for your LLC. They need a physical address within the state and must be available during business hours.
Choosing to be your own Registered Agent or appointing someone you know does not cost extra. However, you can hire a Registered Agent service, which usually costs between $100 and $300 each year. These services also offer additional business support and privacy protection.
Using a Registered Agent service is helpful if you need a state address or if you want to keep your personal address off public records. Some services accomplish this by using their own address.
Tennessee Operating Agreement Costs
A Tennessee LLC Operating Agreement, which details ownership, management, and profit sharing among LLC Members, is free. Both Single-Member and Multi-Member LLCs need to make and keep this agreement in their business records and give copies to all Members.
Although many services usually charge between $50 and $200 for these agreements, in Tennessee, they have no cost.
Tennessee EIN Cost
Getting an EIN Number for your LLC, also known as an Employer Identification Number (EIN), Federal Tax Identification Number, or Federal Employer Identification Number (FEIN), is free. This unique number is essential for filing income taxes, setting up an LLC bank account, and hiring employees if needed.
Although some online platforms charge service fees for EIN acquisition, you can get it for free. You can secure an EIN for your LLC at no cost through the Internal Revenue Service (IRS) website, and the online application process takes only a few minutes.
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Tennessee LLC Taxes
The yearly costs for Tennessee LLC owners vary greatly because of the different taxes they must pay. Here are some examples of these taxes:
Federal Income Taxes
The Internal Revenue Service (IRS) provides different options for handling the federal income taxes of your Limited Liability Company (LLC). For Single-Member LLCs, the IRS classifies them as Disregarded Entities. This classification means the LLC cannot file a separate federal income tax return.
The owner of the Single-Member LLC must report the income and pay the taxes through their personal tax return. How taxes are handled depends on if an individual or another company owns the LLC.
Multi-Member LLC Taxes
When your LLC has multiple owners, it automatically gets classified and taxed as a Partnership. In this case, the LLC must file a tax return called Form 1065, which details the partnership’s income and deductions.
The LLC also provides a Schedule K-1 to each owner, showing their portion of the profits and losses. Owners must then report this information on their personal tax returns.
Husband and Wife LLC Taxes
In certain states, a married couple running an LLC together, often called a husband and wife LLC, can choose to be treated as a Single-Member LLC for tax purposes. This option is usually only available in community property states and only applies in some places.
Electing Corporate Taxation
Aside from the standard choices, an LLC can opt to be taxed as a Corporation. This option includes two corporate structures: S-Corporation and C-Corporation. The S-Corporation election may result in savings on self-employment taxes for well-established businesses. Choosing to be taxed as a C-Corp is less common and generally less preferred by most LLC owners.
Tennessee State Income Tax
Tennessee doesn’t have a personal state income tax, so individuals and LLCs registered in Tennessee don’t need to file a state income tax return.
Tennessee Business Tax
In Tennessee, businesses must pay the Business Tax based on the LLC’s annual gross receipts, main business activity, and whether it functions as a retailer or wholesaler. The tax amount differs, but there’s always a minimum yearly payment required.
Tennessee Franchise & Excise Taxes
Tennessee imposes Franchise and Excise Taxes on businesses. The Franchise Tax is calculated from the net worth or book value of the tangible property that the business owns or uses in the state. The Excise Tax is based on the net earnings of the LLC. Each tax requires different payment amounts, and the Franchise Tax includes a set minimum payment.
Local Income Tax for Tennessee LLCs
In Tennessee, LLCs and individuals might need to pay local income taxes, depending on the municipality. It’s wise to get professional help and talk to local authorities to understand and meet these obligations properly.
Tennessee Sales Tax
LLCs that sell products to consumers in Tennessee often need to collect sales tax. To do this, they must get a Seller’s Permit. This permit, also called a resale or sales tax permit, allows the LLC to collect and send sales tax to the state.
Tennessee LLC Payroll Taxes
If your Tennessee LLC employs workers, you must handle payroll taxes. These taxes include federal income tax withholding, Social Security tax, Medicare tax, both federal and state unemployment taxes, and any local deductions that apply. Although Tennessee does not have a state income tax, you must still meet federal withholding requirements.
Given the complexity of calculating payroll taxes, many LLCs choose to hire a payroll service provider or an accountant who specializes in this area.
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Tennessee LLC Cost – FAQs
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Conclusion
Exploring the process of setting up an LLC in Tennessee reveals a complex financial situation that extends well beyond just the initial registration fee. This path requires handling important documents, hiring registered agents, and managing key elements like operating agreements and securing an EIN.
Managing finances effectively in these areas is crucial, and this is where the expertise of LLC formation services like Northwest Registered Agent really shows. With a clear understanding of these various costs and the support of Northwest Registered Agent, future business owners can confidently start their LLC journey in Tennessee.
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