If you’ve decided to form a limited liability company (LLC) in the state of Tennessee, this is an exciting time for your business.
You’re probably ready to build up your LLC and operate the business you’ve always dreamed of!
However, before you get started, it’s important to understand all of the various fees and other expenses that come with forming a Tennessee LLC.
Most entrepreneurs understand that they’ll have to pay the state a fee in order to get their LLCs formed. However, we find that some people are often unaware of all the potential additional expenses, like LLC formation service fees, registered agent service fees, Annual Report fees, taxes, and more. Let’s take an in-depth look at all the possible expenses you’ll encounter when forming a Tennessee LLC.
The Required Upfront Costs of Forming a Tennessee LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Tennessee without first filing the Articles of Organization, or the document that officially registers a business within the state. The filing fee for this document is at least $300 (for LLCs with 6 members or less). But the price climbs by $50 per member for LLCs that have more than six members, topping out at a fee of $3,000. For most entrepreneurs, the filing fee will be $300.
The Articles of Organization requires some important information about your business, such as its legal name, the registered agent who will accept service of process on your behalf, the start and close of your fiscal year, and more.
But what if you’re not forming a brand-new LLC, and instead you’re transferring a pre-existing business into Tennessee from another state? In that case, you would need to file the Application for Certificate of Authority instead. This application is quite similar to the Articles of Organization, but it also requests some information about the jurisdiction where the business was originally formed. Like the Articles, the filing fee ranges between $300 and $3,000.
For many LLCs, these are the only upfront expenses that are required. That said, your Tennessee LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Tennessee LLC.
The Optional Upfront Costs of Forming a Tennessee LLC
The first optional expense for a Tennessee LLC is name reservation. The only time you need to reserve a business name for a Tennessee LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $20 to reserve a business name in this state, which gives you exclusive rights to the name for 120 days.
However, considering that you can simply form your business instead, the $20 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Articles of Organization, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire registered agent services, and these companies also charge their own fees. Every LLC needs a registered agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your registered agent, who will inform you and forward the documents to you.
We like to bundle registered agent and LLC formation services, as there are some formation services that will throw in a full year of registered agent service at no extra charge. For the most part, these companies charge an average of roughly $150 per year for this service, although rates can vary widely based on which company you choose.
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Articles of Organization because it’s important to get the URL you want for your website. Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of a Tennessee LLC
No matter if you’re forming a new Tennessee LLC or bringing in a foreign LLC from another state, your LLC will need to file annual reports every year. This report keeps the state up-to-date about certain vital but basic business information. And like the initial registration, the annual report filing fee ranges between $300 and $3,000. It’s easiest to file online.
Next, Tennessee requires all businesses to get one of two licenses: the general business license or the minimal activity license. The minimal activity license applies for businesses with gross receipts totalling between $3,000 and $10,000; all other businesses will need the general business license. Both licenses cost $15.
Depending on your LLC’s business pursuits, you will almost certainly need to pay some form of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Tennessee Department of Revenue to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of a Tennessee LLC
Much like you can hire an LLC formation service and a registered agent service, many of these same companies offer annual report services. If you’d like a reputable company to draft and file these reports on your behalf, you’ll need to pay their yearly service fees, on top of Tennessee’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
Next, in addition to the general business license renewals, depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Tennessee LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
The Potential Penalties for Avoiding These Costs
At this point, the costs are really adding up for some Tennessee LLCs. You might be wondering what the consequences would be for avoiding some or all of these expenses. In short, it’s certainly not in your LLC’s best interests to skip out on any necessary fees.
If you don’t pay your Articles of Organization filing fee, your LLC will never exist to begin with. If you fail to pay your annual report fee, the state can administratively dissolve your business. Meanwhile, failing to pay your taxes in full can lead to some severe penalties for you and your business.
While it might seem that these expenses add up quickly, paying these fees is still a far better option than the alternative. If there is simply no way to cover these LLC formation costs, a secondary option is to operate as a sole proprietor.
The Best Tennessee LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together our comprehensive guide to the top-rated business formation services available online. We encourage all of our readers to check out that guide and choose the right company for your specific situation. In addition, we’ll briefly run down a couple of our favorite options here.
We always appreciate what ZenBusiness has to offer, and they’re our top pick for LLC formation services for a reason. First off, ZenBusiness has some of the lowest price points in the industry. In addition, this company includes some valuable features like a full year of registered agent service at no additional cost.
ZenBusiness receives spectacular feedback from its clients, with 6,200+ reviews available online and nearly all of them being positive. Finally, the company also displays tremendous corporate responsibility, as it loans money to women- and minority-owned businesses and partners with Kiva.org to help lift people out of poverty.
Northwest Registered Agent: #2
You don’t need us to tell you that Northwest’s $39 entry-level price point is a good deal. What does Northwest Registered Agent do that makes them stand out? In short, Northwest has the best customer support we’ve ever experienced in this industry.
While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer.
In addition, Northwest also offers its customers a year of registered agent service, just like Incfile and ZenBusiness. However, only Northwest locally scans every document it receives as your agent, while Incfile and ZenBusiness only scan the government forms they’re legally required to scan.
Another of our favorite options is Incfile. It’s impossible to top what Incfile has to offer for pricing, as they will form your business free of charge, as long as you pay your own state fee. Like ZenBusiness, Incfile also includes a year of registered agent service with your LLC formation service for no extra charge.
Additionally, Incfile has nearly 27,000 reviews online, with positive feedback far outweighing negative feedback. We don’t think they’re quite as well-rounded as ZenBusiness, but it sure is hard to argue with Incfile’s pricing model!
Frequently Asked Questions
What is the absolute minimum cost to form a Tennessee LLC?
The cheapest possible price tag for LLC formation in Tennessee is $315, which covers the cost of filing the Articles of Organization for an LLC with 6 members or less along with the business license. All other upfront expenses for a Tennessee LLC formation are optional.
How much does it cost to form a corporation in Tennessee?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. However, in Tennessee it’s the opposite: the For-Profit Charter (the document that forms a corporation) costs just $100, not $300.
How much does ongoing LLC maintenance cost per year in Tennessee?
That largely depends on your business’s license needs, as many businesses will have additional requirements for professional license renewals (on top of the $15 general business license). That said, every business will have at least the annual report fee of $300 to $3,000. For most small businesses, the annual report fee is $300.
Where can I find more information about expenses for Tennessee LLCs?
The Secretary of State provides a comprehensive list of every possible form (and their accompanying fees) on this page.
How many small businesses are there in Tennessee today?
There are currently more than 636,000 small businesses operating in Tennessee, comprising all but 0.5% of the businesses in the state. Roughly 42% of Tennessee’s workforce is employed by one of these businesses.
What are the top official state resources for entrepreneurs?
If you’re looking for small business assistance, look no further than the Tennessee Small Business Development Center. The Center offers free business advising, and their training workshops are low-cost to empower you and your employees at any stage of the game.
We’ve discussed many Tennessee LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Articles of Organization filing and provide registered agent service.