Tennessee boasts the country’s eighth-lowest tax burden and ranks as the fifth best for economic climate. The general ease of doing business and several growing cities make the Volunteer State a fantastic place for those who want to start a new business.
How to Start a Business in Tennessee:
1. Determine your business structure.
Choosing the right legal structure for your company is important. Your choice will have an impact on taxes, paperwork, personal liability, and your ability to raise funds.
You can choose from the following legal structures:
A sole proprietorship is the simplest structure and usually involves one individual who is solely responsible for the enterprise while a partnership is suitable for businesses with two or more owners. A corporation is a standalone entity with shareholders while a Limited Liability Company (LLC) is the most popular type because of minimal paperwork, flexibility, tax benefits, and simple implementation process. LLC business owners are not obligated to file a corporate tax return.
Businesses are regulated by Tennessee state laws and must be registered through the Tennessee Secretary of State website.
2. Write a business plan.
Your business plan is the foundation of your new business and will serve as an invaluable guide for how to structure, run and grow your company. The business plan can fall into one of two common categories: traditional or lean startup.
The traditional plan is very detailed, takes more time to write, and is quite comprehensive while the lean startup plan is streamlined and fast to write.
A strong business plan can help you get funding and makes opening a new business easier. You can consult with the Tennessee Smart Start Guide, a free service that offers business planning and consulting for small business owners in Tennessee.
3. Sign up for business banking.
Your business and personal finances must be kept separate to maintain accurate records. With a business bank account, you can easily obtain statements and access products that would not be available to you as an individual.
Best Banks for Small Business in Tennessee:
4. Seek funding.
Opening a new business often requires capital. If you are unable to fund your new business, you will need to take out a loan. There are three common ways to fund your business: commercial loans, business lines of credit and small business loans.
5. Decide on a business name.
Make a list of names that you like and perform a Google search to find any conflicts with other Tennessee business names.
Once this is done, do a trademark search to ensure that the business name has not already been trademarked. You can perform the trademark search at the U.S. Patent and Trademark Office and the Trademark Electronic Search System. These databases have a comprehensive list of business names that are registered together with their classification.
After you have confirmed that your business name is not trademarked, check the Tennessee Secretary of State website to ensure that your business name is not the same or similar to another corporation registered in Tennessee.
If you are satisfied that your business name is available, you can then register it on the U.S. Patent and Trademark Office website. You can check out our guide on How to Name a Business to assist you with naming your business.
Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your business online.
6. Request an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). Registering for an EIN is very easy—all you need to do is go to the IRS website. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
7. Acquire business licenses and permits.
The state of Tennessee requires businesses with taxable sales of $10,000 or more to have a statewide business license while businesses with taxable sales of more than $3,000 but less than $10,000 require a minimum activity license.
Each business location will require a separate license. You will need to register with the Tennessee Department of Revenue and pay a fee of $15.00 for each license obtained.
You can view all required licenses and permits here.
8. Hire employees.
To start hiring you will need to register at the Tennessee Department of Human Services. Each employee will need to be registered within 20 days of starting work. This does not apply to independent contractors.
The Tennessee Human Rights Act protects job applicants against discrimination on the basis of age, race, creed, color, sex, sexual orientation, gender identity, national origin, religion, or disability.
The Tennessee Lawful Employment Act requires employers with six or more employees to verify work authorization of new hires.
With reference to the pre-employment screening process in Tennessee, an employer is entitled to view a job applicant’s criminal history and obtain the relevant records from the criminal justice system.
Important Posters for Tennessee Business Premises:
- TOSHA Safety and Health.
- TN Unemployment Insurance.
- Wage Regulation.
- Child Labor Act.
- Workers’ Compensation.
- Discrimination in Employment.
9. Check your business employer requirements.
Business employer requirements are specific to the type of business that you are starting and include various labor, safety and tax obligations that need to be met. You should consider hiring a tax or business attorney to ensure your business is fully compliant with the laws in Tennessee.
If you are starting a business in Tennessee, you will need to take note of the following important items:
Tennessee’s law requires all employers to provide workers’ compensation coverage to their employees. You can obtain more information at the Tennessee Department of Labor & Workforce Development website.
Health insurance isn’t a requirement for small businesses in Tennessee.
In Tennessee, your small business is required to establish an unemployment insurance tax account with Tennessee Department of Labor & Workforce Development. If your business is required to contribute towards unemployment insurance, you will need to file quarterly reports.
Tennessee Business Tax
Every individual or entity selling taxable tangible personal property in the state of Tennessee is required to pay sales and use tax. Services rendered are not taxable. You will need to register for a sales tax permit with the Tennessee Department of Revenue.
If your business is a corporation, limited partnership, LLC or business trust in Tennessee, you must register for and pay franchise and excise taxes. You will need to register for franchise and excise tax with the Tennessee Department of Revenue.
Each business type will have different tax contributions. You can view your business classification and tax obligations here.
How much does it cost to start a business in Tennessee?
Tennessee articles of incorporation for LLCs cost $50.00 per member with a minimum fee of $300.00 and a maximum fee of $3,000.00.
Tennessee Registration and Business Fees:
$50.00 per member
Corporation for profit
You can view a comprehensive list of fees here
How do I register a business in Tennessee?
You can register your business with the Tennessee Secretary of State.
How do I start a business in Tennessee with no money?
- Use services to generate cash flow and fund a product-based business.
- Get creative to discover funding sources.
- Grind it out and look for business, even if you don't get paid for it.
- Use your current resources in different ways to generate income.
- Get a credit line to help with the early stages of your business.
- Locate an accelerator if you can hit the market swiftly.
- Crowdfund and allow the public to invest a small percentage of money in return for future buy-in.
- Use a business incubator to provide funding designed specifically to financially assist a startup company.
How can I protect the name and logo of my business in Tennessee?
The easiest way is to register your business name on the U.S. Patent and Trademark Office website. Prior to registration, remember to check on the Trademark Electronic Search System and the Tennessee Secretary of State website to ensure that your business name is not already registered by another company.
Do I need workers’ compensation for my new business in Tennessee?
All employers in Tennessee are compelled to provide workers’ compensation coverage to their employees.
Does my business in Tennessee need to contribute to health insurance?
Health insurance isn’t a requirement for small businesses in Tennessee.
Browse The SMB Guide for more helpful articles for small business owners, and be sure to download our How to Start a Small Business checklist.