Do you have a great business idea, but you’re not quite sure how to get from the idea phase into owning and operating your own business in Tennessee? You’ve come to the right place! There are many important aspects to running a company, and like any other state, Tennessee has its own rules and regulations to consider.
In this guide to starting a business in Tennessee, we’ll discuss all the relevant details to business ownership in this state. By the time you’re done reading, we think you’ll have a strong grasp on the necessary steps involved.
How to Start a Business in Tennessee (in 10 Steps)
1) Create a Business Plan
The first step to creating any business in any state is to plan what products and services you’ll sell, set your operational budget, and figure out how you want to market your company.
Your business plan doesn’t have to be fancy at all, you just need to make sure you spend enough time considering these important aspects before you actually launch your business. To get started, SBA.gov has a great free tool.
2) Choose a Name
The name of your business is an extremely important attribute because it’s often how you make your first impression to potential customers.
Depending on whether you choose to form a corporation or a limited liability company, there are some legal aspects as well (for example, an LLC must include “LLC” or “limited liability company” in the business name, and a corporation must include “incorporated,” “corporation,” “Inc.,” or “Corp.”).
Beyond the basic legalities, you should focus on clearly identifying what your company does in your business name. You can also consider incorporating your values into your business name, like using the word “green” to denote environmental friendliness.
Something You Love
Finally, choose a name that you personally like and take pride in, and one that both sounds good when spoken aloud and looks good on paper.
One big piece of advice we have for naming a business is that you shouldn’t get too focused on one idea until you either form your company or reserve the name.
In Tennessee, you can easily run a business name availability search via the Secretary of State’s website. If your desired name is available, but you are not ready to register your business, you can reserve the name by filing an Application for Reservation of Name. This reservation will last for four months and costs $20.
3) Decide on a Registered Agent
In order to operate a business in Tennessee, you must have a registered agent on file. This agent must have a physical address in the state and must be able to receive mail and other correspondence on behalf of the business.
This position is vital to any Tennessee business because without a registered agent, you could lose your good standing with the state, see your business dissolved by the state, or even remain unaware of a lawsuit progressing against your company.
The Secretary of State does not provide a list of commercial registered agents, however there are various companies throughout the state that can provide this service.
Rocket Tip: We recommend designating an online service to handle these requirements. This eliminates junk mail and keeps your personal and/or business address off public record. ZenBusiness and IncFile both offer a free registered agent service when you use them to form a business online.
4) Choose a Structure and Form Your Business
If you’re just operating a sole proprietorship or general partnership, you don’t need this step (or several of the others in this guide, including selecting a registered agent), because those business structures don’t require any sort of formal formation process.
This leaves two main options: the corporation and the limited liability company.
The LLC is the more common option, partially because it’s much simpler. There’s not much paperwork involved, and the maintenance requirements basically amount to an annual report. Furthermore, LLC owners still receive the personal asset protection that makes a corporation so attractive as a business type in the first place. For more specific information about starting an LLC, check out our full article on the topic.
For some entrepreneurs, the corporation is the better choice. There’s far more effort involved both in forming one and in maintaining it with the state of Tennessee, but for larger businesses they’re usually the better option, as they allow for more growth and investment than LLCs generally do.
If you would like to know more, check out our “LLC vs Corporation: What Is the Difference?” article. No matter which business structure you choose to form, you can find all the relevant forms on the Iowa Secretary of State’s website or have a professional business formation website do it for you.
5) Take Care of Tax Obligations
The vast majority of businesses operating in Tennessee will need a federal tax ID number (EIN), which can be acquired from the IRS.
According to the Tennessee Department of Revenue, “One of the first steps you should take as a new business is registering for various taxes your business must pay the state. Typically, most businesses must pay business tax and sales tax. All business types, except sole-proprietors and general partnerships, must also register for the payment of franchise and excise taxes. Some businesses are subject to other state taxes as well.”
Thankfully, Tennessee makes this part relatively simple. You can easily register your business for taxes via TNTAP, or “Tennessee Taxpayer Access Point.” This system allows businesses to evaluate their specific tax obligations and file their taxes online. You can learn more about TNTAP right here.
Keep in mind that your city and/or county may have taxation requirements as well, so make sure to check with them to make sure you aren’t missing anything.
Here are some business resources for each of the largest cities in Tennessee:
6) Acquire Business Licenses and Permits
There are two important business licenses that are required at the state level, but obtained at the local level. If you operate a business in Tennessee, you may need to obtain a Minimal Activity License or Standard Business License.
According to the Department of Revenue, “If your taxable sales at any given location are more than $3,000 but less than $10,000, you are required to obtain a minimal activity license from the county, and if applicable, the city of your location. The minimal activity license is subject to an annual $15 fee and must be renewed each year.”
Additionally, “if you are located in Tennessee and are subject to the business tax (i.e., your taxable sales are $10,000 or more), you must obtain a standard business license from your county clerk before conducting business. If you are located in a city that imposes the business tax, you must also obtain a license from your city official. If your business has multiple locations, you must have standard business licenses for each location. The licenses must be displayed and are non-transferable.”
You can learn more about these licenses and Tennessee state licensing requirements here.
Much like with taxation issues, there’s also the matter of local licenses to consider. You can learn more about county-level occupational licenses right here.
7) Obtain Required Insurance Policies
In order to operate a business with 5 or more employees (or a company with any number of employees in the construction industry), you are required by the state of Tennessee to obtain workers’ compensation insurance. This insurance makes sure that workers who get injured on the job will have adequate access to healthcare and other benefits.
You can learn more about this insurance and how it applies to Tennessee businesses by visiting the Department of Labor & Workforce Development website.
It is the employer’s responsibility to get these policies to protect your employees, regardless of what line of business you’re in. Of course, it’s probably a good idea to acquire industry-specific policies to protect your company in other ways, but unemployment and workers’ comp are the ones strictly required by law.
8) Open a Business Bank Account
Whether you start a limited liability company or a corporation, you’ll need to keep your business and personal assets separated.
This is where opening a business bank account comes in. While having a separate checking account for your company isn’t a legal requirement, it makes separating your assets considerably easier, and we always advise that any business owner does so.
9) Develop a Business Website
In this day and age, even strictly local businesses should have a website, because the internet is your first point of contact for many of your customers. Your site doesn’t need to be fancy, but you should put some thought into your domain name, and make sure it’s something memorable and easy to type without misspellings.
If you’re not comfortable designing a site yourself ― and if you also don’t have the budget to hire a professional designer ― there are plenty of website builder tools that can help you put together a solid website. WordPress and Weebly are very easy to use.
10) Don’t Be Afraid to Ask for Help
If you run into problems with any of the steps outlined in this guide, remember that you can always find help.
In this state, the Tennessee Small Business Development Center exists solely to (in their own words) “empower small business owners, entrepreneurs, and individuals with a business idea to innovate new products and services that compete in the global marketplace.” With 15 locations across Tennessee, the SBDC is ready and willing to help if you need assistance.
Another excellent resource is the Tennessee chapter of the U.S. Small Business Administration. Their website has information regarding small business events, business resources, press releases, SBA programs, and more.
While there are several vital steps in the process of starting a business in Tennessee, taken individually these steps aren’t terribly complex.
It can seem overwhelming if you consider the entire process all at once, but if you break down these steps and take care of them one at a time, they’re all quite manageable. Keep in mind that you don’t need to go it alone with the DIY option ― if this process becomes overwhelming, or if you simply don’t have the time and energy to devote to these steps ― assistance is available.