Tennessee is known for having no personal income tax, and its cities, from Nashville and Memphis to Knoxville and Chattanooga, attract plenty of new businesses. But when it comes to LLCs specifically, Tennessee is one of the more expensive states. It charges filing and annual report fees per member, and unlike most states it taxes LLCs directly through its franchise and excise taxes. Budget for all three from the start.
What a Tennessee LLC costs
Table of Contents
| Item | Cost | When |
|---|---|---|
| Articles of Organization | $50 per member, minimum $300, maximum $3,000 | At formation |
| Annual report | $50 per member, minimum $300, maximum $3,000 | First day of the fourth month after your fiscal year ends |
| Franchise tax | 0.25% of net worth, $100 minimum | Yearly, with the excise tax return |
| Excise tax | 6.5% of Tennessee net earnings | Yearly |
| Business tax license | Depends on gross receipts | Yearly, if required |
Any LLC with up to six members pays the $300 minimum. A seven-member LLC pays $350, and the fee keeps rising by $50 per member up to $3,000.
A realistic minimum for most small LLCs is about $700 in the first two years of state charges: $300 to form, a $300 annual report, and at least $100 in franchise tax, before any excise tax on profits.
Step 1: Choose your LLC name
The name must include "limited liability company" or an abbreviation such as "LLC" or "L.L.C.", and be distinguishable from other names on file with the Secretary of State. Search the state’s business records, then check federal trademarks, domains and social handles with our business name checklist.
To trade under another name, register an assumed name with the Secretary of State.
Step 2: Appoint a registered agent
Every Tennessee LLC needs a registered agent with a physical Tennessee address, available during business hours. You can serve yourself, name another adult or use a commercial agent.
Step 3: File Articles of Organization
File Articles of Organization with the Tennessee Secretary of State online through its business filing system, or by mail. You’ll state the number of members at filing, which determines the fee, along with the LLC’s name, registered agent, principal office and whether it’s member-managed or manager-managed. Count members carefully, since the number affects both the formation fee and future annual report fees.
Step 4: Register for franchise and excise taxes
Forming the LLC doesn’t register it for state taxes. Register separately with the Tennessee Department of Revenue through its online tax system for:
- Franchise tax: 0.25% of net worth, with a $100 minimum owed every year, even by inactive LLCs. In 2024 Tennessee stopped using a separate property-based measure for this tax, so it’s now based on net worth.
- Excise tax: 6.5% of Tennessee net earnings.
The combined franchise and excise return is due on the 15th day of the fourth month after your fiscal year ends, which is April 15 for calendar-year businesses. Some entities, such as certain family-owned businesses with mostly passive income, can qualify for exemptions. Ask an accountant whether any apply to you.
Step 5: Create an operating agreement
Tennessee doesn’t require you to file an operating agreement, but every LLC should have one. It sets out ownership, management, voting and what happens when members join or leave. Because fees depend on member count, record any changes in membership carefully.
Step 6: Get an EIN and open a bank account
Apply for a free EIN from the IRS online, then open a business bank account with your filed Articles and EIN. See choosing a business bank account.
Step 7: Get a business tax license and register for sales tax
Tennessee also has a business tax on gross receipts, administered with your county and city. In general:
- Businesses with less than $3,000 in gross receipts don’t need a business tax license.
- Businesses with $3,000 to $100,000 obtain a minimal activity license and don’t file business tax returns.
- Businesses above $100,000 obtain a standard business license and file business tax returns.
If you sell taxable goods or services, register for sales and use tax with the Department of Revenue. Tennessee has one of the higher combined sales tax rates in the country once local taxes are added.
Step 8: File your annual report on time
Every Tennessee LLC files an annual report with the Secretary of State by the first day of the fourth month after its fiscal year ends, which is April 1 for calendar-year businesses. The fee follows the same per-member formula, with a $300 minimum. LLCs that don’t file can be administratively dissolved.
How a Tennessee LLC is taxed
Tennessee has no personal income tax, so LLC profits passed to owners aren’t taxed by the state as personal income. Instead, the LLC itself generally pays franchise and excise taxes, unlike in most states, where pass-through LLCs owe no entity-level income tax. Owners still pay federal income tax and self-employment tax.
Hiring your first employee in Tennessee
On top of the federal steps in our first employee guide, Tennessee employers generally register for unemployment insurance with the Department of Labor and Workforce Development, report new hires, and carry workers’ compensation insurance once they have five or more employees. Construction businesses generally need coverage even with fewer employees. Because there’s no state income tax, there’s no state income tax withholding.
Your Tennessee LLC compliance calendar
| Deadline | Filing | Paid to |
|---|---|---|
| April 1 (calendar-year LLCs) | Annual report ($300 minimum) | Secretary of State |
| April 15 (calendar-year LLCs) | Franchise and excise tax return | Department of Revenue |
| Monthly or as assigned | Sales and use tax returns | Department of Revenue |
| Yearly, if required | Business tax license renewal and returns | County, city and Department of Revenue |
| Quarterly | Unemployment insurance reports, if you have employees | Department of Labor and Workforce Development |
Example: state costs for your first two years
For a single-member, calendar-year LLC with modest profits:
| Year 1 | Year 2 | |
|---|---|---|
| Articles of Organization | $300 | — |
| Annual report | — | $300 |
| Franchise tax (minimum) | $100 | $100 |
| Excise tax | 6.5% of Tennessee net earnings | 6.5% of Tennessee net earnings |
| State fees before excise tax | About $400 | About $400 |
Add business tax licenses, any professional or contractor license, and optional services. Use our startup cost calculator to plan.
Tennessee rules for common types of business
Contractors. Tennessee requires a contractor license for projects of $25,000 or more, and some counties require a home improvement license for smaller residential jobs. Electrical, plumbing and HVAC work have their own licensing rules. See our home services industry profile.
Food businesses. Restaurants and food trucks are permitted by the state health department or local health departments. Tennessee’s cottage food rules let some home cooks sell certain foods directly to consumers. See our cottage food business guide.
Short-term rentals. Nashville and other cities require permits and collect local occupancy taxes, with strict rules in some neighborhoods.
Is an LLC the right structure in Tennessee?
Because Tennessee taxes LLCs directly, the usual advantages of an LLC look a little different here. Sole proprietorships and general partnerships generally aren’t subject to franchise and excise taxes, though they don’t offer liability protection. Corporations pay the same franchise and excise taxes but have much lower Secretary of State fees. The right choice depends on your liability risk, profits and growth plans, so it’s worth an hour with a Tennessee accountant before you file.
Mistakes to avoid
- Budgeting only the $300 formation fee, and forgetting the annual report and franchise tax.
- Assuming no income tax means no business tax. Franchise, excise and business taxes still apply.
- Not registering with the Department of Revenue after forming the LLC.
- Miscounting members, which changes your fees.
- Contracting above $25,000 without a license.
Frequently asked questions
Does an inactive Tennessee LLC owe anything? Generally yes: the $300 minimum annual report and the $100 minimum franchise tax, until the LLC is formally dissolved.
When is my first annual report due? For calendar-year LLCs, by April 1 of the year after formation.
Why are corporations cheaper to form in Tennessee than LLCs? Tennessee sets different Secretary of State fees by entity type; corporations have a lower formation fee and annual report fee, though both pay franchise and excise taxes.
Can I be my own registered agent? Yes, with a physical Tennessee address where you’re available during business hours.
Next steps
Read the Start a Business A–Z guide, check your numbers with the break-even calculator, and see taxes and bookkeeping for 2026.
This guide is general information, not legal or tax advice. Fees, taxes and exemptions change; check the Tennessee Secretary of State and Department of Revenue before you file.
Sources
- Inc Authority, How to start an LLC in Tennessee (July 2026)
- File.Business, Tennessee filing requirements verified June 2026
- Tennessee Secretary of State, Business Services
- Tennessee Department of Revenue
Last reviewed October 18, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.
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