Why Form an LLC in Tennessee?

Tennessee eliminated its income tax on investment income (the Hall Income Tax) in 2021, making it a true no-income-tax state. Combined with Nashville’s explosive growth as a business destination, Tennessee has become one of the most attractive states for LLC formation in the Southeast. The $300 filing fee is the highest in this batch, and the $300/year annual report matches it — but Nashville is one of the fastest-growing major cities in the country, and the market justifies the cost.

Nashville has become a genuine hub for healthcare (HCA Healthcare, Vanderbilt University Medical Center), music and entertainment, finance, and technology. Memphis has a massive logistics economy driven by FedEx’s global hub. Knoxville and Chattanooga are growing tech and manufacturing markets. Tennessee’s combination of no income tax, low cost of doing business, and rapidly expanding markets makes it a compelling choice.

Tennessee LLC Requirements

• File Articles of Organization with the Tennessee Secretary of State ($300)
• Designate a registered agent with a Tennessee address
• Create an operating agreement (not required, strongly recommended)
• Get an EIN from the IRS
• File the Annual Report in your anniversary month ($300/year)

How to Form an LLC in Tennessee: Step by Step

1. Name your LLC — Must include “Limited Liability Company,” “LLC,” or “L.L.C.” Search name availability at the Tennessee Secretary of State’s portal. Name reservation costs $20.
2. Appoint a registered agent — Must have a physical Tennessee address. Corp Nation provides Tennessee registered agent service as part of every Starter Package.
3. File Articles of Organization — File online through the Tennessee Secretary of State portal for $300 (base fee covers up to 6 members; add $50 per additional member up to a $3,000 maximum). Processing takes 3–5 business days.
4. Draft your operating agreement — Tennessee doesn’t require one, but given the state’s booming business environment and active deal-making culture, a solid operating agreement is essential protection.
5. Get your EIN — Free at IRS.gov. Required before banking or hiring.
6. Open a business bank account — Avenue Bank (Nashville), Tennessee Commerce Bancorp, and all the major nationals have excellent Tennessee presence. Nashville has extraordinary banking infrastructure for a city its size.
7. File Annual Reports — Due in your anniversary month, $300/year. Filed online through the Tennessee Secretary of State portal.

Tennessee LLC Taxes

• No Tennessee individual income tax — Tennessee eliminated the Hall Income Tax on investment income in 2021, making it a true zero-income-tax state
• Tennessee sales tax: 7% state rate plus local rates — Tennessee has the highest combined average sales tax rate in the country, reaching 9.5%–10%+ in many areas. For businesses selling taxable goods, plan accordingly.
• Tennessee Franchise and Excise Tax: LLCs pay a franchise tax of $0.25 per $100 of net worth (minimum $100) and an excise tax of 6.5% on net earnings. This is a meaningful tax for profitable LLCs — work with a Tennessee CPA to optimize it.
• Federal taxes: Federal income tax and self-employment tax apply regardless of state

Tennessee’s Franchise and Excise Tax is the key complexity most people miss when they hear “no income tax.” It’s a business-level tax on both net worth and earnings — different from an individual income tax, but real money for profitable LLCs. The no-income-tax benefit still wins for most business owners, but understand the full picture before you form.