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A big resource for small businesses.

As the backbone of our state's economy, small businesses make up a majority of all companies in Tennessee. Some of the world’s largest and most well-known companies were started right here in the Volunteer State. Like each of these established businesses, success began with a small business owner who dared to dream big and didn't shy away from hard work. 

 

The challenges that entrepreneurs face are often intimidating. Adequate support and resources are crucial to navigating the early stages of any new venture. Whether you’re just starting out or you just completed your business plan, this website will guide you through the step-by-step process of establishing a business in Tennessee. 

 

We hope you will find this guide helpful and informative. After all, our future success relies on the expansion of small businesses. With one of the country's best business climates, there's no better place to grow a business than Tennessee. 

Steps to starting a business in Tennessee

  • Step 1
  • Step 2
  • Step 3
  • Step 4
  • Step 5
  • Step 6
  • Step 7

Step One

Check the Availability of Your Company’s Name

Step 1

Search the name of your business through the Tennessee Secretary of State’s Office. The Business Name Availability tool allows you to determine if the proposed business name is available in Tennessee.

Step Two

Defining Your Business Legal Structure

Step 2

Once you’ve verified that your chosen business name is available, it’s necessary to determine how your business will be defined legally. Don’t worry, even if you’re not quite ready to form your business entity just yet, you can still reserve your chosen business name by filing a Name Reservation Form with the Tennessee Secretary of State’s Office.

Briefly, here are your options and the filing requirements; however, it may be necessary to consult an attorney, CPA or business counselor for professional advice on each legal structure.

 

  • Sole Proprietorship – This is when your business is owned solely by you.
    • Pros:
      • Easiest and least expensive form of ownership to organize
      • Sole proprietors receive all income generated by the business to keep or reinvest
      • The business is easy to dissolve, if desired
    • Cons:
      • Sole proprietors are responsible for the business as individuals, thus personal assets are vulnerable in a legal action
      • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans

  • General Partnership – This is when your business is owned by you along with one or more other individuals.
    • Pros:
      • Simple and inexpensive to set-up and operate
      • All of the profits go to the partners
      • More capital is available for partnerships
    • Cons:
      • You are equally liable for the decisions that your partners make
      • It is more difficult to change ownership, should you want to leave the business
      • You are responsible for the business as individuals, thus personal assets are vulnerable in a legal action

  • Limited Partnership – This is when your business has one or more general partners and one or more limited partner.
    • Pros:
      • Limited partners’ personal assets are generally less vulnerable in a legal action against the business.
      • All profits for to the partners
    • Cons:
      • General partners’ personal assets are more vulnerable in a legal action
      • It is more difficult to change ownership, should you want to leave the business

  • Limited Liability Company (LLC) –This is a mix of the partnership and corporation legal structure. Owners of an LLC are called members.
    • Pros:
      • Owners have limited personal liability for the debts and actions of the LLC
      • Pass-through taxation
    • Cons:
      • Can be difficult to set up
      • Expensive to organize

  • Limited Partnership – This is when your business has one or more general partners and one or more limited partner.
    • Pros:
      • Limited partners’ personal assets are generally less vulnerable in a legal action against the business.
      • All profits for to the partners
    • Cons:
      • General partners’ personal assets are more vulnerable in a legal action
      • It is more difficult to change ownership, should you want to leave the business

  • For-Profit Corporation – This is when your business is created as a separate legal entity and will return a profit to the owners. Owners of a corporation are called shareholders.
    • Pros:
      • Shareholders have limited liability for the corporation’s debts and judgments in legal actions.
    • Cons:
      • Taxed twice: Shareholders pay taxes on their earnings and the corporation also pays its own taxes.
      • Corporations are a more complex type of legal entity. There is more paperwork to comply with regulations at the local, state, and federal level.

  • Nonprofit Corporation – This is when your business is created as a separate legal entity and will use surplus revenues to achieve its goals rather than distributing them as profit or dividends.

  • Limited Liability Partnership – This is a general partnership with some limited liability options. A limited liability partnership is usually formed by a general partnership that desires limited liability but finds it too difficult to organize as a limited liability company. Usually, a new business would not start out as a Limited Liability Partnership.

  • Foreign-Owned (Out of State) Corporations – If your business started in a state other than Tennessee and you want to conduct business in Tennessee, you will need to file a Certificate of Authority form with the Secretary of State’s office.

  • The Secretary of State’s offers online tools, which allow you to form or register a new business.


Step Three

Will your business employ additional staff?

Step 3

Determining whether or not your business will employ a staff is an important next step.

Yes:

Complete LWFD’s Report to Determine Status and Apply for an Employer Number

  • For-profit businesses
  • Nonprofit businesses

A Guide to Worker’s Compensation in Tennessee

  • Administered by the Tennessee Department of Labor and Workforce Development Worker’s Compensation Division – 1.800.332.COMP (266&)

  • Quick Facts:
    • Who is required to carry Workers' Compensation insurance on their employees?
      • All employers with five or more full- or part-time employees.
      • All employers in the construction or mining industry must have coverage if they have any employees or corporate officers.
      • State and local governments and those employing farm laborers or domestic help are exempt, but may elect workers' compensation coverage.

    • Who pays Workers' Compensation benefits?
      • Benefits are paid by the employer or the employer's insurance carrier. The Tennessee Department of Labor and Workforce Development does not pay workers' compensation benefits.

Worker’s Compensation Exemption Registry

  • To qualify for a worker’s compensation exemption, an applicant must be an individual who is a sole proprietor and owns 100% of the assets of the business, or an officer of a corporation, or a member of a limited liability with at least a 20% ownership interest, or a partner in a partnership with at least 20% ownership interest. In addition, an applicant may qualify for the exemption if the applicant and members of the same family of the applicant hold at least 95% ownership of the business.
  • Construction services providers who meet the business ownership requirements can file an initial Workers' Compensation Exemption Registration (see complete instructions here). The form may be submitted electronically, via the postal service or in person.
  • Workers' Compensation Exemption Registry FAQs

No:

Complete LWFD’s Report to Determine Status and Apply for an Employer Number

  • For-profit businesses
  • Nonprofit businesses

Step Four

Identify the basic tax obligations of operating your business in Tennessee.

Step 4

First, complete the Tennessee Department of Revenue’s tax registration form online.

To learn more about the particular taxes your business might be subjected to, the Tennessee Department of Revenue provides this overview.

However, these are not the only taxes your business might be responsible for filing. This chart gives detailed information about the entities you will need to contact to determine any necessary taxes.

Are you responsible for tangible Personal Property Tax Requirements?

Tangible Personal Property is filed by "(a) All partnerships, corporations, other business associations not issuing stock and individuals operating for profit as a business or profession, including manufacturers, except those whose property is entirely assessable by the comptroller of the treasury" per Tennessee Code Annotated (TCA) 67-5-903. Learn more about personal property tax requirements on the Tennessee Comptroller of the Treasury Division of Property Assessments’ website.

Contact your county’s tax assessor for more specific information.

Important Dates to Remember:

February 1 Personal Property schedules mailed to taxpayer
March 1 Deadline for submission of Personal Property schedules
May 20 Assessment change notices mailed
June (first Monday) County Board hearing for appeals

Step Five

Is your business required to register for permits from the Tennessee Department of Environment and Conservation?

Step 5

If your business might affect the environment – including water, air and ground – you might need to apply for a permit from the Tennessee Department of Environment and Conservation.

TDEC’s Environmental Permit Requirements Guide  is any easy-to-read listing of the necessary permits certain types of businesses may require.

Step Six

What other resources can assist you with opening your business?

Step 6

Free Tax Workshops for New Businesses: The Tennessee Department of Revenue sponsors free tax workshops for new businesses/business owners. These sessions normally include business tax, sales and use tax, and issues regarding tax enforcement from the Department of Revenue, as well as a presentation from the Department of Labor and Workforce Development on state unemployment tax. These workshops are recommended primarily for new business owners, but may be beneficial to established owners as well.

BERO: The Business Enterprise Resource Office, operated by the Tennessee Department of Economic and Community Development,  works to expand economic opportunities for small, rural, minority and women-owned businesses in Tennessee by providing information on procurement opportunities, loan programs and management programs with Tennessee private industry and government entities.

OSBA: The Office of the Small Business Advocate is part of the Comptroller of the Treasury and was established to make state government more responsive to Tennessee’s small businesses. It is the office Tennessee’s small business owners can contact when they have questions about what department they need to speak with in state government or if they are experiencing difficulties working with a state department or agency.

Go-DBE: The Governor's Office of Diversity Business Enterpriseis the central point of contact to attract and assist minority owned, women owned, service-disabled veteran owned and small business enterprises interested in competing for state contracting opportunities. The goal of this office is to increase the number of certified minority, women owned, small business and service-disabled veteran owned businesses desiring to compete successfully in state procurement activity.

TSBDC: The Tennessee Small Business Development Centers are a network of professional business consultants with 20 locations throughout the state of Tennessee, including 14 service centers, five satellite offices and one affiliate office. The TSBDC provides expert business advice to all types of businesses and maintains an international trade center. Expert counsel in the following areas is available: accounting, banking, expansion, international trade, marketing, public relations, sources of capital, tax planning, advertising, employee relations, finance, management, operations, sales training and location analysis.

Step Seven

Congratulations!

Smart Start Small Business Guide

You’ve completed the step-by-step guide for starting a business in Tennessee. For more comprehensive small business start-up information, please download a free copy of Tennessee Smart Start Small Business Guide.



 

 

 

This page is administered by the Tennessee Department of Economic and Community Development. If you have questions or need additional information about starting a business in Tennessee, please contact the Small Business Advocate, Tennessee Comptroller of the Treasury, at smallbusiness.advocate@cot.tn.gov.