How to Start a Business in Tennessee

Plan your Tennessee business

Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:

Select a business name

Selecting the name for your new company is an important first step. You may already have some names in mind. If you don’t, start thinking about names that are memorable/catchy, relevant to your business/industry, and appropriate for your target audience. 

Important note: You must choose a unique name that is not already in use in Tennessee. You’ll need to search the state database to confirm availability. If a name is already in use in the state, you cannot use it for your business. 

The requirement to use a unique name is the main rule to consider, but there are other rules, including: 

• Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
• Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
• The use of certain words or phrases is restricted, and some financial terms require written permission to use
• Check out the full Tennessee LLC naming rules here and TN Corporation naming rules here. 

Once you find the name you want, what’s next? You can move on with the rest of the steps on this list. Or, if you’d like some time to think about it, you can reserve the business name for 4 months. This prevents anyone else from registering the name for a period of 120 days. 

Tennessee trade names

Keep in mind that Tennessee businesses are allowed to use trade names, otherwise known as fictitious names/DBAs. A DBA is essentially a secondary name that you register once your business is already formed. Once registered, you can legally use the trade name to do business. This gives you more flexibility, particularly when it comes to branding and marketing your new business. 

A Tennessee DBA is registered on the county level for sole proprietorships and partnerships, and with the Secretary of State for corporations and LLCs. 

Register a domain name

Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering. 

You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative. 

Complete market research

Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee. 

Select a business location

Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business. 

Create a business plan

You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:

• Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
• Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
• Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
• Staff & partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses? 

If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans. 

Register your business in Tennessee

Now is your opportunity to actually register your business as a legal entity. This process is handled by the Tennessee Secretary of State. You will need to file some paperwork with the state, either online or through the mail. 

Entrepreneurs have two basic options here: Do the work yourself and file with the Secretary of State or opt to use a paid business formation service. 

If you do everything on your own, the basic steps include:

1. Naming your company
2. Choosing a registered agent (this individual or company is tasked with receiving legal documents on behalf of the business). You can be your own registered agent, appoint an employee, or use a service
3. Filing paperwork with the state
4. Registering for state franchise and excise taxes 
5. Obtaining business licenses and permits if necessary 
6. Applying for an EIN from the IRS

The process can be done on your own, but it will definitely save you time and hassle if you opt to use a service. These companies specialize in forming new businesses, and they can walk you through the process from start to finish. 

Some of the best formation services out there are Northwest Registered Agent, ZenBusiness, and Bizee. All three have great service and low prices for business formation packages. 

Keep in mind that the process of forming a new business entity depends on the type of entity you are forming. More on this below. 

Form a Tennessee sole proprietorship

Follow these steps:

1. Decide if you will operate under your own legal name, or use a trade name
2. If you decide to use a trade name, you may need to register an assumed name/DBA 
3. Apply for a business license and/or other necessary permits from local governments (city/county), as needed

Form a Tennessee LLC

Follow these steps:

1. Name your new LLC (see notes above)
2. Choose a Tennessee Registered Agent (or use a service such as Northwest Registered Agent). Your Registered Agent will receive legal documents on behalf of the company.
3. File the LLC Articles of Organization online or by mail, and pay the filing fee. The filing fee depends on the number of members your LLC has ($50 per member); the minimum is $300 (even for single-member LLCs), and the maximum is $3,000
4. Draft an LLC operating agreement
5. Apply for an EIN with the IRS

Form a Tennessee corporation

Follow these steps:

1. Decide on your desired corporate tax structure (S corp or C corp) 
2. Name your new corporation 
3. Choose a Registered Agent for your business (or use a service)
4. Hold an organizational meeting and appoint directors
5. File the Tennessee Domestic For-Profit Corporation Charter online or by mail, along with the $100 filing fee
6. Apply for an EIN from the IRS

Apply for business licenses and permits

Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses. 

The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.

There are different requirements at each level of government:

• Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
• State: Tennessee may require additional permits and/or licenses in order to operate legally in the state. Check the Tennessee Licenses & Permits page for more information. 
• Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details. 

At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick. 

Set up your business finances

Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:

• Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.

• Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards. 

• Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help. 

• Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started. 

Hire employees

Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).  

Employers also have various state-level requirements when it comes to hiring employees. For instance, employers are required to report new hires to the state within 20 days of the date they are hired. And firms with employees must register for and pay unemployment insurance tax.

Finally, this is the time to set up a payroll system to ensure that federal and state payroll taxes are collected accurately (and your employees are paid on time). You can do this yourself, but it’s much easier to use a payroll service.

Tennessee business FAQs

Still have questions about running a business in Tennessee? Here are some answers to frequently asked questions.