Tennessee has no state income tax on wages, which gets a lot of attention, but that's only part of the picture. Filing and annual fees scale with how many members your LLC has, and most multi-member LLCs owe a separate franchise and excise tax by default. Here's what it takes to start a business in Tennessee in 2026.
1. Which business structure fits you?
Before you file anything, it helps to know what you're actually choosing between.
- Sole proprietorship. No filing required to start, and you and the business are legally the same entity. Simple, but you're personally liable for whatever the business owes.
- Partnership. Two or more people running a business together, with the same liability exposure as a sole proprietorship, just split across partners.
- LLC. The most common structure for small businesses in Tennessee. It separates your personal assets from the business's debts and lawsuits.
- Corporation, either S-corp or C-corp. More paperwork and more formality, usually worth it once you're bringing on investors or multiple shareholders.
For a deeper comparison, see our guide on choosing a business structure.
LLCs and corporations register with the Tennessee Secretary of State, the agency that handles business filings statewide. Sole proprietorships and general partnerships don't register there.
2. Register your business
Forming an LLC
You form an LLC in Tennessee by filing Articles of Organization with the Secretary of State through the TNBear portal. The fee is $50 per member, with a $300 minimum and a $3,000 maximum, so most single-member LLCs pay the $300 floor. Online filings process immediately.
Every LLC needs a registered agent with a physical Tennessee address, available during business hours. You can act as your own agent, or hire a commercial service. Tennessee doesn't require a publication step, unlike a handful of other states.
Tennessee doesn't require an operating agreement by law, but it's still worth writing one, particularly for multi-member LLCs, to spell out how decisions and profits get split.
Sole proprietorships and DBAs
Sole proprietorships don't file with the Secretary of State. If you're operating under an assumed name, you'll register it with the county clerk in the county where your business is located.
3. Get an EIN
An Employer Identification Number is free straight from the IRS and takes about 15 minutes online. You'll need one to open a business bank account, hire anyone, or file most business tax forms, even for single-member LLCs.
4. Check licenses and permits
Tennessee doesn't issue a single general business license either. What you need depends on your industry and city: professional licensing for regulated fields, a local business tax license in some counties and cities, and sales tax registration through the Taxpayer Access Point (TNTAP) if you sell taxable goods or services. Our guides on professional licensing by industry and zoning laws for home businesses cover more of this.
5. Understand Tennessee taxes
Tennessee has no personal income tax on wages or business earnings; the old Hall tax on investment income was fully repealed in 2021. That doesn't mean the state skips entity-level tax, though. Most LLCs are subject to Tennessee's franchise and excise tax by default: a 6.5% excise tax on net earnings, plus a 0.25% franchise tax on net worth, with a $100 minimum franchise tax. Single-member LLCs owned directly by an individual are generally exempt from franchise and excise tax, which makes the structure meaningfully cheaper for solo founders than for multi-member LLCs.
Sales tax starts at a 7% state base, one of the higher state-level rates in the country, with local additions of up to 2.75% pushing combined rates to around 9.25% to 9.75% in most major cities.
6. Stay compliant
Every Tennessee LLC files an annual report with the Secretary of State, due by the first day of the fourth month after your fiscal year closes, April 1 for calendar-year LLCs. The fee follows the same formula as formation: $50 per member, $300 minimum, $3,000 maximum. If your LLC owes franchise and excise tax, that return (Form FAE170) is separately due April 15.
Tennessee business costs at a glance
| Item | Cost |
|---|---|
| Articles of Organization (LLC) | $50/member, $300 minimum |
| Annual Report (every year, due April 1) | $50/member, $300 minimum |
| Franchise tax minimum (multi-member LLCs) | $100 |
| Excise tax (multi-member LLCs) | 6.5% of net earnings |
| Registered agent service (optional) | $100 to $250/year |
| EIN | Free (IRS) |
| State income tax | None |
| State sales tax | 7% + up to 2.75% local |
Frequently asked questions
Does Tennessee have state income tax?
No personal income tax on wages or business earnings; the old Hall tax on investment income was fully repealed in 2021.
Are single-member LLCs exempt from Tennessee's franchise and excise tax?
Yes, single-member LLCs owned directly by an individual are generally exempt, making the structure meaningfully cheaper than for multi-member LLCs.
How much does it cost to form an LLC in Tennessee?
$50 per member with a $300 minimum, so most single-member LLCs pay the $300 floor.
What's Tennessee's franchise and excise tax for multi-member LLCs?
A 6.5% excise tax on net earnings plus a 0.25% franchise tax on net worth, with a $100 minimum franchise tax.
When is Tennessee's Annual Report due?
By the first day of the fourth month after your fiscal year closes, April 1 for calendar-year LLCs, following the same $50-per-member, $300-minimum fee formula as formation.
Fees and rates above come from the Tennessee Secretary of State and Department of Revenue as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a Tennessee-licensed attorney or CPA about your specific situation.