Tennessee likes to advertise its lack of a wage tax, and that part holds up. What gets less attention is that filing and annual fees scale with how many members an LLC has, and a separate franchise-and-excise tax catches most multi-member LLCs by default. Below is what actually goes into forming and running a Tennessee business in 2026.
1. Which business structure fits you?
A quick rundown of the options before you file anything:
- Sole proprietorship: nothing to file to get going, since you and the business are legally one and the same. It's the simplest route, but every dollar the business owes, you owe personally.
- Partnership: essentially the sole-proprietorship model split between two or more people, with the same personal liability just divided across partners.
- LLC: the default pick for most small Tennessee businesses, mainly because it puts a legal wall between your personal assets and whatever the business gets sued for or can't pay.
- Corporation, S-corp or C-corp: heavier on paperwork and formality, and usually not worth adopting until you've got outside investors or more than a small handful of shareholders.
Our guide on choosing a business structure walks through the tradeoffs in more depth.
Formal registration only applies to LLCs and corporations, which file with the Tennessee Secretary of State, the office that handles business filings statewide. Sole proprietorships and general partnerships skip this step entirely.
2. Register your business
Forming an LLC
Tennessee LLCs are created by filing Articles of Organization with the Secretary of State through the TNBear portal. Expect to pay $50 per member, with a $300 floor and a $3,000 ceiling, so most solo founders land at the $300 minimum. File online and the state processes it right away.
Every LLC needs a registered agent, someone with a physical Tennessee street address who's reachable during normal business hours. You can act as your own agent or pay a commercial service to handle it. Unlike a handful of other states, Tennessee doesn't make you publish a notice anywhere.
Nothing in Tennessee law forces you to draft an operating agreement, but multi-member LLCs in particular benefit from having one on paper, since it's the document that settles how decisions get made and profits get divided once memories or expectations diverge.
Sole proprietorships and DBAs
The Secretary of State never sees sole proprietorship paperwork. Operating under a name other than your own means registering that assumed name with the county clerk in whichever county your business is based.
3. Get an EIN
Getting an Employer Identification Number costs nothing and takes roughly fifteen minutes on the IRS site. Even a single-member LLC with no employees will need one to open a business bank account, bring on staff, or file most of the tax paperwork the business generates.
4. Check licenses and permits
No single license covers every Tennessee business. What applies to you depends heavily on your industry and location: certain professions carry their own licensing requirements, some counties and cities levy a local business tax license, and anyone selling taxable goods or services has to register for sales tax through the Taxpayer Access Point (TNTAP). Two of our other guides go deeper here: professional licensing by industry and zoning rules for home-based businesses.
5. Understand Tennessee taxes
Wages and business earnings both escape Tennessee's personal income tax, and the old Hall tax on investment income is gone too, fully repealed back in 2021. That doesn't mean the state skips taxing businesses altogether, though. Most LLCs owe 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 floor on the franchise portion. The exception worth knowing: single-member LLCs owned directly by an individual are generally exempt from both, which makes solo formation noticeably cheaper than running a multi-member LLC.
Sales tax starts at a 7% state rate, already among the higher state-level rates nationally, and local governments can add up to another 2.75% on top, pushing most major cities to somewhere around 9.25% to 9.75% combined.
6. Stay compliant
Every Tennessee LLC owes an annual report to the Secretary of State, due on the first day of the fourth month after your fiscal year closes, April 1 for a calendar-year filer. It's priced the same way formation is: $50 per member, $300 floor, $3,000 ceiling. Any LLC that owes franchise and excise tax also has a separate return, Form FAE170, 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, not 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?
Generally yes, when the LLC is owned directly by an individual, which makes the structure meaningfully cheaper than a multi-member LLC.
How much does it cost to form an LLC in Tennessee?
$50 per member with a $300 minimum, so most single-member LLCs simply 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?
The first day of the fourth month after your fiscal year closes, April 1 for calendar-year LLCs, priced with the same $50-per-member, $300-minimum formula used at formation.
Numbers here reflect the Tennessee Secretary of State and Department of Revenue as of 2026; both agencies revise fees and rates periodically, so confirm current figures before filing. This is informational content, not legal or tax advice. Run your specific situation past a Tennessee-licensed attorney or CPA.