You can Search the name of your business through the Tennessee Secretary of State's Office. Here, you can see if the name you'd like to choose is available in Tennessee.
Define Your Business Legal Structure
Once you’ve verified that your chosen business name is available, it’s necessary to determine how your business will be defined legally.
Liability and taxes are defined by your business’s legal structure, as well as the ease or difficulty for growth. Don’t worry if you’re not quite ready to form your business entity just yet, you can reserve your name by filing a Name Reservation Form with the Tennessee Secretary of State office.
This is when the business is owned solely by you.
1. Easiest and Least expensive form of ownership to organize.
2. Sole proprietors receive all income generated by the business to keep or reinvest.
3. The business is easy to dissolve, if desired. Cons:
1. Sole proprietors are responsible for the business as individuals, thus personal assets are vulnerable in a legal action.
2. May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.
3. Difficult to establish monetary value of company for sale
This is when your business is owned by you along with one or more other individuals.
Make sure to file the SS-4514 Form, too. Pros:
1. Simple and inexpensive to set-up and operate.
2. All of the profits go to the company partners. Cons:
1. You're equally liable for decisions that your partners make.
2. It's more difficult to change ownership if you decide you would like to leave
3. As an individual, you are tied to your company. Therefore, during legal action, your personal assets are also vulnerable.
Remember: If you choose either a General or Sole Proprietorship, you should consider getting a trademark of your business name.
This is when your business has one or more general partners and one or more limited partner.
1. Limited partners’ personal assets are generally less vulnerable during any legal action against the business.
2. All profits go to the partners.
1. Contrary to Limited partners, General partners' personal asets are more vulnerable in a legel action.
2. If you decide you want to leave the business, it is more difficult to change ownership.
Limited Liability Partnership
This is a general partnership with some limited liability options.
Most new businesses do not start out as a Limited Liability Partnership. These types of businesses usually develop when a general partnership deisres limited liability, but cannot organize as a limited liability company.
Limited Liability Company (LLC)
This type of business is a mix of the partnership and corporation legal structure. Limited Liability Company owners are called members.
1. Owners have limited personal liability for the debts and actions of the LLC.
2. Benefits of Pass-through taxation
1.Can be difficult to set-up and expensive to organize.
This is when your business is created as a separate legal entity and returns profit to its owners. Not-For-Profit Corporations: 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.
For Profit Corporations: Owners of a corporation are called shareholders. There are two general types of corporations: C and subchapter S.
1. Shareholders have limited liability for the corporation's debts and judgments in legal actions. Cons:
1. Corporations are a more complex type of legal entity. There is more paperwork to comply with regulations at the local, state, and federal level.
C or Standard-
1. Taxed twice: Shareholders pay taxes on their earnings and the corporation also pays its own taxes.
2. May be domestic or foreign and works for large groups of investors.
Subchapter S (aka Small Business Corporation, file with IRS)-
1. Can avoid paying taxes twice by passing items to shareholders.
2. Must be domestic and limited to no more than 100 citizen or legal resident shareholders.
Foreign-Owned (Out of State) Corporations (all types) – If you incorporated your business outside of Tennessee and you want to relocate or conduct business in Tennessee, you need to decide if you want to operate as a foreign-owned business or establish a Tennessee business. To register, a foreign-owned business must submit a Certificate of Existence/Authorization or letter of good standing from the original state.
The Secretary of State's office offers online tools to help you form or register a new business. In addition, your local county or municipal clerk can help connect you with a business license.
Identify the basic tax obligations of operating your business in Tennessee
Business Identification Number: Social Security Number or Federal Employer Identification Number?
If your business is a partnership or corporation: you must have a Federal Employer Identification Number (FEIN). You must also have an FEIN if you pay wages to anyone other than yourself. The IRS issues these.
If your business is a sole proprietorship or a general partnership, your Social Security Number (SSN) will be your business entity identification number. Both of these are not liable for franchise and excise taxes. Remember: Business information is public record, and having an FEIN gives your business an identity number that is NOT your Social Security Number.
About Tax Registration: The Tennessee Department of Revenue requires that you register your business. You can do that online, here.
The Department of Revenue also provides more information on all taxes your business might be subject to. You can attend a new business workshop to learn more. The Department of Revenue is responsible for collecting taxes and fees for on and off premise alcoholic beverages, bail bonds, tobacco, and professional privileges, among others.
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 TCA 67-5-903. Learn more about on the Tennessee Comptroller of the Treasury Division of Property Assessments’ website. Contact your county's tax assessor for more specific information.
Click here to look at a comprehensive calendar of important dates to remember.
New Hire Reporting: All employers must submit their new hire reports. You can register online here.
Workman's Compensation: Who is required to carry workers' Compensation insurance on their employees?
1. All employers with five or more full- or part-time employees.
2. All employers in the construction or mining industry must have coverage if they have any employees or corporate officers.
3. State and local governments and those employing farm laborers or domestic help are exempt, but may elect workers' compensation coverage.
Benefits are paid by the employer or the employer's insurance carrier.
Worker's Compensation Exemption Registry
To qualify for a worker’s compensation exemption, an applicant must be:
1. An individual who is a sole proprietor and owns 100% of the assets of the business, or
2. An officer of a corporation, or
3. A member of a limited liability with at least a 20% ownership interest, or
4. 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 or in person. Workers' Compensation Exemption Registry FAQs can be seen here.
Drug-Free Workplace Program
If you use the Drug-Free Workplace Program, you can get a premium credit on your workman's compensation. Check out the program website for more information, here.
Department of Labor's website provides additional resources, as well as a handbook with important information for your consideration.
Register your Business as Veteran-Owned
As a veteran, the Federal Department of Veterans Affairs helps coordinate programs for small business owners. In addition, they will work with you to locate government and corporate procurement opportunities.
The first thing you'll want to do is register your small-business with the Department of Veterans Affairs, which you can do at this website. Afterwards, you can learn more about resources that you may qualify for here.
If you have a service-related disability, the Office of Small & Disadvantaged Business Utilization also provides resources specifically to disabled veterans.
Learn more about resources that may help you get your small business up and running at their website.
The Veteran Entrepreneur Portal through the Department of Veterans Affairs has interactive tools to help you find the resources specific to veterans, women veterans, disabled veterans, and much more.
Click through their interactive guides here to learn more. Their veteran specific resources can be found here.
Determine Regulations, Licensing and Permitting requirements for your Business
Who applies?: Think about starting here first, this department covers a wide array of businesses including: Accountancy, architecture and engineering examiners, auctioneers, barbers, contractors/home improvement license, cosmetology, funeral directors, insurance companies, plumbers, private protective services, surveyors and appraisers, et.al.
Who applies?: Businesses that effect air (dry cleaners, gas stations), land resources (drilling, grading), natural resources, water use, work in or near water (manufacturers) Look at a guide of Permit Requirements at their website.
Who applies?: Quite a few apply here, especially those related to medicine. Some include: Acupuncture, athletic trainer, body piercing, childcare, counselor, EMS, food service establishments, hotels, massage therapists, professional and facility licensing, swimming pools, tattoo artists, vet techs.
Who applies?: Alcohol and drug abuse, developmental disability and mental health facilities/services and personal support services.
Please note that this is not a comprehensive list of all state departments and agencies. There are also some agencies at the federal level that require licensing (for example the Environmental Protection Agency, Food & Drug Administration etc.) A comprehensive list of Tennessee departments and agencies can be found here.
Additional information on laws, appointments to boards and commissions, hearings and public meetings can be found on the respective websites.
Pending and effective rules and hearing notices can be found here.
What other resources can assist you with your business State Resources?
Beyond those listed in previous steps, the following is a list of some other sites that may be able to help you get your business up and running.
From the Federal Government: Business USA: business resource portal that ranges from topics of startups, to expansion, to exporting, and more. IRS, Small Business Center: tax information and filing resource with detailed information for small business and those who are self-employed. Office of National Ombudsman: assists in resolution of issues concerning small businesses and federal agencies. SCORE: Sponsored by the Small Business Administration and is a volunteer corps of mentors and business counselors offering training and workshops. Small Business Administration-TN: provides information on access to capital, resources and managed the 8(a) business development program, among others.
You've completed the basic step-by-step guide to starting your business in Tennessee. For more information, please download the free copy of the Tennessee Smart Start Guide. This document goes into more detail on the topics you've just seen as well as addresses topics from types of insurance, to finance options and much more.
A review of this step-by-step process can be found here, or you can download the comprehensive Smart Start Guide here.