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How to Start a Business

As the backbone of our state's economy, small businesses make up the 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. For each of those businesses, success began with someone 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. This website will guide you through the step-by-step process of establishing your business. The steps are: 1) choosing a name, 2) determining a legal structure, 3) taxes, 4) hiring employees, 5) licensure requirements, 6) key resources to help you, and 7) a guide. We hope you will find this helpful and informative!



    Is the business name you are thinking of already in use?

    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.


    Defining Your Business Legal Structure

    What legal structure is best for my business?

    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 chosen business name by filing a Name Reservation Form with the Tennessee Secretary of State office.

    Briefly, here are your options:

    Sole Proprietorship This is when your business is owned solely by you.

    • 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
    • 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
    • Difficult to monetize for sale
    General Partnership This is when your business is owned by you along with one or more other individuals. You have to file with form SS-4514, too. Pros:
    • Simple and inexpensive to set-up and operate
    • All of the profits go to the partners
    • 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

    If you go with one of these legal structures, you may want to trademark your business name.

    You should contact your local county or municipal clerk to get a business license for a Sole Proprietorship or General Partnership.

    Limited Partnership This is when your business has one or more general partners and one or more limited partner.

    • Limited partners’ personal assets are generally less vulnerable in a legal action against the business.
    • All profits for to the partners
    • 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 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. 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
    • Can be difficult to set up
    • Expensive to organize
    Corporation This is when your business is created as a separate legal entity and returns profit to its owners.

    For-Profit Corporation - Owners of a corporation are called shareholders. There are two general types of corporations: C and subchapter S.

    • Shareholders have limited liability for the corporation’s debts and judgments in legal actions.
    • 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 –
      • Taxed twice: Shareholders pay taxes on their earnings and the corporation also pays its own taxes.
      • May be domestic or foreign and works for large groups of investors
      Subchapter S (aka Small Business Corporation, file with IRS) –
      • Can avoid paying taxes twice by passing items to shareholders
      • 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.

    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.

    The Secretary of State offers online tools, which allow you to form or register a new business. and then contact your local county or municipal clerk for information about getting a business license.

    Recommendation: Consult an attorney or CPA to determine the best structure for your business needs.


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

    What are my tax obligations in Tennessee?

    First, a business identification number: SSN or FEIN?

    You must have a Federal Employer Identification Number (FEIN) if your business is a partnership or corporation, or if you pay wages to anyone other than yourself. It is issued by IRS .

    If your business is a sole proprietorship or a general partnership, your Social Security number (SSN) will also be your business entity identification number. Sole proprietorships and general partnerships are not liable for franchise and excise taxes.

    Consider: An FEIN gives your business a unique number that is not a SSN, and business information is public record.

    Now, on to tax registration for your business…

    All businesses register with the Tennessee Department of Revenue. You can use the online tax registration .

    To learn more about the particular taxes your business might be subject to, Revenue provides this overview or you can attend a new business workshop .

    These are not the only taxes your business might be responsible for filing. For example, Revenue is also responsible for collecting taxes and fees for on and off premise alcoholic beverages, bail bond, tobacco, and professional privilege, 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.

    Important dates to remember:

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