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How To Start A Business In Tennessee: 10 Steps (2024)

how-to-start-a-business-in-tennessee:-10-steps-(2024)
How To Start A Business In Tennessee: 10 Steps (2024)

This content doesn’t contain and isn’t meant to provide legal, tax, or business advice.*

Tennessee has emerged as a popular spot for new businesses in recent years. Its low cost of housing, major manufacturers, and competitive corporate tax rate draw entrepreneurs from across the country.

Whether you’re looking to start a business in the urban hubs of Nashville or Memphis, in smaller cities like Chattanooga or Knoxville, or in one of the abundant rural regions, here are nine steps to get your new venture up and running in the Volunteer State.

Start a business in Tennessee

  1. Choose a business idea
  2. Name your Tennessee business
  3. Create a business plan
  4. Choose a business structure and get started
  5. Get a federal employer identification number (EIN)
  6. Obtain business licenses and permits
  7. Examine business insurance options in Tennessee
  8. Open a business bank account
  9. Get funding for your business entity
  10. Market your business

1. Choose a business idea

A great business idea can vault you past the competition. You may want to create a new product or service or improve an existing one. Here are two questions you can ask yourself to find your footing:

Who is your customer?

Analyze your target market, paying particular attention to customers who aren’t fully served by current offerings. You may want to survey prospective customers, investigate successful businesses in your sector, and look into industry trends. Conduct market research to steer you in the right direction before you open your doors for business.

What’s your projected profitability?

It isn’t enough to simply make money. You have to make more than you spend over the long term. How many products or services do you need to sell to cover your costs and turn a profit? How long will this take?

2. Name your Tennessee business

Customers can glean a lot about a business’s product offerings, prices, and quality simply from its name. Consider two hypothetical florists: one called Flower Warehouse and another called Lennie’s Desert Flora. You get an instant sense of how these two differ. Here’s how to secure a strong name for your Tennessee business:

Get creative

Many successful businesses have unconventional names that stand out and stay lodged in people’s minds. Alliteration, rhymes, and pop culture references can work wonders. These business name guidelines can help if you need extra pointers.

Register your original name

Before registering your business online in Tennessee, confirm another business hasn’t already claimed it. The Tennessee Secretary of State provides a business name availability tool for this purpose. Once you have a name, file Tennessee Form SS-9425: Application for Name Reservation by mail or email the Secretary of State. The filing fee is $20. 

Include required phrases

Tennessee requires LLCs to include the term “Limited Liability Company” or its abbreviations (“LLC” or “L.L.C.”) in their official business names. Tennessee corporation names must contain the word “Corporation,” “Company,” or “Incorporated” (or an abbreviation of one of these words). Tennessee professional corporations must include the phrase “Professional Services Corporation” or the abbreviation “PSC.”

Register a DBA

DBA stands for “doing business as.” The term applies to companies organized under one legal business entity but that interface with customers using an assumed name. For instance, Whittinghill Agricultural Ventures LLC might use Happy Chickens Grain Feed as an alias. To use a DBA, register an assumed name with the state of Tennessee for $20. Shopify offers a dive into the DBA process.

Reserve an online domain name and social media handles

Secure a domain name and social media handles aligned with your business name or DBA, that way your customers are able to find you online. You can use a domain name generator to create a URL for your business website.

3. Create a business plan

Many successful business owners craft and follow business plans establishing organizational objectives, plot growth, and set benchmarks for success. Most of these also include a financial plan balancing business income with business expenses.

If unsure how to start, consult a business plan template or browse business plan examples for inspiration. Comprehensive business plans include:

  • An executive summary
  • A mission statement and company description
  • An outline of the organizational and managerial structure
  • An operations and logistics plan, including forecasted business costs
  • A portfolio of products or services
  • Market research and analysis
  • A marketing plan
  • A customer segmentation report

4. Choose a business structure and get started

Your new business entity will likely take one of four business structures: sole proprietorship, limited liability company (LLC), general partnership, or corporation. Each has its benefits, operational requirements, and tax exposure. Here’s how the three structures compare:

Sole proprietorship

Sole proprietorships are owned and operated by a single person. They’re not recognized as legal entities, meaning there’s no legal distinction between an owner’s personal and business expenses.

For instance, if the company is sued, the sole proprietor could have to pay out of their personal savings. These informal business structures have few legal paperwork requirements and keep all their profits. Tennessee sole proprietorships may appeal to small business owners in low-risk industries with no employees.

General partnership

A general partnership is similar to a sole proprietorship, but it involves two or more partners who share in a company’s profits, losses, and assets.

LLC

A limited liability company (LLC) is a formal business structure owned by individuals called LLC members. Members control their company’s operations without the oversight of a corporate board of directors and often abide by an LLC operating agreement. LLCs provide personal liability protection, meaning owners’ personal assets are not at risk if the LLC is sued.

Many small business owners favor LLCs for their personal asset protection. Regarding federal taxes, the IRS treats LLCs as pass-through organizations, meaning LLC profits and losses pass through to members, who report them on their personal income tax returns. To officially establish an LLC in Tennessee, you must file Articles of Organization with the Secretary of State.

Corporation

A corporation is a legal business entity owned by shareholders. Like LLCs, corporations do not mingle company assets with their owners’ personal assets. The shares-based corporate business structure makes it easier to welcome new shareholders and raise capital for business expenses.

Corporations are taxed at a corporate rate, which differs from the personal income tax rate. In Tennessee, the corporate excise tax rate is 6.5%. Corporations have a more complex legal structure and require more formalized accounting and tax filing than LLCs and sole proprietorships. Corporations must maintain corporate boards of directors, name corporate officers, and hold periodic meetings.

Incorporating in Tennessee

Tennessee requires new corporations to:

File a corporate charter

Tennessee corporations must file a corporate charter via the Tennessee Secretary of State’s website or by mailing in a form. The filing fee is $100. If your corporation is based outside Tennessee and wants to expand into the state, file Tennessee’s Form SS-4429 and pay a $20 filing fee to the Secretary of State’s office. A $600 fee accompanies the separate application for the Certificate of Authority . Further details are included in the Tennessee Smart Start Small Business Guide.

Designate a registered agent

Registered agents receive legal and tax correspondence on behalf of the company. Your corporation’s registered agent must have a physical address in Tennessee. A registered agent can come from your ownership ranks, or you can enlist a dedicated registered agent service.

5. Get a federal employer identification number (EIN)

If your Tennessee business plans to hire employees, you must apply for a federal employer identification number (EIN) with the Internal Revenue Service (IRS). An EIN functions as a business’s federal tax number.

You’ll need to present your EIN in various business ownership scenarios, from hiring employees to establishing a business bank account and paying business taxes. Your EIN is also used to obtain a state sales tax number from the Tennessee Taxpayer Access Point (TNTAP).

6. Obtain business licenses and permits

Tennessee business law subjects most companies to licensing and permitting regulations. Many Tennessee business licenses are issued at the county level. The Tennessee Department of Revenue provides more information to get you started. Common Tennessee business licenses include:

Standard business license

If your Tennessee business has gross receipts of $100,000 or greater, you must obtain a standard business license from your local county clerk. The registration fee is $15.

Minimal activity license

Tennessee businesses with gross receipts of more than $3,000 but less than $10,000 must obtain a minimal activity license from their local county clerk. (You don’t need a license if your business income from gross receipts is less than $3,000.) The registration fee is $15.

Sales and use tax certificate

Tennessee LLCs must collect a 7% sales tax on goods and certain services, and localities can add additional amounts. You need a sales tax and use certificate to conduct retail sales in the state legally. To obtain one, create an account on the Tennessee Department of Revenue website and follow the prompts.

Many Tennessee industries require unique certification and business licenses, including medicine, architecture, accounting, insurance, home inspection, and cosmetology. Consult the Tennessee Department of Commerce & Insurance website for details.

7. Examine business insurance options in Tennessee

Even with the personal asset protection afforded by LLC and corporate business structures, most small business owners purchase insurance to shield their business assets against costly mishaps. In Tennessee, some types of insurance, like workers’ compensation insurance, are required by state law (with some conditions). Other insurance is not state mandated but may be required by other entities such as landlords or lenders.

The Tennessee Department of Commerce & Insurance provides business resources to help you determine what insurance you need. Standard business insurance policies include:

  • Workers’ compensation insurance. Tennessee requires all businesses with five or more employees to purchase workers’ compensation insurance to cover on-the-job injuries.
  • Commercial general liability insurance. Commercial general liability insurance (CGL) protects businesses from financial claims involving property damage, bodily injury, libel, slander, and misleading advertising.
  • Professional liability insurance. A professional liability insurance policy protects your business against claims that your advice or services caused a customer financial harm. For example, a real estate agent who fails to note mold in a basement can be liable for damages.
  • Cyber liability insurance. Cyber liability insurance protects against financial losses from cyberattacks and data breaches. You may find this coverage invaluable (and more comprehensive than data breach insurance alone) if your business collects customers’ credit card numbers or other personal information.
  • Commercial automobile insurance. If you own a vehicle in Tennessee, it must be covered by vehicle insurance, whether it’s for commercial or personal purposes. For your business vehicles, obtain commercial auto insurance.

8. Open a business bank account

Choose a financial institution to handle your company’s business banking. Use this account to separate personal and business expenses when paying workers or business tax, and when receiving income.

Manage your money where you make it with Shopify Balance

Shopify Balance is a free financial account that lets you manage your business’s money from Shopify admin. Pay no monthly fees, get payouts up to seven days earlier, and earn cashback on everyday spending.

Discover Shopify Balance

9. Get funding for your business entity

New companies often need cash infusions to get off the ground. Several Tennessee agencies connect business owners with funding, grants, and information about tax benefits, including the Tennessee Small Business Development Centers network and the Tennessee Department of Economic and Community Development.

The US Small Business Administration is an independent federal agency supporting entrepreneurs and small businesses. It maintains an office in Nashville.

Get funding to run and grow your business through Shopify Capital

Shopify Capital makes it easy to get funding quickly and use it for inventory, marketing, and more. Automatically make payments as a percentage of your daily sales. No compounding interest. No schedules. No surprises.

Explore Shopify Capital

10. Market your business

Marketing starts with building a brand and identifying what makes it stand out. Effective marketing takes into consideration color schemes, fonts, logos, and slogans. Once you’ve honed in on your brand identity, you’re ready to promote your business online and in person. Popular methods include:

For further guidance, peruse online marketing resources like this small business marketing guide.

Tips for starting a business in Tennessee

Starting a business can seem easy once you’ve done your market research and have funding in place, according to Phala Mire, president and CEO of Women’s Business Enterprise Council South (which includes Tennessee).

“Don’t forget that there are steps every business owner needs to take before starting a business to ensure that the company is operating in compliance with state and local laws,” she emphasizes.

Here, Mire shares her top three startup tips for business owners launching a business in Tennessee:

Research start-up requirements on the state and local levels

Startup requirements can vary by state, geographic location, and business type. Make sure to check in with your state’s economic development office to find out exactly what steps you need to take and what resources they provide to business owners.

The Tennessee Department of Economic & Community Development’s (ECD) Business Enterprise Resource Office (BERO) offers a comprehensive Tennessee Smart Start Guide with step-by-step instructions for those looking to start their own business.

Register your business with the Secretary of State, and obtain any licenses and permits necessary for your business structure and industry requirements

Having the necessary licenses and permits ensures that you run the company legally—and avoid potential fines and penalties. This is also a great time to research possible business certifications—national, state, and local—that can help your business access opportunities for certified small businesses, as well as minority-, veteran-, and women-owned businesses.

Take advantage of any tax breaks and business start-up incentives

Check what’s offered by your state or city government. The Tennessee Department of Revenue lists a plethora of incentives on their website, such as the Jobs Tax Credit, which allows qualified businesses a credit against franchise and excise taxes based on capital investment and the number of jobs created.

*This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Tennessee will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.

Starting a business in Tennessee FAQ

How much does it cost to start a business in Tennessee?

Sole proprietorships are informal business structures that do not require any legal filings, so there are no startup costs concerning the Tennessee government. For more complicated legal structures, the total fees can range from around $100 to $3,000.

Is Tennessee a good state to start a business?

Tennessee has a competitive corporate tax rate of 6.5%. And the state is experiencing strong economic growth, plus it provides ample business and training opportunities for small businesses. However, its sales tax rate averages 9.75% when combined with state and local rates, which is among the highest in the country.

What is a good business to start in Tennessee?

  • Ecommerce
  • Real estate
  • Home improvement 
  • Restaurant
  • Law firm
  • IT firm
  • Landscaping
  • Beauty salon

What do I need to start a business in Tennessee?

This article originally appeared on Shopify and is available here for further discovery.
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