How to Incorporate in Tennessee (August 2024 Update)

Tucked away in the lush rolling mountains of Appalachia, Tennessee doesn’t often come to mind as a hotspot for new business. However, the Volunteer State is increasingly gaining traction as a welcoming environment for entrepreneurs.

Between the state government’s efforts to attract corporate investment and the low cost of living drawing individuals, Tennessee strikes an appealing balance. If you’re thinking of turning your business idea into reality, incorporating in Tennessee may provide the launching pad you’re looking for. This comprehensive guide breaks down everything you need to know to form a corporation in Tennessee.

Benefits of a Tennessee Corporation

Before delving into the process, let’s consider some of the advantages of incorporating specifically in Tennessee:

Limited Liability Protection

Like all states, Tennessee offers business owners protection from personal liability for any debts or legal judgements against their incorporated company. Since the corporation exists as a separate legal entity from its ownership, only corporate assets are vulnerable in court rather than owners’ personal finances.

Tax Incentives

Tennessee offers appealing tax breaks aimed at business. Not only does the state lack personal income tax, but it also provides generous exemptions for business income, including eliminating taxes on dividends and interest. Property taxes and sales taxes remain on the high side but incorporating can still yield sizable tax savings.

Ability to Draw Investors

For startups aspiring to rapid growth rather than lifestyle businesses, attracting outside investment brings immense advantages. The corporation structure builds investor confidence as it has more established rules for issuing ownership shares. Having your business incorporated shows you’re serious about expansion.

Step-by-Step Process for Forming a Tennessee Corporation

While starting a corporation brings nice perks, the process itself has more paperwork and moving pieces than if you were to start a small business as a sole proprietorship. However, staying organized and completing each step meticulously positions your company for future success.

Choose a Business Name

Your first official task will be naming your Tennessee corporation. The state wants to ensure business names aren’t already taken or too similar to another existing entity. Your corporation’s name must include a corporate designation like:

• Incorporated
• Corporation
• Company
• Corp.
• Inc.
• Co.

You can check Tennessee’s business entity database to see if the Secretary of State has your preferred name registered or reserved. If available, you may submit an application to reserve the name for 120 days while you complete additional incorporation tasks.

Appoint a Registered Agent

Before filing your official incorporation paperwork, your forming corporation must designate a registered agent authorized to receive legal correspondence on its behalf. This person or business must have a physical street address in Tennessee, not a P.O. box.

While you can save money initially by appointing a volunteer director or yourself as the registered agent, this exposes your personal contact information in public records. Consider using a commercial registered agent service to keep your privacy while remaining accessible for important mail.

File Articles of Incorporation

The main step formalizing your corporation’s existence is submitting Articles of Incorporation (or a Charter) to the Tennessee Secretary of State. This document will become public record. It must include:

• Your corporation’s name (including corporate designation)
• Names and addresses of your incorporators
• Your registered agent’s name and complete street address
• Your principal corporate office address
• Total number of shares your corporation can issue

Tennessee processes both standard and expedited filings. Standard wait times currently average around five business days. You can file online, by mail, or in-person for the $100 state fee.

Establish Your Corporate Bylaws

Part of legitimizing your corporation is adopting bylaws, or operating rules and procedures. Your bylaws outline important internal processes like:

How and when to hold shareholder/director meetings

• Electing corporate leadership
• Issuing stock shares
• Voting procedures
• Amending existing bylaws

Though not submitted to the state, keeping your bylaws with other business records remains essential.

Obtain an Employer Identification Number (EIN)

Nearly all corporations need an EIN – the business equivalent to a Social Security Number. The IRS issues EINs for free as you’ll need one to open business bank accounts and hire employees. An EIN also facilitates registering for state tax obligations.

Hold Organizational Meeting

Once legally formed, your Tennessee corporation should hold its first official meeting. Your initial corporate bylaws often become enacted during the organizational meeting. It also marks when leadership like your board of directors formally assume their positions. Be sure to memorialize the proceedings in official meeting minutes.

Open a Business Bank Account

Keeping your business finances wholly separate from personal funds remains key to maintaining corporate liability protections. Explore banks offering business checking accounts to deposit revenue and pay any corporate debts. The EIN from the previous step now comes in handy.

For more information, take a look at our article on the key benefits of business checking accounts.

Ongoing Tennessee Corporation Compliance

You did it – launching your Tennessee corporation! But staying compliant with state laws preserves your limited liability protection and ability to operate. You must file an Annual Report and pay Tennessee franchise taxes yearly. Consulting a tax professional also helps wade through nuances of federal income taxes.

Obtaining any required professional licenses or operational permits can’t be overlooked either. For example, those rendering medical, legal, or financial services need special clearance. Construction companies, restaurants, even hair salons must apply for industry-specific licensure in Tennessee.

Conclusion

With so many moving pieces to juggle while starting a business, Tennessee’s corporation formation process can feel daunting. However, aligning with the right business formation services streamlines incorporating properly. Consider enlisting help to alleviate administrative hurdles from the get-go. That way, you can focus energy on your company’s purpose and positioning it for prosperity rather than wrestling with compliance.