In this Article, we will give you a snapshot of the legal compliance requirement and associated fees required to register Limited Liability Company (LLC) in Tennessee and most importantly, maintain the status of an LLC, especially as a small business e-commerce start up.
In the United States, LLCs are registered on the state level, therefore you can register an LLC in any of the 50 States in the United States, including Washington DC.
You can check out our the best states in the US to register your LLC as a small business e-commerce start-up, if you want to pay less State fees, less State imposed taxes and do less periodic paperwork in order to maintain your LLC.
In this Article, our focus is on Tennessee LLC. What cost should you expect to pay when you register an Tennessee LLC? What periodic filings requirements are imposed on Tennessee LLCs? What State taxes are levied on e-commerce small business start ups in Tennessee and what are the tax rates? What business permits are required to be obtained by e-commerce businesses in Tennessee, what’s the cost of these permits and are there any renewal requirements?
This Article presents you a snapshot, so you know what fees and legal compliance requirements to expect if you want to register an LLC for your e-commerce small business start up in Tennessee, operate with the required licenses and maintain your LLC status.
Business registration and compliance on Tennessee
LLC Registration cost; the state fee for registering an LLC in Tennessee is $308. You can register your LLC with Bizee for a service charge of $0 + the State fee.
LLC registration Publishing requirement; No, LLCs in Tennessee are not required to publish their registration in a local newspaper.
Has the Option to register as an Anonymous LLC; No, LLCs in Tennessee do not have the option to register as an anonymous LLC. Meaning that the business details of the LLC Owners are published on the Tennessee public records. The LLC can still maintain some privacy by using a virtual office address and not the Owners real addresses.
DBA requirement; DBA is required if your LLC is operating under a different name than your LLC registered name. In Idaho DBA is referred to as a “Assumed name”. Cost of registration is $20, the length of approval is 5 years. You can register for a DBA in Tennessee online or outsource the registration of your Tennessee DBA (if needed) to Bizee
Annual report filing requirement; yes, Tennessee LLCs have annual report filing requirements. The cost of filing annual report in Tennessee is $300
You can file the Tennessee annual returns yourself, you’ll need to visit the Tennessee Annual Report Filing or you can outsource the filling of your annual returns to Bizee for a $99 service charge + the state fee.
You can register your DBA or fill your annual returns directly on the State’s website and only pay the state’s filing fees. Alternatively you can use Bizee a US business filing service to register your DBA and file your annual returns. Bizee charge a service fee of $99 + the state fees. We recommend Bizee for registering your LLC because specifically for LLC registration, Bizee does not charge any service fee. so you pay $0 + the state fees.
Annual Franchise tax filing and compliance in Tennessee
State Franchise tax requirement; All Corporations, LLCs, and Partnerships, regardless of their tax status with the IRS, are subject to the Tennessee Franchise tax and Tennessee Excise tax.The franchise tax has a minimum payment of $100. Franchise tax is figured at 25% of the net worth of corporations or tangible property.
The excise tax is 6.5% of the net taxable income made in TN. You can learn more about the Tennessee Franchise tax.
Annual State income tax filing and compliance in Tennessee
State income tax requirement; Tennessee does not have an individual income tax. Tennessee has a flat 6.50 percent corporate income tax rate and levies a gross receipts tax.
- Who files State income tax; LLCs by default are passed through entities meaning that tax obligation passes through to the individuals who own the LLC. Therefore an LLC with a default tax status pays the individual state income tax. Interestingly, if the individuals behind the LLC are not resident in the state and do not have state source income (a dependent agent in the state), then they are not required to pay “individual State income tax”.
If the LLC owners are resident in the State or have State source income (a dependent agent in the state), then the LLC Owners are required to pay “individual State income tax”.
If the LLC has elected to be taxed as a corporation (C-corp), then the LLC is required to pay “Corporate State income tax”.
- How to file state income tax; You can file your Tennessee State income tax by yourself. You will need to visit the State website. Alternatively, we recommend using the Service of a Certified Public Accountant (CPA), through H&R Block to file your state income tax.
Periodic Sales tax filing and compliance in Tennessee
Sales tax requirement; Tennessee has a 7.00 percent state sales tax rate, a max local sales tax rate of 2.75 percent, and an average combined state and local sales tax rate of 9.55 percent.
- Sales tax nexus; Sales tax nexus is
the state-defined threshold between a Seller and a state, which when reached makes it obligatory for the Seller to register for a Seller permit in the state, charge sales tax to customers in the state and remit the sales tax to the State Government.
Generally, there is the “physical sales tax nexus” and “economic sales tax nexus”.
Physical sales tax nexus is reached when the Seller had physical presence in the state (i.e have an office address, a warehouse etc).
In most States, “economic sales tax nexus” is reached when a Seller makes up to 200 transactions or $100,000 in sales in a State.
It’s important to note that, when you register your LLC in the State of Tennessee (which generally requires that you have a registered business address in Tennessee), you automatically meet the physical sales tax nexus and will be required to obtain a Sales tax permit in Tennessee, charge applicable sales tax rates to customers in Tennessee and remit sales tax to the Tennessee State Government.
Sales tax permit; It costs $0 to register for register for sales and use tax in Tennessee. However, most businesses also need a business license, which costs $15 and is issued from a county and/or clerk’s office.
There is no requirement to renew a Sales tax permit in Tennessee.
Reseller/Resale Certificate; Businesses who purchase products from their suppliers for the purpose of reselling those products to their customers can make sales tax free purchases from their suppliers if they have a resale certificate.
This means that Resale businesses can get cheaper product prices from their suppliers (that is product prices without sales tax included) which can help these Businesses have a higher profit margin and/or maintain competitive selling prices to their Customers.
Generally, suppliers will charge the sales tax rate applicable in the State where the product is to be delivered unless the business presents to the supplier a Resale Certificate (also called a Reseller Certificate).
The Resale certificate must be valid and acceptable in the state where the product is to be delivered.
Businesses can present any of the below listed Resale certificates to suppliers if they want to make sales tax free purchases for product delivery to an Tennessee address.
- MTC Uniform Sales & Use Tax Resale Certificate (The MTC form serves as a uniform resale certificate for various states, streamlining the process by replacing the need for multiple state-specific resale forms when dealing with your supplier.)
- SST Certificate of Exemption (The SST form serves as a uniform resale certificate for various states, streamlining the process by replacing the need for multiple state-specific resale forms when dealing with your supplier.)
Note; Tennessee accepts the use of out-of-State Seller ID.
This means that Resale Businesses seeking sales-tax-free purchases in Tennessee can use an out-of-state seller ID (i.e a seller ID issued by another US state or their home state) to fill-out the MTC uniform resale certificate or SST Certificate of Exemption. They can indicate an out-of-state seller ID as their Tennessee Seller ID on the MTC form or SST form.
In Tennessee, A blanket Resale certificate (This means that the resale is kept on file by the Supplier to cover multiple purchase transactions between a specific Supplier and Reseller) appears to be valid until revoked in writing because Tennessee does not list an expiration period on its resale certificates.
Conclusion
This Article shows you a snapshot of the legal fillings and compliance requirements for LLCs that are registered in Tennessee, specifically for LLCs that want to carry on the business of selling and especially for small e-commerce start up LLCs that are registered in Tennessee.
If you are wondering what might be the best State in the United States to register your small business (especially if you are a reseller or an e-commerce business), we have written this Article, where we go over our most recommended states for registering a business in the United States, if you want to pay less LLC filling and legal compliance fees, if you want less state imposed taxes and if you want to do less periodic legal paperwork required to maintain your LLC status.
