How to start a business in Tennessee

Tennessee has a history of incubating blockbuster businesses. It’s time for yours to join the ranks.

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With one foot in Appalachia and the other on the Mississippi, Tennessee straddles a strategic region in the South. Enjoying access to millions of Americans, the Volunteer State is home to enterprises like FedEx, Cracker Barrel, Dollar General, and countless other companies that started out small and ended up as national or multinational corporations.

Will your idea for a service business be the next great southern success story? Learn how  to start a business in Tennessee with our step-by-step guide.

Checklist: start a business in Tennessee

  1. Write your business plan
  2. Name your business
  3. Check zoning requirements
  4. Select a business structure
  5. Register your business
  6. Open a business bank account
  7. Secure startup capital
  8. Research licenses and permits
  9. Acquire business insurance
  10. Invest in business software
  11. Understand your tax obligations
  12. Grow your team

How to start a business in Tennessee

1. Write your business plan

A business plan is essential to the startup and longevity of your business. A comprehensive plan allows you to understand factors like launch costs, goals, competitive market, and more, giving you both something to work towards and look back on to measure your accomplishments.

A great business plan can help you:

  • Calculate your startup costs
  • Define business goals 
  • Understand your competition and your own competitive advantage
  • Develop growth strategies
  • Identify potential customers
  • Create a basic marketing plan
  • Brainstorm additional revenue streams
  • Attract investment

Download a free business plan template from the Tennessee Smart Start Small Business Guide or the Small Business Administration (SBA)—two great business resources you should be familiar with as a Tennessee business owner.

2. Name your business

In Tennessee, sole proprietors and general partnerships are allowed to use their full, legal name(s) as their business name. Other business structures must choose a name that conforms to Tennessee’s Business Name Availability Guidelines.

How to name a business in Tennessee

  1. Perform a business name search. Check to see if your preferred name is available using Tennessee’s Business Name Availability tool.
  1. Register your business name. If the name is available, you can claim it while registering your business (limited liability companies and corporations) or register it as an assumed name (sole proprietorships and general partnerships).

How to reserve a business name in Tennessee

You can reserve a business name in Tennessee for 120 days by filing a name reservation form and paying $20 to the Tennessee Secretary of State.

3. Check Tennessee zoning regulations

Business locations are almost always regulated by zoning laws. Even home-based businesses can be impacted by zoning, lease, and homeowners association restrictions. Make sure that you understand the zoning laws wherever your business will be located in Tennessee.

Zoning in Tennessee is administered at both the county and city levels. For example, zoning in Nashville is managed jointly by the municipal government and Davidson County. Be sure to check with your local governments to ensure that you are allowed to operate your business at your address.

4. Select a business structure

When registering your business in Tennessee, you must choose a business structure, which is sometimes referred to as a business entity, legal structure, or legal entity.

The structure that you choose will have a significant impact on the complexity of the startup process, personal liability protection, business size, and more. You can read more about business structure types, but it is recommended that you work with a CPA or business attorney to determine the best one for your goals.

You can choose from the following business structure options in Tennessee:

  • Sole proprietorship
  • General partnership
  • Limited partnership
  • Limited liability company (LLC)
  • Limited liability partnership
  • For-profit corporation
  • Nonprofit corporation

Many service business owners choose to operate limited liability companies, due to the tax flexibility and personal asset protection that this legal structure provides. The Tennessee Smart Start Small Business Guide has more information on the business structures available to you.

5. Register your business

The Tennessee Smart Start Small Business Guide is the best resource for information related to registering your business. When you’re ready, you can start the process online with the Tennessee Secretary of State.

Here’s an overview of what steps to expect:

  • Elect or hire a registered agent. This is an individual or corporation with a physical address in Tennessee that is responsible for receiving and distributing legal communications on behalf of your business. All business structures must have a registered agent except for sole proprietors and general partnerships.
  • File forms. Depending on your choice of business structure, you will need to file several formation documents with the Tennessee Secretary of State.
  • Set up a Federal Employer Identification Number (FEIN or EIN). This is a federal tax registration requirement and also allows you to open business bank accounts and hire staff. You can apply for an EIN online.
  • Register for Tennessee business tax. You will need to register your business to pay business tax. You can find more information and register with the Tennessee Department of Revenue.

Business formation can be a tricky process. Unless you know your way around every legal document, it’s a good idea to enlist the help of a CPA or business accountant to help you make the right choices and fill out the forms correctly.

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

The filing fee for registering a business in Tennessee varies depending on the type of business structure you have chosen. For example, an LLC can cost between a minimum of $300 to a maximum of $3,000. While the Tennessee state government does not provide a single fee schedule, they do list all forms involved in the registration process with associated fees.

6. Open a business bank account

While it’s a requirement for most business types to open a business bank account, it’s also just a good idea. Keeping your personal finances and business expenses separate can save time and confusion when you are working on chores like bookkeeping, accounting, and paying your taxes.

To set up a business bank account, you’ll need the EIN that you probably acquired during business registration. It works a lot like a social security number for your business.

You should sign up for a business checking account for day-to-day transactions. Consider adding a savings account as well to allow you to set aside profits or save for tax time. Business credit cards can make your life a lot more convenient and help your business build a healthy credit rating over time—just be sure to pay it off every month.

Whatever your preference in financial institutions, make sure you shop around to try to get the best deal for your new business. Banks are constantly creating new promotional offers that may be advantageous to you.

7. Secure startup capital

If you happen to have enough cash on hand to cover your startup expenses and ongoing business costs, you can get started right away. But many new service business owners need to find funding to get their operations off the ground.

Here are a few places you might be able to find small business funding in Tennessee:

Don’t forget to include your potential startup costs in your business plan so that you’re ready to seek out funding when the time comes.

8. Research licenses and permits

It’s likely that you’ll need to apply for licenses or permits at the federal, state, and local levels depending on what type of business you are planning to start.

To determine the licensing requirements that may apply to your business, check these information sources:

  • Federal level. check the SBA’s licenses and permits page.
  • State level. TN Regulations administers professional licenses. Registering for Tennessee Business tax with the Tennessee Department of Revenue is equivalent to acquiring a state business license.
  • County level. Business licenses and permits could apply, so don’t forget to check with the county clerk in your area for more information.
  • Local level. Consult city hall or the local chamber of commerce to learn about and apply for business licenses and permits. For example, licenses in Knoxville are handled by the City of Knoxville.

9. Acquire business insurance

All businesses need insurance, even the ones without anything to steal or damage. In the case of legal liabilities, you need protection. Depending on the business structure that you have registered, like an LLC, you may have some protection for your personal assets, but additional coverage is the best way to be sure your business and personal assets remain in your possession. The type of work you do will likely determine the insurance that you need.

In Tennessee, you are required to have workers’ compensation insurance if you have employees and commercial auto insurance if you use vehicles as part of your business. It’s also recommended that you have general liability insurance and professional liability insurance where it applies to the work that you do. 

For a deeper look at insurance, check out our guide to small business insurance.

10. Invest in business software

Besides the specific equipment and supplies that you need to do your job, you should think about using software to automate some of your business processes, freeing up your time for other things.

Business software can be used to streamline:

  • Invoicing. Automate your invoicing and accept credit card payments to save time and ensure you get paid promptly.
  • Review management. Great reputations don’t just happen by accident. Durable’s review management tool can help you build a good name for your business.
  • Customer relation management. Knowing details about your clients is key to building long-term, profitable relationships. A customer relationship management (CRM) platform tracks every interaction you have with clients so that you can give them exactly what they need at just the right time. Durable’s CRM automates many of these types of interactions, helps you stay organized, and it’s free.
  • Scheduling. Booking, tracking, and remembering appointments can be a huge chore. Take the pain out of scheduling with an automated tool like Calendly or TidyCal.

If there are other processes in your business that seem like they could be automated, chances are someone has already figured out how to do it. Don’t hesitate to do some research to find out.

11. Understand your tax obligations

The best way to sort through your tax obligations is to work with a CPA who specializes in things like business taxation, commercial deductions, filing deadlines, etc. While Tennessee does not collect income tax, you’re going to have to pay taxes of some kind at all levels of government, and tax codes can be complicated, so the help of a professional will certainly be worth their fee.

Here are some key business tax obligations in Tennessee:

  • Business tax. Functioning like a business license, business tax is administered by all counties and some cities in Tennessee.
  • Sales and use tax. You will most likely have to collect Sales and Use Tax from your clients to remit to the Department of Revenue.
  • Franchise and excise tax. Most business structures are required to pay franchise and excise tax on their property and earnings in Tennessee.
  • Product taxes. You might have to pay additional taxes on the products you sell, such as liquor

A complete list of taxes is available from the Tennessee Department of Revenue.

12. Grow your team

Hiring employees is a big commitment. Many small business owners opt instead to work with independent contractors when they’re just starting out.

If you do need full- or part-time staff to keep your operation running smoothly, make sure that you are set up to be compliant with state and federal employment regulations before you start the hiring process.

Here are some key employer responsibilities to keep in mind:

What's Durable?

With zero income tax and a thriving location in the South and Midwest, Tennessee might be the ideal place to start your next entrepreneurial pursuit. Follow the steps in this guide to learn how to start a business in Tennessee. And once your business is set up, stick around and give Durable a try.

Durable is an all-in-one platform with everything you need to start and grow a service business. Build your business website in minutes, and make invoicing, customer management, and review management a breeze.

Try Durable today—it’s free!

This guide is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Durable assumes no liability for actions taken in reliance upon the information contained herein.
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