Meow Technologies, Inc.
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.
Before delving into the process, let’s consider some of the advantages of incorporating specifically in Tennessee:
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.
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.
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.
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.
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:
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.
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.
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:
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.
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
Though not submitted to the state, keeping your bylaws with other business records remains essential.
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.
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.
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.
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.
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.