The LLC’s business name must be different from all other business entity names registered or reserved with the state, including nonprofit organizations. Your new LLC’s name must end with the words “Limited Liability Company” or the abbreviations “LLC” or “L.L.C.” The word “Limited” may be abbreviated as “Ltd.” and the word “Company” may be abbreviated as “Co.” Your new LLC’s name may not, however, include the words “corporation” or “incorporated.” It also may not include language that state or implies that:
- The LLC is organized for any illegal or unlawful purpose
- The LLC conducts or has the power to conduct any business without actual authorization
- The LLC is connected with any fraternal, veterans,’ service, religious, charitable, or professional organization, unless certified in writing by the organization
- The LLC is an agency of or affiliated with any government agency unless certified in writing
An available LLC name may be reserved for four months for a $20 fee.
The state filing time is 3 weeks with an expedited filing time of 5 business days
State Filing Fees
The filing fee is $308, but can be expedited for an additional $100 for a faster processing time.
Articles of Organization and Operating Agreement
The formation of a Tennessee LLC means that you have to file articles of organization (along with the $125 filing fee) with the Business Services Division of the Tennessee Department of State. The articles, which must be signed by at least two persons organizing the LLC, must include:
- The LLC’s name
- The address of the LLC’s registered office
- The name of the LLC’s initial registered agent there
- The names and addresses of the organizer(s)
- Whether one or more members are personally liable for the LLC’s debts
- Whether the LLC will be member-managed or board-managed
- The number of members on the date the articles are filed
- Whether the LLC’s dissolution can be triggered by action by all or some of the board of governors
- Whether and how board governance rights can be transferred
- Whether the LLC will begin when the articles or filed or on a future date (cannot be more than 90 days from the filing date)
- The street address (including county) of the LLC’s principal executive office
- Whether the LLC has the power to expel a member
- The period of the LLC’s duration (may be perpetual or for a specified time period)
- Whether members or other parties have preemptive rights
The filed articles must be signed by a member, manager, organizer, or fiduciary (if the LLC is the hands of a receiver, trustee, or other court-appointed fiduciary) and indicate the name and title of the person signing the document.
Your new LLC is officially “organized” once the original articles of organization and one duplicate or conformed copy is delivered to the Secretary of State by one or more organizers. The articles must contain a statement which makes it clear that it is being filed pursuant to the Tennessee Limited Liability Company Act.
The articles must be executed (signed) by an organizer if the LLC has not yet been formed, or if the directors or board have not yet been selected. If the LLC has already been formed, or if the directors or board have been selected, a filed document must be executed by the chair of the board of directors, or by its president or other authorized manager if an LLC action is taken.
The articles may also include a grant of authority to one or more members, managers, or governors to execute instruments for the transfer of real property, and any restrictions and conditions with respect to such authority
The LLC’s next most critical document is its operating agreement. Having an operating agreement is not officially required by the state, but it’s a very important internal document that sets forth how the LLC will run. The operating agreement should list the LLC’s members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting. It can be amended or repealed as specified in the agreement itself or by state law.
The operating agreement can also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn’t have to. Often, however, it does include operating constraints and allowances that are already contained in state law and regulations. It also may contain constraints on the members’ authority to change or repeal the operating agreement or any provision thereof.
A Tennessee LLC must have at least one member, who may be a natural person or a business entity. Members may acquire an interest in the LLC either in proportion to their contribution or in some other way that is in accordance with the LLC’s operating agreement or articles of organization.
The contributions of a member to the LLC may consist of cash, property, services rendered, or a binding obligation (such as a promissory note) to make these kinds of contributions in the future.
An LLC member may not resign except in accordance with the operating agreement or articles of organization, or his or her resignation is considered “wrongful.” If a member resigns or withdraws wrongfully, that member forfeits governance rights in the continued operation or the termination process of the LLC. The withdrawing member is only entitled to receive the lesser of the fair market value or the original contribution of the member’s interest—but if the LLC terminates, the member is entitled to receive his or her distribution. In either case, the member is entitled to his distribution or interest within six months of withdrawal, and the member is liable to the LLC and all its remaining members for any damages caused by the wrongful withdrawal.
Tennessee has an unusual statutory structure and naming convention for LLC management. As in other states, Tennessee state law allows for management of the LLC by all members. However, member-managed (and other) LLCs are expected to fill at least two “manager”: positions (which must be held by two separate individuals): a chief manager and a secretary. In reality, these are officer—not manager—positions.
The chief manager functions as LLC president and is responsible for insuring that management orders are executed—a common CEO day-to-day responsibility. The secretary is charged with maintaining the records of the LLC—again, a typical officer job.
The person(s) who can be chosen instead of the members to manage the LLC are not called managers, but “governors,” who are selected to serve on the board of governors. Most smaller LLCs opt for member management.
Tennessee LLCs have to continuously maintain both a registered agent and registered office in the state—the person or office designated to receive official state legal and administrative correspondence. An LLC registered agent may be an individual who resides in Tennessee or a business entity authorized to conduct business there. The registered agent’s business office must be the same as the corporation’s registered office.
The registered office may be—but doesn’t have to be—the LLC’s place of business.
Ongoing Filing and Compliance
All board-governed Tennessee LLCs must keep the following types of records open and available for inspection at its main office:
- Names and addresses of the chief manager, secretary, and all members and governors
- Names and addresses of each assignee of financial rights, and a description of the rights assigned for each
- A copy of the articles of organization and any amendments
- A copy of the operating agreement and any agreements about membership interests
- Copies of the LLC’s federal, state, and local income tax returns for the past three years
- The LLC’s financial statements and accounting records
- Records of all members proceedings (if any)
- Any written consents or agreements from members
- Records of all board of governor proceedings for the past three years
- A list of all contributions, who gave them, and their consensus value
- The LLC’s most recent annual report to the Tennessee Secretary of State
If the LLC is member-managed, the same records are required as if the LLC is board-governed, except for those items relating to governors. The member-managed LLC must also keep available financial information about the status of the business and the LLC’s financial condition.
A Tennessee LLC is dissolved when any one of the following events occurs:
- When the time for expiration specified in the articles of organization arrives
- By agreement of the organizers or members as laid out in the articles of organization or operating agreement
- An event specified in the articles of organization or operating agreement
- A court order mandating dissolution
- Action by the Tennessee Secretary of State
- Withdrawal by a member
- A merger in which the LLC is not the surviving organization
The LLC may prevent dissolution when a member leaves the LLC if, within 90 days, there is at least one remaining member, and the remaining member(s) agree to continue the business by a majority vote or a percentage provided in the articles of organization.
An LLC by its nature offers some specific advantages over a corporation’s organizational structure, especially when it comes to taxes. This includes access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a “pass-through” entity for tax purposes, meaning that LLC owners report business profits and losses on their individual tax returns.
The Tennessee individual income tax rate is six percent of eligible income.