Starting a Corporation in Tennessee | What You Need to Know

Start a Corporation in Tennessee

In Tennessee, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Tennessee, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Tennessee.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Tennessee?

A corporation in Tennessee is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Tennessee are required to have at least Three directors. One of the main advantages of a corporation in Tennessee is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Tennessee is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

It is recommended to Start a Corporation in Tennessee if you would like to provide limited liability protection to your shareholders rather than Tennessee LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

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How to Start a Corporation in Tennessee

To start a corporation in Tennessee, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Charter for Profit Corporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Tennessee naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Tennessee-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Tennessee Secretary of State‘s business name database and Business Name Search in Tennessee. If the name is available, you may choose to reserve it for a specific period of 4 months by filing a name reservation application and paying the online name reservation fee of $20 and mail name reservation fee of $20. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by two methods, by mail and in person., which costs around Varies by county. In addition, the DBA’s validity in Tennessee is five years, which you can file in Tennessee Secretary of State.

You can check out How to File a DBA in Tennessee for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Tennessee Registered Agent Services to check in forming Tennessee Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Tennessee are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Tennessee, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Charter for Profit Corporation

After you appoint the initial board of directors in your Tennessee corporation, the next step is to write and file a Charter for Profit Corporation. In writing, the Tennessee Charter for Profit Corporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Tennessee corporation, you must prepare and file Charter for Profit Corporation with the Tennessee Secretary of State. The Charter for Profit Corporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Charter for Profit Corporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Charter for Profit Corporation are complete, please submit them to the Tennessee Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Tennessee, the Charter for Profit Corporation filing fee costs around $100 for online and by mail filing. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site.
  • Offline filing: Send the form by mail to or drop it off in person at Corporate Filings, 312 Rosa L. Parks Avenue, 6th Floor, William R. Snodgrass Tower, Nashville, Tennessee 37243

Step 5: Creating Corporate Bylaws

Now you are done filing Charter for Profit Corporation in Tennessee, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Tennessee corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Tennessee corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Tennessee are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Charter for Profit Corporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Tennessee Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Tennessee licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Tennessee corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Tennessee for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Tennessee corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Tennessee can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Tennessee Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Tennessee corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Tennessee Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Tennessee

Even if you have established your corporation in Tennessee, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Tennessee has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Tennessee are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Tennessee

In forming a corporation in Tennessee, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Tennessee, it costs $100 for online and by mail filing. The corporation in Tennessee also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What are the basic requirements for starting a corporation in Tennessee?
To start a corporation in Tennessee, you will need to file articles of incorporation with the Tennessee Secretary of State.
Does Tennessee require corporations to have a registered agent?
Yes, Tennessee requires corporations to designate and maintain a registered agent for service of process.
Can I use a PO Box as my corporation’s registered office address in Tennessee?
No, you must use a physical street address as your corporation’s registered office address in Tennessee.
Is there a minimum number of directors required for a corporation in Tennessee?
Yes, Tennessee requires corporations to have at least one director.
Do I need to file a separate tax return for my Tennessee corporation?
Yes, corporations in Tennessee are required to file a separate tax return on Form FAE 170.
What is the filing fee for the articles of incorporation in Tennessee?
The filing fee for the articles of incorporation in Tennessee is $100.
Can I use a trade name for my corporation in Tennessee?
Yes, Tennessee allows corporations to operate under an assumed name, but you must first register the trade name with the Secretary of State.
How long does it take to incorporate a business in Tennessee?
It takes about 2-3 business days for the Tennessee Secretary of State to process a corporation’s articles of incorporation.
What is the franchise tax rate for Tennessee corporations?
The Tennessee franchise tax rate varies depending on the type of corporation, but generally ranges from 0.25% – 0.5% of the franchise tax base.
Does Tennessee have a corporate income tax?
Yes, Tennessee has a corporate income tax that is levied on net earnings from business operations conducted within the state.
Is there a minimum authorized stock requirement for corporations in Tennessee?
No, corporations in Tennessee are not required to have a minimum authorized stock.
Can I form a corporation online in Tennessee?
Yes, you can form a corporation online at the Tennessee Secretary of State’s website.
Is there a deadline for filing annual reports for Tennessee corporations?
Yes, Tennessee corporations are required to file annual reports with the Secretary of State by April 1 each year.
What are the rules for conducting business with a foreign corporation in Tennessee?
Foreign corporations must obtain a certificate of authority from the Tennessee Secretary of State and appoint a registered agent before conducting business in the state.
Can I start a nonprofit corporation in Tennessee?
Yes, you can start a nonprofit corporation in Tennessee by filing articles of incorporation with the Secretary of State that include specific language regarding the organization’s nonprofit purpose.
What types of insurance are required for Tennessee corporations?
Tennessee corporations must carry workers’ compensation insurance and liability insurance.
What is the process for dissolving a corporation in Tennessee?
To dissolve a corporation in Tennessee, you must file articles of dissolution with the Secretary of State and complete any necessary tax returns and filings.
Can I use a friend or family member as my corporation’s registered agent in Tennessee?
Yes, you can use a friend or family member as your corporation’s registered agent, as long as they are a resident of Tennessee and have a physical street address.
Does Tennessee require corporations to hold an annual shareholders’ meeting?
No, Tennessee does not require corporations to hold an annual shareholders’ meeting, but it is recommended to do so.
Can I start a professional corporation in Tennessee?
Yes, certain professions that require a license or certification, such as doctors or attorneys, can form professional corporations in Tennessee.
What reporting requirements are there for Tennessee corporations?
Tennessee corporations are required to maintain accurate records and hold shareholder and board meetings as needed, but there are no specific reporting requirements beyond annual reports.
How can I check the availability of a corporation name in Tennessee?
You can use the Tennessee Secretary of State’s online business database to check the availability of a corporation name.
What entity types can I choose from when starting a business in Tennessee?
Tennessee allows businesses to form as corporations, limited liability companies, partnerships, and more.
Can I change my corporation’s name in Tennessee?
Yes, you can change your corporation’s name in Tennessee by filing an amendment with the Secretary of State.
Is a corporate seal required for Tennessee corporations?
No, Tennessee corporations are not required to have a corporate seal, but it is commonly used for formal documents.
What is the purpose of a corporation in Tennessee?
The purpose of a Tennessee corporation is to create a separate legal entity that can do business, enter into contracts, and borrow money on its own behalf.
Can I reincorporate my out-of-state business in Tennessee?
Yes, you can reincorporate your business in Tennessee, but you will need to follow the state’s filing and registration requirements.
Are there any age restrictions for directors of a Tennessee corporation?
No, there are no age restrictions for directors of a Tennessee corporation.
Can I have a foreign address as my corporation’s registered office in Tennessee?
No, your corporation’s registered office address must be a physical street address located in Tennessee.
How do I start a corporation in Tennessee?
To start a corporation in Tennessee, you’ll need to file articles of incorporation with the Secretary of State.
How much does it cost to start a corporation in Tennessee?
The filing fee for articles of incorporation in Tennessee is $100.
What are the requirements for incorporators in Tennessee?
Tennessee only requires one incorporator to start a corporation.
Do I need a registered agent for my Tennessee corporation?
Yes, every Tennessee corporation needs a registered agent.
What is a registered agent in Tennessee?
A registered agent is a person or entity that accepts legal documents on behalf of your corporation in Tennessee.
Can I be my own registered agent in Tennessee?
Yes, you can be your own registered agent if you have a physical address in Tennessee.
What types of corporations can I form in Tennessee?
Tennessee allows for-profit and nonprofit corporations to be formed.
Do I need an attorney to start a corporation in Tennessee?
No, you don’t need an attorney to start a corporation in Tennessee, but it’s recommended to seek legal advice.
How long does it take to start a corporation in Tennessee?
It typically takes 3-5 business days to process your articles of incorporation in Tennessee.
What are the annual reporting requirements for Tennessee corporations?
Tennessee corporations are required to file an annual report with the Secretary of State.
How much does it cost to file an annual report for a Tennessee corporation?
The fee to file an annual report for a Tennessee corporation is $20.
Are Tennessee corporations required to have bylaws?
Yes, Tennessee corporations are required to have bylaws.
What is the minimum number of directors required for a Tennessee corporation?
Tennessee requires at least one director for a corporation.
How old do I need to be to incorporate a business in Tennessee?
There isn’t an age requirement to incorporate a business in Tennessee.
Can a foreign corporation do business in Tennessee?
Yes, foreign corporations can do business in Tennessee, but they need to register with the Secretary of State.
What is a Certificate of Authority in Tennessee?
A Certificate of Authority is a document that foreign corporations must file with the Secretary of State to do business in Tennessee.
What is the franchise tax for Tennessee corporations?
The franchise tax for Tennessee corporations is 0.25% of the net worth or 0.125% of the total receipts, whichever is greater.
Do Tennessee corporations need a business license?
Depending on the type of business you’re starting, you may need a business license for Tennessee.
What is an EIN and do I need one for my Tennessee corporation?
An EIN is an Employer Identification Number, and you’ll need one if your Tennessee corporation has employees.
How do I obtain an EIN for my Tennessee corporation?
You can obtain an EIN for your Tennessee corporation through the IRS website.
Can I use a PO Box as my Tennessee corporation’s address?
No, Tennessee requires corporations to have a physical address.
What is a Trade Name registration in Tennessee?
Trade Name registration is the legal registration of a corporation’s name or assumed name in Tennessee.
Do I need to file for a trademark to protect my Tennessee corporation’s name?
No, but registering a trademark is recommended so that your corporation has exclusive rights to your name.
How do I dissolve my Tennessee corporation?
To dissolve your Tennessee corporation, you’ll need to file Articles of Dissolution with the Secretary of State.
What happens if I don’t file my annual report for my Tennessee corporation?
If your Tennessee corporation doesn’t file its annual report, it’s considered an abandoned entity, and you’ll need to pay a reinstatement fee to revive it.
What is the duration of a Tennessee corporation?
There is no set duration for a Tennessee corporation, it can exist indefinitely.
What is the legal system like for Tennessee corporations?
Tennessee corporations operate under the common law legal system.
What is the jurisdiction for Tennessee corporations?
The Secretary of State’s office has jurisdiction over Tennessee corporations.
Can I change my incorporated Tennessee business to an LLC later?
Yes, it is possible to convert your incorporated Tennessee business to an LLC at a later time.

Also Read

How to Save Money While Forming Your Tennessee Corporation

First and foremost, it is important to carefully consider your business structure and needs before you start the process of incorporating. While a corporation may be the right choice for some businesses, others may benefit more from a limited liability company (LLC) or a simpler sole proprietorship. By understanding the pros and cons of each structure and choosing the one that best suits your business goals, you can avoid costly mistakes down the road.

Once you have determined that a corporation is the right choice for your business, it is time to consider the various fees involved in the formation process. In Tennessee, the filing fee for incorporating a business is $100, which is relatively low compared to other states. However, there may be additional fees for services such as expedited processing or name reservation. To save money, you can opt for the standard processing time and choose a business name that is unique but does not require reservation.

Another way to save money while forming your Tennessee corporation is to take advantage of online resources and DIY tools. There are a number of online platforms that offer affordable services for business owners looking to incorporate, such as LegalZoom or MyCorporation. These services can help you prepare and file all the necessary paperwork, saving you time and money on legal fees. However, it is important to do thorough research before choosing an online service to ensure they are reputable and reliable.

In addition to using online resources, you can also save money by doing some of the legwork yourself. For example, instead of hiring a lawyer to draft your articles of incorporation, you can use templates provided by the Tennessee Secretary of State’s office and customize them to fit your needs. While it is always recommended to seek legal advice when starting a business, taking on some of the tasks yourself can help you cut costs without compromising on quality.

Lastly, it is important to keep in mind that forming a corporation is just the first step in the entrepreneurial journey. There will be ongoing expenses and obligations that come with running a business, such as annual report filings and tax requirements. By staying organized and proactive in managing your business finances, you can save money in the long run and set your corporation up for success.

In conclusion, while forming a Tennessee corporation may require some financial investment, there are ways to save money without sacrificing quality or compliance. By carefully considering your business needs, utilizing online resources, and taking on tasks yourself, you can keep costs low and set your corporation on the path to success. Remember, the money you save during the formation process can be reinvested back into your business, helping it grow and thrive in the competitive market.

Conclusion

Starting a corporation in Tennessee involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Tennessee corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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