How to Start a Limited Liability Partnership in Tennessee | 2024 Guide

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Start a Limited Liability Partnership in Tennessee

A Limited Liability Partnership (LLP) is a popular business structure offering the flexibility of a partnership while providing limited liability protection like starting an LLC in Tennessee. LLP structure is ideal for attorneys, accountants, and consultants. If you’re considering starting a Limited Liability Partnership in Tennessee, this comprehensive guide will walk you through the necessary steps, from researching and planning to ongoing compliance and reporting requirements.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your Tennessee LLP, all the steps in this article must guide you.

Steps in Starting a Limited Liability Partnership in Tennessee

What is a Limited Liability Partnership?

Forming an LLP is like starting an LLC as well. However, there are differences in terms of it. A Limited Liability Partnership (LLP) is a type of business structure that combines elements of partnerships and corporations. It allows multiple individuals, known as partners, to jointly own and manage the business while providing limited liability protection to each partner. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.

LLPs are popular among professional service providers, such as lawyers, accountants, and consultants, as they allow for flexible management structures and profit-sharing arrangements. The partners in an LLP can directly manage the business, unlike forming a Corporation in Tennessee, where a board of directors typically handles the management.

Each partner’s liability is also limited to the extent of their investment, and they are not personally responsible for the negligence or misconduct of other partners. This is a key difference between an LLP and Tennessee General Partnership, where partners have unlimited liability for the partnership’s actions and other partners.

It is suggested that you speak with a legal professional before you begin setting up your limited liability partnership. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC rather than a limited liability partnership.

– WEBINARCARE EDITORIAL TEAM

Steps in Starting a Limited Liability Partnership in Tennessee

To form a limited liability partnership in Tennessee, you must consider following the below guidelines that include research and planning, choosing an LLP name, designating a Registered Agent, filing for Articles of Organization, drafting a partnership agreement, get an EIN, obtaining necessary licenses and permits, the opening of business bank account and maintain ongoing compliance and reporting requirements. 

Step 1: Research and Planning

Before forming an LLP in Tennessee, you must familiarize yourself with the state’s laws and regulations governing LLPs. Conduct thorough research to determine if an LLP is the right business structure for your needs, and create a detailed business plan outlining your goals, strategies, and financial projections.

Step 2: Choose an LLP Name

Selecting a unique and appropriate name for your LLP is crucial. First, check the availability of your desired LLP name with the Tennessee business registry. Ensure that your chosen name follows Tennessee naming guidelines and requirements, which typically include the use of “Limited Liability Partnership” or “LLP” in the name. You can register and reserve the name with Tennessee Secretary of State if desired.

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

  • Be distinguishable from other businesses registered in your state
  • Include the words “Limited Liability Partnership,” “LLP,” or a similar abbreviation.
  • Not include words that are restricted by your state
  • Ensure that your chosen name does not infringe on any existing trademarks or intellectual property rights.

However, to check the availability of your desired LLP name, you can also search the Tennessee Secretary of State business name database and Tennessee Business Name Search. 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 LLP 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 varies by county. In addition, the DBA’s validity in Tennessee is five years, which you can file in the Tennessee Secretary of State.

You can check out how to file a DBA in Tennessee for clearer understanding.

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Step 3: Designate a Registered Agent

In Tennessee, you’ll need to designate a Registered Agent for your LLP. The Registered Agent is responsible for receiving the partnership’s important legal and tax documents. Choose a qualified individual or Tennessee Registered Agent Services to serve as your LLP’s Registered Agent, ensuring that they meet Tennessee requirements.

However, If you plan to become a Registered Agent of your own LLP, follow the steps below. Also, this applies a guideline in hiring your registered agent.

  • Research the requirements in the state where you want to offer your service. Each state has specific criteria, such as having a physical address and being available during normal business hours.
  • Obtain a physical address in the state(s) if needed.
  • Be familiar with the rules, regulations, and compliance requirements for businesses in your state.
  • Create a business plan outlining your services, pricing, and marketing strategy.
  • Register your business entity, such as an LLP, if required.

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Step 4: File a Certificate of Limited Liability Partnership

To officially form your LLP, you must file a Certificate of Limited Liability Partnership with the Tennessee Secretary of State. Obtain the necessary forms and provide the required information, such as the LLP name, principal office address, registered agent’s name and address, names and addresses of partners, and management structure. Pay the required filing fee and submit the completed forms to the Tennessee Secretary of State’s office.

Step 5: Draft a Partnership Agreement

A well-crafted partnership agreement is essential for governing your LLP and protecting the interests of its partners. This document should cover crucial provisions such as roles and responsibilities of partners, profit and loss sharing, decision-making processes, partner admission and withdrawal, and dispute resolution. Consider having the partnership agreement reviewed by an attorney to ensure its completeness and compliance with Tennessee laws.

A partnership agreement should include the following:

  • Business name
  • Description of the business
  • Contact information of the business and its owners

Ownership of all business partners, decision-making, capital contribution, profits and distribution, death and disability, and withdrawal and addition of partners is one of the key factors to consider when forming or creating a partnership agreement. In this way, all business partners will understand what this is all about and how to proceed if the mentioned scenarios happen. 

Without a partnership agreement, your company will often be subject to the general partnership default laws of Tennessee. The default laws in Tennessee might not be appropriate for your requirements.

Step 6: Get an EIN

Your LLP must obtain Tennessee Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The application of an EIN 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.

After you have your EIN, you can benefit in several ways. It will give your LLP the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 7: Obtain the Necessary Licenses and Permits

Depending on your specific industry, you may need to obtain Tennessee Business Licenses and permits to operate your LLP. Research your business’s licensing and permit requirements and apply for them accordingly.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in Tennessee.

Step 8: Open a Business Bank Account and Obtain Insurance

Maintaining clear financial records is crucial for any business, so open a separate bank account for your Tennessee LLP. Additionally, obtain the necessary Tennessee Business Insurance, such as general liability insurance, professional liability insurance (if applicable), and workers’ compensation insurance (if you have employees). 

Check the Best Bank for Small Businesses in Tennessee to open a bank account.

Step 9: Maintain Compliance and Reporting Requirements

Stay informed about and comply with relevant laws and regulations to keep your LLP in good standing. File Annual Reports with the Tennessee Secretary of State (if required), maintain accurate financial and operational records, and file and pay required taxes at the federal, Tennessee, and local levels.

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Advantages of Forming a Limited Liability Partnership in Tennessee

While the specific advantages of forming an LLP in Tennessee can vary depending on the state’s unique laws and regulations, several public benefits associated with LLPs often apply across jurisdictions. Here are some advantages to consider when forming an LLP in Tennessee:

  • Limited Liability Protection: One of the main benefits of an LLP is its limited liability protection to its partners. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.
  • Pass-through Taxation: An LLP typically enjoys pass-through taxation, which means that the profits and losses of the business are passed through to the partners, who report them on their personal income tax returns. This avoids the double taxation often associated with corporations.
  • Flexible Management Structure: Unlike corporations requiring a board of directors, LLPs allow for a more flexible management structure. Partners in an LLP can directly manage the business and make decisions without needing a formal board.
  • Profit-sharing Flexibility: The partnership agreement can outline the distribution of profits and losses among partners, allowing for a customized profit-sharing arrangement based on the partners’ preferences and contributions.
  • Easier Formation and Compliance: Forming an LLP is generally less complicated and expensive than forming a corporation. Ongoing compliance requirements may also be less burdensome than other business entities, depending on the specific laws and regulations in Tennessee.
  • Professional Credibility: Forming an LLP can enhance your business’s professional credibility, as it demonstrates a commitment to a formal business structure and can offer reassurance to clients, customers, and potential investors.

Bear in mind that the advantages of forming an LLP in Tennessee may vary based on the specific laws and regulations governing LLPs. Researching the applicable laws and consulting with legal or financial advisors is essential to fully understand the benefits and requirements of forming an LLP in Tennessee.

Cost of Forming an LLP in Tennessee

The cost of forming an LLP in Tennessee may vary depending on the required filing fees and any additional services you may need. The filing fee for a Certificate of Limited Liability Partnership typically ranges from $50 to $200, depending on the state.

Can I Form an LLP in Other States?

You can form an LLP (Limited Liability Partnership) in other states. To form an LLP in a different state, you must follow that state’s specific registration requirements and filing procedures. This usually involves filing an application or certificate of registration, paying a registration fee, and obtaining any necessary permits or licenses.

Additionally, you may need to register your LLP as Tennessee Foreign LLC if you plan to conduct business in multiple states. It is advisable to consult with an attorney or a business consultant familiar with the laws and regulations of the state where you plan to form your LLP.

Can an LLP Need to Have One Owner?

An LLP (Limited Liability Partnership) cannot have just one owner. By definition, an LLP is a partnership, which means it requires at least two partners to be formed. If you want a business structure with limited liability protection and only one owner, you may consider forming a Single-Member LLC in Tennessee instead. An LLC can have one or more owners, known as members, and offers limited liability protection and pass-through taxation. The requirements for forming an LLC will vary by state, so consult your state’s laws and regulations.

FAQs

How do I start a limited liability partnership in Tennessee?
To start an LLP in Tennessee, you need to register with the Secretary of State.
Do all partners in an LLP need to reside in Tennessee?
No, at least one partner must have a physical address in Tennessee, but partners can reside in any state or country.
What is the process for registering an LLP in Tennessee?
To register an LLP in Tennessee, complete and file the necessary paperwork with the Secretary of State and pay the required filing fees.
What is the filing fee for registering an LLP in Tennessee?
The filing fee is $300 to register an LLP in Tennessee.
How long does it take to register an LLP in Tennessee?
It takes approximately 5-7 business days for the Secretary of State to process the registration and issue a certificate of registration.
What are the advantages of starting an LLP in Tennessee?
The main advantage of an LLP is that partners have limited liability, meaning they are not personally responsible for the debts or obligations of the partnership.
Are there any tax advantages to starting an LLP in Tennessee?
Yes, LLPs are taxed as partnerships, meaning income is passed through to partners and the partnership itself is not taxed.
What are the annual reporting requirements for LLPs in Tennessee?
LLPs must file an annual report with the Tennessee Secretary of State each year and pay a $50 filing fee.
Are there any restrictions on the type of business that can operate as an LLP in Tennessee?
No, any lawful business can operate as an LLP in Tennessee.
Am I required to have a registered agent to start an LLP in Tennessee?
Yes, LLPs are required to have a registered agent in Tennessee to act as a point of contact for the partnership.
How do I choose a name for my LLP in Tennessee?
The name of an LLP in Tennessee must include “limited liability partnership” or “LLP” as part of the name.
Can I reserve a business name in Tennessee before registering my LLP?
Yes, you can reserve a business name for up to four months by filing with the Secretary of State and paying a fee.
Are there any residency requirements for registered agents in Tennessee?
Registered agents must be individuals or entities with a physical address in Tennessee.
Can I retire or withdraw from an LLP in Tennessee?
Yes, partners can retire or withdraw from the LLP’s partnership with the consent of the remaining partners.
How are profits and losses distributed in an LLP in Tennessee?
Profits and losses in the LLP are distributed based on the partners’ agreed-upon percentage ownership or investment in the business.
Am I able to add partners to an LLP in Tennessee after registration?
Yes, LLPs are able to add new partners after registration with the consent of the existing partners.
Can a Tennessee LLP do business with other states?
Yes, LLPs can conduct business in other states by complying with the foreign entity registration requirements in those states.
Does Tennessee require LLPs to have insurance?
Tennessee does not require LLPs to have insurance, but it’s always recommended to carry liability insurance for the partnership.
Can an individual be a partner and employee of an LLP at the same time in Tennessee?
Yes, partners can also receive a salary or be employees of the partnership in Tennessee.
What happens to an LLP in Tennessee if one partner dies or becomes incapacitated?
The LLP can continue with the remaining partners or dissolve according to the partnership agreement.
Can a partner in an LLP be held personally liable in Tennessee?
Only if the partner personally guarantees a loan or credit with a personal signature or acts negligently or intentionally.
Are Tennessee LLPs required to hold annual meetings?
No, but they are encouraged to hold meetings to discuss important issues about the partnership.
Does Tennessee provide free business counseling services for new LLPs?
Yes, the Tennessee Small Business Development Center offers free counseling and training services for new businesses.
Is there a penalty for late annual report filings in Tennessee?
Yes, if annual reports are not filed on time, there can be a penalty fee and the state may administratively dissolve the LLP.
Can a foreign LLC convert to an LLP in Tennessee?
Yes, a foreign LLC can convert to an LLP in Tennessee by filing the required paperwork with the Secretary of State and paying any associated fees.
Can an LLP in Tennessee have its status revoked for not maintaining current filings?
Yes, the state can revoke an LLP’s status if they fail to pay fees or file annual reports.
Can a registered agent be changed for an LLP in Tennessee?
Yes, an LLP can change its registered agent in Tennessee by submitting the appropriate paperwork with the Secretary of State.
What paperwork is required to dissolve an LLP in Tennessee?
An LLP must file articles of dissolution and pay any outstanding fees to dissolve in Tennessee.
What is a limited liability partnership?
A limited liability partnership (LLP) is a type of partnership where the partners enjoy limited liability.
Can an LLP be formed in Tennessee?
Yes, an LLP can be formed in Tennessee.
What is required to form an LLP in Tennessee?
To form an LLP in Tennessee, you need to file a registration with the Tennessee Secretary of State.
What is the registration fee for forming an LLP in Tennessee?
The registration fee for forming an LLP in Tennessee is $300.
How many people do I need to form an LLP in Tennessee?
In Tennessee, you need at least two people to form an LLP.
What are the advantages of forming an LLP in Tennessee?
The advantages of forming an LLP in Tennessee include limited liability protection and tax flexibility.
What are the disadvantages of forming an LLP in Tennessee?
The disadvantages of forming an LLP in Tennessee include the cost of registration and ongoing maintenance.
What tax benefits come with an LLP in Tennessee?
An LLP in Tennessee has tax flexibility since it is a pass-through entity.
What is the difference between an LLP and an LLC in Tennessee?
The main difference between an LLP and an LLC in Tennessee is that an LLP is a type of partnership, while an LLC is a type of corporation.
Can an LLP in Tennessee be formed with just one person?
No, an LLP in Tennessee cannot be formed with just one person.
Can an out-of-state business form an LLP in Tennessee?
Yes, an out-of-state business can form an LLP in Tennessee.
Do I need a registered agent for my LLP in Tennessee?
Yes, you need a registered agent for your LLP in Tennessee.
Can I be my LLP’s registered agent in Tennessee?
Yes, you can be your LLP’s registered agent in Tennessee if you are a Tennessee resident.
How do I dissolve my LLP in Tennessee?
To dissolve your LLP in Tennessee, you need to file a Certificate of Dissolution with the Tennessee Secretary of State.
Can I convert my Tennessee LLP to an LLC?
Yes, you can convert your Tennessee LLP to an LLC.
Do I need an operating agreement for my LLP in Tennessee?
It’s highly recommended to have an operating agreement for your LLP in Tennessee.
Can an LLP in Tennessee have a foreign partner?
Yes, an LLP in Tennessee can have a foreign partner.
How do I change my LLP’s name in Tennessee?
To change your LLP’s name in Tennessee, you need to file a Certificate of Amendment with the Tennessee Secretary of State.
What is the liability of an LLP partner in Tennessee?
The liability of an LLP partner in Tennessee is limited.
Can an LLP in Tennessee be owned by an individual and a corporation?
Yes, an LLP in Tennessee can be owned by an individual and a corporation.
Can I reserve my LLP’s name in Tennessee?
Yes, you can reserve your LLP’s name in Tennessee by filing an Application for Reservation of Name.
How long does it take to form an LLP in Tennessee?
It takes around 7-10 business days to form an LLP in Tennessee.
Do I need a business license for my LLP in Tennessee?
Yes, you need a business license for your LLP in Tennessee in certain municipalities.
What is the difference between a general partnership and an LLP in Tennessee?
In a general partnership in Tennessee, each partner is fully liable for the partnership’s debt, while in an LLP, the partners’ liability is limited.
Can I form an LLP in Tennessee if I’m a foreign citizen?
Yes, you can form an LLP in Tennessee if you’re a foreign citizen.
Do I need to publish an announcement of my LLP formation in Tennessee?
No, you do not need to publish an announcement of your LLP formation in Tennessee.
Can I change my LLP to another state’s LLC?
Yes, you can change your Tennessee LLP to another state’s LLC.
Can I form an LLP in Tennessee if I’m a convicted felon?
Yes, you can form an LLP in Tennessee if you’re a convicted felon unless your conviction is related to business law.

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Conclusion

Starting an LLP in Tennessee may seem daunting, but you can successfully establish and run your business with thorough research, planning, and compliance with legal requirements. Feel free to seek professional assistance from legal or financial advisors when needed to ensure your Limited Liability Partnership’s smooth operation and growth in Tennessee.

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