Starting a business in Tennessee costs as little as $300 for an LLC filing fee. Tennessee has no personal income tax, making it especially attractive for pass-through entities like LLCs and S-Corps. Below we compare LLC vs. S-Corp vs. Sole Proprietorship costs, walk through the 6 steps to form your business, and provide calculators pre-filled for Tennessee. Tennessee ranks #3 nationally for business friendliness.
LLC vs. S-Corp vs. Sole Proprietorship — 2026 estimated costs
| Entity Type | Filing Fee | Annual Fee | Franchise Tax | 1st Year Total | Ongoing/Yr |
|---|---|---|---|---|---|
| LLC | $300 | $300 | $300 | $1,050 | $750/yr |
| S-Corp | $300 | $200 | $300 | $950 | $650/yr |
| Sole Proprietorship | $75 | -- | -- | $75 | -- |
No personal income tax. Franchise & excise tax on net worth/income. High sales tax but no individual income tax on pass-through.
Your LLC name must be unique in Tennessee and include"LLC" or"Limited Liability Company." Search the Tennessee Secretary of State database to verify availability. Consider reserving the name (typically $10-25 for 60-120 days) while you prepare your filing.
File your Articles of Organization (or Certificate of Formation) with the Tennessee Secretary of State. The filing fee is $300. You can file online in most states for faster processing. Include your registered agent information, member names, and business purpose.
Apply for a free Employer Identification Number (EIN) from the IRS at irs.gov. You need this for opening a bank account, hiring employees, and filing taxes. The online application takes about 5 minutes and you receive your EIN immediately.
Tennessee has no state income tax. However, you may want to register for sales tax collection if you sell taxable goods or services. The Tennessee sales tax rate is 7.0%. Check for any applicable local taxes or business license requirements.
Check Tennessee and local requirements for business licenses, professional licenses, and permits. Requirements vary by industry and location. Common needs include a general business license, zoning permit, and industry-specific permits (food service, construction, healthcare, etc.).
Open a dedicated business bank account to maintain your LLC's liability protection. You may need your Articles of Organization, EIN, and operating agreement. Keep personal and business finances strictly separate — commingling funds can pierce the corporate veil and expose personal assets.
Total estimated first-year cost: $1,050 (filing fee + registered agent + annual fees). Ongoing annual cost is approximately $750/yr after the first year.
Tennessee's COL index of 92 is below the national average, though Nashville metro has risen to ~100-105.
Memphis and Chattanooga remain significantly below the national average.
Tennessee has no state income tax on wages or salaries — one of seven no-income-tax states.
Tennessee eliminated its Hall Tax on interest and dividends as of 2021 — truly no income tax of any kind.
Sales tax is the primary revenue source: 7% state rate plus local additions (up to 2.75%), for a combined max of 9.75%.
Tennessee has no estate or inheritance tax.
National averages based on mean of all 50 states + DC. "pp" = percentage points.
The Tennessee LLC filing fee is $300. Including a registered agent ($150/yr) and annual fees ($300) plus franchise tax ($300), the first-year total cost is approximately $1,050. This is $168 above the national average filing fee.
An LLC is simpler and cheaper to maintain in Tennessee ($1,050 first-year cost vs. $950 for an S-Corp). An S-Corp can save self-employment taxes if you earn over ~$50K in profit by splitting income into salary and distributions. Most Tennessee businesses start as an LLC and elect S-Corp taxation later when profits justify the additional complexity and payroll costs.
Tennessee has no personal income tax, which benefits pass-through entities (LLCs, S-Corps, sole proprietors). C-Corps pay a 6.5% corporate income tax. A franchise/margin tax may apply based on gross revenue. Sales tax is 7.0% at the state level (plus local additions).
Requirements vary by business type and location. Most Tennessee businesses need: (1) a state business license or registration, (2) a local business license from your city/county, (3) industry-specific permits or professional licenses, and (4) a sales tax permit if selling taxable goods. Check with the Tennessee Secretary of State and your local city clerk for specific requirements.
Business formation costs are estimates based on Tennessee Secretary of State fees as of 2026. Tax rates use 2026 data. Registered agent fees based on market averages. Actual costs may vary. Consult a CPA or business attorney for personalized advice. Last updated: April 2026.