The Tennessee Limited Liability Company (LLC) is now a popular corporate entity formation option for new businesses beginning operations in the southern state. The new legislation allowing corporation filing was put into place in 2021 by the Tennessee legislature. The new law allows corporations to incorporate as limited liability companies. The LLC has the ability to save on taxes and offers greater personal liability protection than many other forms of business structure.
An LLC is only different from a sole proprietorship in the way that it is organized under the law. Like a sole proprietorship, the LLC is organized solely for the benefit of the owner(s). In addition, it is treated as a separate entity from the rest of the business. While an LLC may share the same records as a corporation, the corporation is never treated as the sole unit of a business when it comes to its records.
There are three main differences between an LLC and a sole proprietorship: the incorporation requirement, liability protection, and business name. Both require two individuals to sign their personal responsibilities to the company. LLCs are not required to file an annual report with the IRS nor do they need to report their activity during the year on their tax returns. As with corporations, an LLC can offer up to two business names during one year.
How to Form an LLC in Tennessee
Because of their separate nature, LLCs are subject to different taxation rules than sole proprietorships. Unlike a sole proprietorship, an LLC is only taxed if income or profits are reported. Business owners need to choose an appropriate registered agent when filing their annual report. Registered agents in many cases act as legal counsel to the company and help with filing paperwork with the IRS. They also provide insurance coverage for the company, should anything occur that renders the business unable to operate as usual.
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The next step in How To Form An Llc In Tennessee is choosing an operating agreement. An operating agreement is essentially the rules governing how the business will be run and who will be its members. It can vary greatly depending on whether the LLC is an S-corp or a C-corp. A typical operating agreement will include general operating guidelines and provide for the payment of dividends to the members as well as other important information pertinent to the LLC's tax purposes.
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One of the most important parts of an LLC's operating agreement is its Employer Identification Number or EIN. The EIN should be valid and in effect at the time of filing. An LLC with an EIN cannot be operated by its members for federal income tax purposes. In terms of its tax status, an LLC with no Employer Identification Number is treated like a sole proprietorship and will need to register with the IRS.
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Next, the members must decide on the name of their LLC. Each member should choose a name that will best describe the type of business they intend to start. The name of the company should include the name of the LLC's registered agent and its TIN if it is a sole proprietorship. All of these details are vital to the process of how to form an llc in tennessee.
When all of the above steps are complete, each member should sign the bottom of a file labeled "LLC Operating Agreement." An electronic or manual filing system is preferred for filing an LLC Registration. A file with all of the necessary information should then be sent to the Tennessee Secretary of State through the Internet. Additional paperwork including a completed Operating Agreement should be sent to the office of the Secretary of State in Nashville. Once the paperwork has been filed with the Secretary of State in Tennessee, the business should be formally established and the LLC can enjoy all of the benefits that come with being registered with the TANF (Texas Association of Registry Firms).
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