Starting a Business in Tennessee: Licenses, Permits & Requirements (2026)

Last updated: February 25, 2026

Tennessee is one of the most attractive states in the Southeast for new businesses. There is no personal income tax on wages or salary, the cost of living is below the national average, and major metro areas like Nashville, Memphis, Knoxville, and Chattanooga offer strong consumer markets. LLC formation starts at $300 through the Secretary of State, and while Tennessee does levy a franchise and excise tax on business entities, the first $50,000 of net earnings is now exempt from the excise tax.

This guide walks you through every step to legally start a business in Tennessee, from choosing your structure to getting the licenses and tax registrations you need. We’ve compiled requirements from the Tennessee Secretary of State, Department of Revenue, Bureau of Workers’ Compensation, and local agencies so you don’t have to piece it together yourself.

How to Start a Business in Tennessee (Step by Step)

Step 1: Choose Your Business Structure

Your business structure determines your personal liability, tax treatment, and paperwork requirements. The most common options in Tennessee:

• Sole Proprietorship – Simplest to start, but you’re personally liable for all debts. No state formation filing required (just register an assumed name if using a DBA).
• LLC (Limited Liability Company) – Most popular choice. Protects personal assets, flexible tax treatment. Tennessee LLCs are subject to the franchise and excise tax.
• Corporation (S-Corp or C-Corp) – More formal structure with shareholders, directors, and officers. Better for businesses seeking investors or planning to go public.
• Partnership – For businesses with two or more owners. Can be a general partnership (GP), limited partnership (LP), or limited liability partnership (LLP).

For most small businesses, an LLC is the right choice. It gives you liability protection without the complexity of a corporation. Be aware that Tennessee LLCs must file and pay franchise and excise taxes annually, but the first $50,000 of net earnings is exempt from the excise tax.

Step 2: Register Your Business with the State

LLC Formation via Tennessee Secretary of State

Tennessee business entities are registered through the Tennessee Secretary of State, Business Services Division at sos.tn.gov. Online filings are processed through the Tennessee Business Enterprise Resource (TNCaB/TNBEAR) system.

Item	Cost
Articles of Organization filing fee	$50 per member (minimum $300, maximum $3,000)
Total to form a single-member TN LLC	$300.00
Annual report fee	$300 minimum ($50 per member, max $3,000)
Annual report due date	April 1 (or first day of 4th month after fiscal year end)
Assumed name (DBA) registration – LLC	$20.00 (filed with Secretary of State)
Assumed name (DBA) – sole proprietor/partnership	$15.00 (filed with county clerk)

How to file:

1. Go to the TNBEAR online filing system
2. Choose a business name that includes “LLC,” “L.L.C.,” or “Limited Liability Company” – it must be distinguishable from existing entity names on file
3. Designate a registered agent with a physical street address in Tennessee
4. Pay the filing fee ($50 per member, minimum $300) – standard processing takes approximately 2-5 business days for online filings
5. You can check filing status through the TNBEAR portal

Assumed Name (DBA): If you plan to operate under a name different from your LLC’s legal name, file an assumed name registration with the Secretary of State for $20 through the TNBEAR system. Sole proprietors and partnerships file with the county clerk in the county where the business is located for $15.

Federal EIN (Employer Identification Number)

After forming your LLC, apply for a free EIN from the IRS at IRS.gov. You’ll receive it immediately when applying online. You need an EIN to open a business bank account, hire employees, and file taxes.

Important: Register your LLC with the state before applying for an EIN, since the IRS application requires your legal entity name.

Step 3: Get Required Licenses & Permits

Tennessee Business License (Business Tax)

Tennessee requires most businesses to obtain a business license (also called a business tax license) from the county and/or city clerk where the business is located. This is tied to Tennessee’s business tax, which is a tax on gross receipts from business activity.

• State business tax: Tennessee imposes a business tax on the privilege of doing business. Rates vary by classification (ranging from 0.015% to 0.3% of gross receipts depending on business type).
• Minimum tax: $22 per classification per location
• Where to register: Your county and/or city clerk’s office
• Exemptions: Businesses with less than $10,000 in Tennessee gross receipts in a year are exempt from the business tax (as of the Tennessee Works Tax Act)

State Professional License (If Required for Your Industry)

Tennessee licenses professionals through various state boards under the Department of Commerce and Insurance. You may need a state license if your business falls into a regulated category, including:

• HVAC and mechanical contractors (Board for Licensing Contractors)
• Cosmetologists and barbers (Board of Cosmetology and Barber Examiners)
• Private investigators (Private Investigation and Polygraph Commission)
• Childcare providers (Department of Human Services)
• Real estate agents (Tennessee Real Estate Commission)
• Electricians and plumbers (Board for Licensing Contractors)
• Pesticide applicators (Department of Agriculture)

Step 4: Register for State Taxes

Tennessee Sales Tax

If your business sells taxable goods or certain services, you must register for a sales tax permit and collect sales tax.

• State sales tax rate: 7.00%
• Local tax: An additional 0%-2.75% depending on your county/city
• Combined rates: Typically 8.50%-9.75%
• Highest rate: 9.75% in Nashville/Davidson County (as of February 2025)
• Grocery food: Reduced state rate of 4% (plus local tax)
• Registration: Register through the Tennessee Department of Revenue online at TNTAP (Tennessee Taxpayer Access Point)

Tennessee Franchise and Excise Tax

Tennessee does not have a personal income tax on earned income (wages, salary, or business income passed through to individuals). However, LLCs, corporations, limited partnerships, and business trusts doing business in Tennessee must pay the franchise and excise tax:

• Franchise tax: 0.25% of the greater of net worth or real/tangible property in Tennessee (minimum $100)
• Excise tax: 6.5% of net income – the first $50,000 of net earnings is exempt (effective for tax years ending on or after December 31, 2024)
• Filing deadline: April 15 (for calendar year filers)
• Registration: Register through TNTAP

Important for sole proprietors: Sole proprietorships and general partnerships are NOT subject to the franchise and excise tax. Only LLCs, corporations, limited partnerships, and business trusts are liable.

Tennessee Unemployment Insurance (If Hiring Employees)

If you plan to hire employees, you must register for unemployment insurance with the Tennessee Department of Labor and Workforce Development:

• New employer rate: 2.7%
• Taxable wage base: First $7,000 per employee
• Rate range: 0.01% to 10.0% (based on experience rating)
• New hire reporting: Report all new hires within 20 days to the Tennessee New Hire Reporting Center

Register through the Tennessee Department of Labor and Workforce Development employer portal.

Step 5: Get Business Insurance

Insurance requirements depend on your business type and whether you have employees:

Workers’ Compensation

Tennessee requires workers’ compensation insurance for employers with five (5) or more employees. Important exceptions apply:

Situation	When Required
General employers	5 or more employees (full-time or part-time)
Construction industry	1 or more employees (any employee triggers requirement)
Coal mining	1 or more employees
Farm laborers / domestic help	Exempt (may elect coverage voluntarily)
Sole proprietors / partners	May elect coverage voluntarily

Unlike Ohio’s state-fund system, Tennessee allows employers to purchase workers’ compensation from private insurance carriers. Large employers may also qualify for self-insurance.

The Tennessee Bureau of Workers’ Compensation oversees the system. Employers who fail to carry required coverage face penalties including fines and personal liability for workplace injuries.

General Liability Insurance

While not always legally mandated, general liability insurance is practically essential for most businesses. It protects against claims of bodily injury, property damage, and advertising injury. Many clients, landlords, and government contracts require proof of coverage.

Tennessee Business Guides by Industry

Every industry has different licensing, permit, and insurance requirements. Choose your business type for a detailed breakdown of everything you need in Tennessee:

• How to Start a Cleaning Service in Tennessee – Business license, insurance, TOSHA requirements, and cost breakdown
• How to Start a Food Truck in Tennessee – Health department permits, food safety certification, commissary requirements, and sales tax rules
• How to Start a Daycare in Tennessee – DHS licensing, background checks, training, and facility requirements
• How to Start an HVAC Business in Tennessee – Board for Licensing Contractors CMC-C license, EPA certification, bonding, and insurance
• How to Start a Hair Salon in Tennessee – Cosmetology and Barber Board license, shop permit, and sanitation rules
• How to Start a Landscaping Business in Tennessee – Pesticide licensing, contractor license thresholds, and workers comp rules
• How to Start a Private Investigation Business in Tennessee – TPIPC licensing, background checks, bonding, and costs

Tennessee Business Resources & Official Links

Resource	What It’s For
Tennessee Secretary of State – Business Services	Business entity registration, name searches, assumed names
TNBEAR (Tennessee Business Enterprise Resource)	File Articles of Organization, annual reports, check filing status
Tennessee Department of Revenue	Sales tax, business tax, franchise and excise tax
TNTAP (Tennessee Taxpayer Access Point)	Register for tax accounts, file returns, make payments
Tennessee Bureau of Workers’ Compensation	Workers’ comp requirements and compliance
Tennessee Department of Labor – UI Tax	Unemployment insurance, employer registration
Tennessee New Hire Reporting	Report new employees within 20 days
Tennessee Department of Commerce and Insurance	Professional licensing boards, regulatory information
IRS EIN Application	Free federal tax ID number

Frequently Asked Questions

How much does it cost to start an LLC in Tennessee?

The filing fee for Articles of Organization with the Tennessee Secretary of State is $50 per member with a minimum of $300 (maximum $3,000). A single-member LLC costs $300 to form. Tennessee also requires an annual report with the same fee structure ($300 minimum). Additional costs include a registered agent and the franchise and excise tax filing.

Does Tennessee have a state income tax?

No. Tennessee does not tax wages, salary, or other earned income. The Hall Tax on investment income (interest and dividends) was repealed effective January 1, 2021. However, LLCs, corporations, and other registered business entities must pay the franchise and excise tax – 0.25% of net worth (franchise) plus 6.5% of net income (excise), with the first $50,000 of net earnings exempt from excise tax.

Does Tennessee require a general business license?

Yes. Most businesses need a business license (business tax license) from the county and/or city clerk where the business operates. This is tied to Tennessee’s business tax on gross receipts. Rates range from 0.015% to 0.3% depending on business classification, with a $22 minimum. Businesses with less than $10,000 in gross receipts are exempt.

What is Tennessee’s sales tax rate?

Tennessee’s state sales tax rate is 7.00% – one of the highest in the nation. Local governments add 0%-2.75%, making combined rates typically 8.50%-9.75%. Nashville/Davidson County has the highest combined rate at 9.75%. Grocery food is taxed at a reduced state rate of 4% plus local tax.

When do I need workers’ compensation in Tennessee?

Tennessee requires workers’ comp when you have 5 or more employees (full-time or part-time). The major exception is the construction industry, where coverage is required with just 1 employee. Farm laborers and domestic help are exempt. Unlike some states, Tennessee uses private insurance carriers – there is no state fund.

What is Tennessee’s franchise and excise tax?

The franchise tax is 0.25% of the greater of net worth or tangible property in Tennessee (minimum $100). The excise tax is 6.5% of net income, but the first $50,000 of net earnings is now exempt. Both apply to LLCs, corporations, limited partnerships, and business trusts. Sole proprietorships and general partnerships are NOT subject to this tax. File by April 15 through TNTAP.