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

Last updated: October 4, 2026

Starting a Tennessee business involves choosing a structure, checking county and city licensing, and setting up the tax and employee accounts your activity requires. Use the checklist to connect each applicable step with official guidance and optional help.

Tennessee Business Requirements at a Glance

Choose the structure before paying for formation. An LLC does not replace a local business license, trade approval, insurance or tax registration. Tennessee’s license thresholds and employee-coverage rules depend on how the business operates.

Affiliate links may earn us a commission. Paid providers are optional; official filing routes are included.

Setup step	When it applies & what to budget	Your next step
Choose your business structureChoose first	An LLC can help separate business liabilities from personal assets, but not every business needs one. Tennessee’s standard LLC Articles of Organization fee is $50 per member, with a $300 minimum and $3,000 maximum. Provider packages and add-ons cost extra; annual reporting is a separate recurring obligation.	Understand Tennessee LLC costs and filing, or use the official state filing route. If an LLC fits your business, ZenBusiness can help prepare and submit the formation filing. Starter begins at $0 plus state filing fees. Review optional services and renewal terms before ordering; licenses and ongoing business obligations are separate. Form an LLC with ZenBusinessAffiliate · Optional provider
Check licenses & your locationDepends on your work	For an in-state location, gross receipts above $3,000 but below $100,000 generally require a minimal activity license from the applicable county or city clerk. At $100,000 or more, check the standard business-license and business-tax rules. Exemptions and location rules matter; zoning and industry permits remain separate.	Find your Tennessee industry guide. Check the local business-license and tax registration rules.
Register a trading nameIf using an assumed name	An LLC using a name other than its registered legal name can file an assumed-name registration with the Secretary of State. Sole proprietors should check the name information required by their local licensing office. A trading name does not create a separate entity or replace required licenses.	Check the name-registration route for your structure.
Get your federal tax IDIf an EIN is needed	An employer identification number (EIN) identifies your business for federal tax purposes. Whether you need one depends on your structure and activities. It is free from the IRS. If forming an LLC or corporation, form it before applying.	Check eligibility and get an EIN free. You do not need to buy an EIN service.
Register for business taxesDepends on activity and structure	Use TNTAP to set up applicable sales-and-use, business, and franchise-and-excise tax accounts. These are separate taxes with different triggers. An LLC’s federal pass-through treatment does not by itself remove Tennessee franchise-and-excise obligations; check exemptions and your actual activities.	Check tax registration and filing requirements.
Arrange business insuranceRequired coverage varies	Most non-construction businesses need workers’ compensation at five or more employees. Construction and mining follow stricter rules; do not apply the five-worker threshold to them. Confirm owner exemptions and employee coverage before hiring. Other liability, vehicle and property coverage depends on your work and contracts.	Check Tennessee workers’ compensation rules. Optional quote service: Simply Business can help you explore business insurance. Coverage and availability depend on your trade and underwriting. Get business insurance quotesAffiliate · Optional provider
Separate money & keep recordsPractical setup	Choose how you will separate business receipts and expenses, reconcile transactions and save tax records. Compare account fees, cash-deposit access and bookkeeping needs. Account-opening documents depend on the provider and business structure.	Prepare your formation or trading-name documents and tax ID, then compare business accounts. Set up a recordkeeping routine before your first payment.
Put customer agreements in writingDepends on your service	Agree on the work, price, payment dates, exclusions and cancellation terms before starting. A general service-agreement template may help with routine work; regulated or complex jobs can need specific contract terms or legal review.	Optional document service: use LawDepot to customize a service agreement, then check that it fits your work. Create a service agreementAffiliate · Optional provider
Set up invoices & paymentsChoose your payment method	Decide how customers will pay and when invoices are due. Compare transaction fees, hardware costs and payout timing. Buying a particular payment service is not a state requirement.	Optional payment service: explore Square for accepting customer payments and compare its fees with your expected sales. Explore Square paymentsAffiliate · Optional provider
Plan startup costs & cash reservesBorrowing is optional	Add filing costs, equipment, insurance and operating expenses before deciding whether to borrow. Financing options depend on revenue, time in business, credit and lender criteria. A new, pre-revenue business may not qualify.	Optional comparison service: SuperMoney Business Financing lets you explore funding options, subject to eligibility. Compare total repayment cost and payment frequency. Compare business financingAffiliate · Optional provider
Prepare for employeesIf hiring	Set up applicable unemployment insurance through Jobs4TN Employer e-Services, arrange federal payroll withholding, and report new hires. Check wage records, workplace notices and workers’ compensation before employees start. Tennessee’s lack of a general individual income tax does not remove employer reporting or unemployment obligations.	Set up Employer e-Services access
Calendar reports & renewalsFor your entity and licenses	A Tennessee LLC files an annual report with a $300 minimum fee, increasing with member count up to $3,000. Check the deadline for your fiscal year in the state filing system. Local licenses, tax returns, assumed-name registrations and insurance have separate deadlines.	Check the official reporting and renewal guidance. Paid filing help is optional and may cost extra.

Need the detailed instructions? Continue below for state filings, employer obligations and links to the licensing agencies.

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

Step 1: Choose Your Structure and Register It

An LLC is one option, not a requirement for every business. Compare ownership, liability and ongoing obligations before choosing. If an LLC fits your plans, the filing instructions below apply; our Tennessee LLC guide explains the costs and options.

File Articles of Organization (Form SS-4270) online through the Tennessee Charity and Business Filing System (TNCaB), accessible at sos.tn.gov. Tennessee accepts paper filings, but online is the practical default and produces same-business-day approval in most cases.

Filing fee: Tennessee uses a per-member fee structure unique among states: $50 per member, with a $300 minimum (covering 1-6 members) and a $3,000 maximum cap. So a single-member LLC pays $300; a 10-member LLC pays $500 ($300 + $50 × 4 additional); a 60-member LLC pays $3,000. This $300 floor is six times higher than Colorado ($50) and ranks among the most expensive in the country alongside Massachusetts and Texas. TNCaB charges an additional 2.29% credit/debit card fee or a flat $0.95 for ACH e-check.

LLC name: Must include “LLC,” “L.L.C.,” or “Limited Liability Company” and be distinguishable from existing entities. Name search through TNCaB.

Registered agent: Required – must have a Tennessee physical street address (not a P.O. box). You may serve as your own agent if Tennessee-based, or hire a commercial registered agent service.

Annual Report: Tennessee LLCs must file annually using the same per-member fee formula as formation ($300-$3,000). The report is due the first day of the fourth month after fiscal year end – April 1 for calendar-year filers, or e.g., October 1 for a June 30 fiscal year. Tennessee provides a 60-day grace period; entities not filing within that window face administrative dissolution. Set this calendar reminder before you set anything else – a forgotten report dissolves the LLC and its liability protection.

Federal EIN: Free at IRS.gov immediately after LLC formation.

Step 2: Register for Tennessee State Taxes (Sales, Franchise, Excise)

Tennessee’s Tax Profile: No Income Tax, but F&E Catches Most Businesses

Tennessee has no personal income tax on wages and never has. The Hall Income Tax (a 6% tax on interest and dividends) was phased out and fully repealed for tax periods beginning January 1, 2021 under Public Chapter 1106 of 2016. As of 2026, Tennessee taxes neither wage income nor investment income at the personal level – one of the strongest pro-employee tax positions in the country, on par with Florida, Texas, and Nevada.

However, Tennessee imposes a combined Franchise and Excise Tax (F&E) on most LLCs, corporations, and limited partnerships – including pass-through entities that would only pay personal income tax in other states:

• Excise Tax: 6.5% of net earnings from business in Tennessee. The Tennessee Works Tax Act (Public Chapter 377 of 2023) and subsequent legislation introduced a $50,000 standard deduction effective for tax years ending on or after December 31, 2024 (maximum $3,250 reduction at the 6.5% rate; cannot create or increase a net loss).
• Franchise Tax: 0.25% of the greater of net worth or property value, with a $100 minimum. Effective for tax years ending on or after December 31, 2024, the first $500,000 of property is excluded from the minimum-measure base (a $1,250 franchise tax reduction for businesses paying on the property base).
• Combined effective tax burden is meaningfully higher than the headline “no income tax” suggests. A small Tennessee LLC with $200,000 in net earnings pays roughly $9,750 in excise tax (6.5% × ($200,000 – $50,000)) plus franchise tax on net worth. Compare to states without F&E equivalents.

Register through the Tennessee Taxpayer Access Point (TNTAP) at tntap.tn.gov. The same portal handles sales and use tax, F&E, business tax, and most state tax accounts.

Tennessee Sales and Use Tax

The state sales tax rate is 7%, with local option tax up to 2.75% (in 0.25% increments). Combined rates in Tennessee’s major metros for 2026:

• Nashville (Davidson County): ~9.75% combined – includes the Metro Nashville 0.5% transit surcharge effective February 1, 2025 (the “Choose How You Move” referendum passed November 2024)
• Memphis (Shelby County): ~9.75% combined
• Knoxville (Knox County): ~9.25% combined (7% + 2.25% local)
• Chattanooga (Hamilton County): ~9.25% combined

Service taxability: Tennessee taxes services more broadly than most states, but the rules are nuanced. Cleaning of real property (carpets, walls, windows, exterior surfaces) is exempt; cleaning of tangible personal property (furniture, rugs, draperies, laundry/dry cleaning) is taxable. Landscaping installation services involving real-property improvement are generally not taxed at the labor level (materials are taxable to the contractor). Salon services are not taxed; retail products sold in salons are. Get this distinction right – mis-billing causes audit exposure.

Single Article Limitation: Tennessee caps the local-option tax on the first $1,600 of any single tangible item, with a state single-article tax of 2.75% on the portion between $1,600 and $3,200. This matters for vehicle sales, equipment purchases, and any high-ticket transaction.

Step 3: Comply With Tennessee Wage, Workers’ Comp, and UI Rules

Federal Minimum Wage With State Preemption

Tennessee has no state minimum wage law – the federal Fair Labor Standards Act rate of $7.25/hour applies (with $2.13 tipped wage and standard tip-credit rules). Tennessee is one of only five states with no state minimum wage statute (the others are Alabama, Louisiana, Mississippi, and South Carolina).

Critically, T.C.A. § 50-2-112 preempts local minimum wage ordinances. Nashville, Memphis, Knoxville, Chattanooga, and every other Tennessee municipality are legally barred from setting a higher city minimum wage. Multiple bills have been introduced over the past decade to repeal this preemption; none have passed. Plan for federal $7.25 statewide for the foreseeable future.

Workers’ Compensation Thresholds (5 Non-Construction / 1 Construction)

Tennessee’s workers’ compensation requirements under T.C.A. § 50-6 (Workers’ Compensation Law) use a split threshold based on industry:

Industry	Tennessee Workers’ Comp Trigger	Statutory Citation
Non-construction (general business)	5 or more employees	T.C.A. § 50-6-102 (definition of “employer”)
Construction Services Providers	1 or more employees (no minimum)	T.C.A. § 50-6-902
Coal mining and production	1 or more employees (no minimum)	T.C.A. § 50-6-102
Sole proprietor with no employees	Optional (owner may elect coverage)	T.C.A. § 50-6-102

Construction includes electrical, plumbing, HVAC, roofing, landscaping installation, and general building trades. If you operate in any building trade in Tennessee, the answer to “do I need workers’ comp?” is yes the moment you have a single employee or treat a 1099 sub as a worker without proper documentation. Working family members and part-time employees count toward both thresholds. The Bureau of Workers’ Compensation enforces aggressively, including penalty assessments and personal liability for uninsured construction injuries.

Tennessee’s WC market is competitive (no monopolistic state fund). The Bureau of Workers’ Compensation (TDLWD) maintains insurance status verification.

Unemployment Insurance and New Hire Reporting

Tennessee UI uses a $7,000 taxable wage base for 2026 – one of the lowest in the country (compare to Washington at $78,200 or Massachusetts at $15,000 for 2026). 2026 operates under Premium Rate Table 6. New employers pay 2.7%; experienced employers range from 0.01% to 10.0% based on reserve ratio. Register for UI through TDLWD’s employer portal.

New hire reporting: Tennessee requires reporting new hires within 20 days of hire to the Tennessee New Hire Reporting Center. Free service.

Right-to-Work State (Constitutionalized 2022)

Tennessee has been a Right-to-Work state since 1947 under T.C.A. § 50-1-201 through 50-1-204. On November 8, 2022, voters approved Constitutional Amendment 1 with 70% of the vote, adding right-to-work protections to the Tennessee Constitution as Article XI, Section 14. The constitutional amendment makes the policy substantially harder to repeal than statutory right-to-work in other states.

Step 4: Get Local Business Licenses (County + City)

Tennessee uses a two-tier county-and-city local business license system tied to gross receipts. Most businesses with gross receipts of $3,000+ need a Minimal Activity License; $100,000+ requires a Standard Business License. The county clerk is the primary point of registration; if your business is inside a city’s limits, the city also requires its own license.

• Nashville (Metropolitan Government of Nashville and Davidson County): Nashville and Davidson County have been a consolidated metropolitan government since 1963 – one of the earliest US examples (Indianapolis-Marion County followed in 1970). Apply through Metro: a single registration covers both city and county. The Metro Nashville 0.5% transit surcharge effective 2/1/2025 raised Nashville’s combined sales tax to ~9.75%.
• Memphis (Shelby County): Separate city and county registrations apply. Shelby County is Tennessee’s largest county by population (~915,000).
• Knoxville (Knox County): Separate city and county registrations. Knox County hosts the University of Tennessee flagship and is adjacent to Oak Ridge National Laboratory in Anderson County.
• Chattanooga (Hamilton County): Tennessee Valley Authority headquarters; Volkswagen Chattanooga assembly plant.
• Murfreesboro (Rutherford County): Tennessee’s fastest-growing county; Middle Tennessee State University; Nissan North America Manufacturing in Smyrna.

The local business tax is filed through the county clerk and is administered through TNTAP after first issuance.

Step 5: Get State Professional Licenses Through TDCI or Industry-Specific Agencies

The TDCI Umbrella

The Tennessee Department of Commerce and Insurance (TDCI) at tn.gov/commerce regulates a broad slate of trades and professions through dedicated boards and commissions. Key boards include:

• Board for Licensing Contractors (BLC) – general contractors, mechanical/CMC, electrical, masonry, etc., at the $25,000 project threshold
• Board of Cosmetology and Barber Examiners – cosmetologists, barbers, estheticians, manicurists, hair braiders
• Private Investigation and Polygraph Commission – PI individual and company licenses (consolidated into the Detection Services Licensing Program effective 7/1/2021)
• Real Estate Commission, Auctioneers, Funeral Directors, Land Surveyors, and many others

Industries NOT Under TDCI

• Daycare: Licensed by the Tennessee Department of Human Services (TDHS) Child Care Services Division under T.C.A. § 71-3-501+ and Rule 1240-04-01 (revised February 2026). NOT a TDCI program.
• Mobile food units: State-level registration through the Tennessee Department of Agriculture (TDA), with local plan review and inspections through county/city health departments (Metro Public Health, Shelby County Health, Knox County, Hamilton County, etc.). Tennessee operates on the 2009 FDA Food Code incorporated by reference – one of the oldest current adoptions among states.
• Pesticide applicators (landscaping): Tennessee Department of Agriculture Pesticide Section, with category exams administered through the University of Tennessee Pesticide Safety and Education Program (PSEP).

Tennessee’s Distinctive Tax and Regulatory Environment

Tennessee’s profile differs from neighbors and other Sun Belt states in several ways that change planning math:

1. No income tax, but franchise and excise tax catches LLCs. Tennessee’s “no income tax” headline is correct for personal returns but masks the F&E tax imposed on most LLCs and corporations – including single-member LLCs treated as disregarded entities federally. The 6.5% excise rate applies to net earnings in Tennessee; many small operators discover this only after their first April 15. Compare to Florida (no F&E equivalent for non-corp entities) or Texas (franchise tax above ~$2.47M revenue threshold). Plan for the F&E hit, particularly above the $50K excise deduction.

2. The $300 LLC formation floor adds up over time. Tennessee’s $50/member, $300 minimum LLC formation and annual report fee structure (capped at $3,000) is far higher than most states and applies every year. A single-member LLC operating for a decade pays $3,300 in cumulative state filing fees – before any taxes, licenses, or insurance. This is a real cost, not a one-time setup expense, and it influences whether a small operator should remain a sole proprietor or form an LLC.

3. Right-to-Work plus federal minimum wage with preemption. Tennessee is structurally pro-employer. Constitutional Right-to-Work (Article XI § 14, voter-approved Nov 2022) means no compulsory union membership or fee assessments. T.C.A. § 50-2-112 preempts local minimum wage rates above federal $7.25. Combined, these define a labor environment unlike Massachusetts ($15.00 state min, strong union presence) or even neighboring Kentucky (federal min but no constitutional RTW).

4. The $25,000 BLC threshold is binding for trades businesses. Tennessee’s Board for Licensing Contractors requires a contractor license for any project of $25,000 or more (including labor and materials, with no 10% tolerance). The license applies to general contractors, mechanical (HVAC, plumbing, fire sprinkler), electrical, masonry, and other trades. Below the threshold, trades work falls to the local jurisdiction’s home improvement licensing – which in Memphis and Knoxville is non-trivial. Above the threshold, you face a CPA-reviewed financial statement, GL insurance, workers’ comp, and a trade exam.

5. One-party recording consent under T.C.A. § 39-13-601. Tennessee is a one-party consent state for wire, oral, and electronic communications. A party to a conversation may record it without others’ consent unless the recording is for criminal or tortious purposes. Unauthorized interception is a Class D felony (2-12 years) plus civil exposure of greater of actual damages, $100/day, or $10,000 plus punitive damages. Cross-border calls into two-party states (Illinois, etc.) require the more restrictive law.

Tennessee Market Context: Four Metros, Distinct Economies

Tennessee’s economy is not one market – it’s four overlapping metros plus rural and tourism corridors, each with separate demand drivers:

• Nashville-Davidson Metro: ~2.1 million MSA. Music industry and live entertainment, healthcare (HCA Healthcare global HQ, Vanderbilt University Medical Center, Bridgestone Americas HQ), state government, and accelerating tech presence (Oracle’s Nashville campus, Amazon’s Operations Hub). Population growth has been 12-15% over the past decade. This drives sustained demand for cleaning, daycare, food trucks, and HVAC across new suburbs (Williamson, Wilson, Rutherford counties).
• Memphis-Shelby Metro: ~1.3 million MSA. The FedEx World Hub at Memphis International is the world’s busiest cargo airport by tonnage. Logistics, distribution, healthcare (St. Jude Children’s Research Hospital, Methodist Le Bonheur), and Mississippi River port traffic anchor the economy. AutoZone, FedEx Corporation, International Paper, and First Horizon are headquartered in Memphis.
• Knoxville-Knox Metro: ~900,000 MSA. The University of Tennessee flagship (~33,000 students), Oak Ridge National Laboratory in adjacent Anderson County (~5,800 employees, $2.4B annual budget), Tennessee Valley Authority operations, and a manufacturing base. Stable year-round demand with academic-calendar peaks.
• Chattanooga-Hamilton Metro: ~570,000 MSA. Volkswagen Chattanooga Assembly (Atlas, ID.4 EV; ~5,500 jobs), Tennessee Valley Authority HQ, BlueCross BlueShield of Tennessee HQ, and tourism (Lookout Mountain, Tennessee River Gorge). Chattanooga’s “Gig City” municipal fiber network (one of the first 10 Gbps citywide deployments in the US) supports a small but real tech sector.
• Tri-Cities (Northeast TN): Johnson City + Kingsport + Bristol. Eastman Chemical HQ in Kingsport, ETSU in Johnson City, manufacturing.
• Tourism corridors: Sevier County (Pigeon Forge, Gatlinburg, Great Smoky Mountains National Park – the most-visited national park in the US, ~12 million visitors/year) generates seasonal demand for food trucks, cleaning, and short-term rental servicing distinct from year-round metros.
• Murfreesboro/Smyrna (Rutherford County): Nissan North America’s Smyrna assembly plant (largest auto plant in North America by volume historically) and Middle Tennessee State University make Rutherford the fastest-growing county in Tennessee, often top 10 nationally for population growth percentage.

Tennessee Business Guides by Industry

Tennessee plumbing business guide — CMC-A contractor licensing, Limited Licensed Plumber rules, insurance and startup steps for plumbing companies.

Tennessee electrical business guide — LLE versus CE licensing, project-value limits and local approvals.

Every industry has different licensing, permit, and insurance requirements in Tennessee. Select your business type:

• How to Start a Cleaning Service in Tennessee – sales tax split between real property (exempt) and personal property (taxable), no state license, BLC threshold for janitorial contracts $25K+
• How to Start a Food Truck in Tennessee – TDA mobile food permit + county/city plan review (Metro Public Health, Shelby County, Knox County, Hamilton County), 2009 FDA Food Code, commissary requirement
• How to Start a Daycare in Tennessee – TDHS Child Care Services Division licensing, 1240-04-01 ratios, 3-Star Quality Program, CCAP at 85% SMI
• How to Start an HVAC Business in Tennessee – BLC CMC-C (HVAC) at $25K threshold, $250 application, A2L refrigerant transition, 2018 IECC residential
• How to Start a Hair Salon in Tennessee – TDCI Cosmetology Board, 1,500-hour cosmetologist, 750 esthetician, 600 manicurist, $30 hair braider registration, $60 biennial renewal
• How to Start a Landscaping Business in Tennessee – TDA Cat 03 Ornamental & Turf pesticide cert (UTK PSEP), no state landscape license, BLC at $25K, TN One Call 3 working days
• How to Start a Private Investigation Business in Tennessee – TDCI Detection Services PI license, 2,000 hours experience, $100-$500 fees, T.C.A. § 39-13-601 one-party recording
• How to Get a Tennessee Dealer License – Motor Vehicle Commission $600 application, $50,000 two-year bond, $300,000 garage liability, and a facility test: 288 sq ft with a restroom, gravel lot for 15 vehicles, 8-inch sign letters
• How to Get a Tennessee Liquor License – every server needs a $20 TABC permit within 61 days of hire, liquor-by-the-drink runs $650 to $1,200 by seating capacity, and the LLC costs $50 per member with a $300 floor every year
• How to Get a Tennessee Massage License – Board of Massage Licensure: 650 classroom hours since July 2024, MBLEx via FSMTB, $280 application, and CE with a board-set Tennessee-law curriculum
• Do You Need an Arborist License in Tennessee? – No arborist license – but offering pesticide application for sale needs a charter for EACH location, with a $10,000 bond and $250,000 per incident liability cover

Key Tennessee Business Resources

Resource	What It Covers
Tennessee Secretary of State (TNCaB)	LLC formation, annual reports, name searches, trade names
TNTAP (TN Department of Revenue)	Sales and use tax, franchise and excise tax, business tax
TDLWD Employer Services	UI tax, workers’ comp verification, wage and hour
TDCI	Contractor licensing, cosmetology, PI, insurance, securities
TDHS Child Care Services	Daycare licensing under Rule 1240-04-01
Tennessee Department of Agriculture	Mobile food, retail food stores, pesticide applicator certification
Tennessee Department of Health	Restaurants and food service, environmental health
Tennessee 811	Underground utility locate (T.C.A. 65-31; 3 working days)

How Long Do New Businesses Last in Tennessee?

The Bureau of Labor Statistics follows every private-sector establishment in Tennessee from the year it opens. Of the businesses opened in March 2024, 70.7% were still operating one year later. Among those opened in March 2020, 46.4% reached the five-year mark — 5.0 points below the national 51.4% — and 32.8% of the March 2015 cohort made it to ten years.

Two things keep those numbers from reading as grimly as they look. A closed establishment is not always a failed one: the BLS count includes owners who sold, merged, moved, or retired. And the businesses that last, grow — nationally, establishments reaching age ten average 11.7 employees, up from 4.4 when they opened. Rates for every state and 19 industries: business survival rates by state.

Frequently Asked Questions

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

The Tennessee Secretary of State LLC filing fee is $50 per member with a $300 minimum and $3,000 maximum – among the most expensive in the country. A single-member LLC pays $300; a 10-member LLC pays $500; a 60+ member LLC pays $3,000. The same per-member formula applies to your annual report every year, due the first day of the fourth month after fiscal year end (April 1 for calendar-year filers). Tennessee provides a 60-day grace period before administrative dissolution. Add the 2.29% credit card processing fee or $0.95 e-check fee charged by the TNCaB portal. Cumulative state filing fees over a decade for a single-member LLC are about $3,300 before any taxes or licenses.

Does Tennessee have a state income tax?

No. Tennessee does not tax wage income and never has. The Hall Income Tax (a 6% tax on interest and dividends) was phased down and fully repealed effective January 1, 2021 under Public Chapter 1106 of 2016. However, most LLCs and corporations pay franchise and excise tax (F&E): a 6.5% excise tax on net earnings (with a $50,000 deduction for tax years ending on/after 12/31/2024) and a 0.25% franchise tax on net worth or property value (minimum $100; first $500,000 of property excluded for tax years ending on/after 12/31/2024). Pass-through LLC owners do not file a Tennessee personal return for business income, but the LLC itself pays F&E.

Does Tennessee require workers’ compensation for small employers?

It depends on industry. Under T.C.A. § 50-6 (Workers’ Compensation Law), non-construction businesses must carry workers’ comp at 5 or more employees (working family members and part-timers count). Construction Services Providers under T.C.A. § 50-6-902 must carry coverage at 1 or more employees regardless of size. Coal mining is also 1+ employee. If you operate in any building trade (HVAC, plumbing, electrical, landscaping installation, general contracting), assume you need workers’ comp the moment you hire your first worker. Sole proprietors with no employees may elect optional coverage.

Can Nashville or Memphis set a higher local minimum wage?

No. Tennessee has no state minimum wage law (federal $7.25 applies), and T.C.A. § 50-2-112 preempts local minimum wage ordinances. Nashville, Memphis, Knoxville, Chattanooga, and every other Tennessee city are barred by state law from setting a higher rate. Multiple bills to repeal the preemption have been introduced over the past decade, but as of May 2026 none have passed. Tennessee remains one of five states with no state minimum wage statute (with Alabama, Louisiana, Mississippi, and South Carolina) and one of fewer states with explicit local preemption.

What are Tennessee’s combined sales tax rates in major cities?

The state rate is 7%, with local option tax up to 2.75% in 0.25% increments. Combined 2026 rates: Nashville (Davidson County) about 9.75% (state 7% + Davidson 2.25% + Metro Nashville 0.5% transit surcharge effective 2/1/2025); Memphis (Shelby County) about 9.75%; Knoxville (Knox County) about 9.25%; Chattanooga (Hamilton County) about 9.25%. Tennessee also caps the local tax on the first $1,600 of any single tangible item, with a 2.75% state single-article tax on the portion between $1,600 and $3,200.

Are services like cleaning and landscaping taxable in Tennessee?

Tennessee taxes services more broadly than most states, but cleaning is split: cleaning of real property (carpets, walls, windows, exterior surfaces) is exempt, while cleaning of tangible personal property (furniture, rugs, draperies, laundering, dry cleaning) is taxable. Landscaping installation services that constitute real-property improvement are generally not taxed at the labor level (the contractor pays sales tax on materials at purchase). Salon services are not taxed; retail products sold in salons are. Mobile food sales follow standard prepared-food taxability. Get the real-property-vs-personal-property distinction right – mis-billing creates audit exposure.

What is the BLC contractor license threshold and who needs one?

The Tennessee Board for Licensing Contractors (BLC) under TDCI requires a contractor license for any project of $25,000 or more (combined materials and labor; no 10% tolerance). Classifications include BC (general building), CMC-A (plumbing), CMC-C (HVAC), CMC-D (fire sprinkler), CMC (full mechanical), CE (electrical), and others. Application is $250 for a 2-year license. Requirements include a CPA-reviewed or audited financial statement, general liability insurance, workers’ comp, and passing the trade exam plus the Business and Law exam. Below the $25K threshold, trades work falls to local home improvement licensing through cities and counties (Memphis, Nashville, Knoxville, etc.).

Wondering whether Tennessee is one of the states that requires a general business license? See how Tennessee compares in our 51-state business license requirements table.