Starting a Corporation in Tennessee 2024: Expert Guide

One crucial aspect of starting a business is selecting the appropriate legal structure for your venture. Starting a corporation in Tennessee is a popular choice for many entrepreneurs due to the state’s favorable business environment and legal framework. Incorporating your business can provide several benefits, including personal liability protection, tax advantages, and increased credibility with customers and investors.

However, like Tennessee LLC, running a corporation also comes with significant responsibilities, including complying with state and federal laws, maintaining accurate records, and holding regular shareholder meetings. This guide will explore the benefits and responsibilities of starting Tennessee corporation. At LLCBase, we understand that forming a corporation can be an overwhelming experience, so we are here to help you every step of the way and set your business up for success.

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What is a Corporation

A corporation is a legal entity separate from its owners, created to conduct business. It is established under the laws of the country or state where it operates and is registered with the government. The corporation can enter into contracts, sue and be sued, own property, hire employees, and issue stock to the public. It is governed by a board of directors responsible for managing the corporation’s affairs and making decisions on its behalf.

One of the primary advantages of a corporation is limited liability, which means that the shareholders or owners are not personally liable for the debts and obligations of the corporation. This protects their personal assets from being used to pay off business debts. Other benefits include easier access to capital through the issuance of stock and the ability to transfer ownership more easily.

However, corporations often face more regulations and legal requirements than other business structures, such as sole proprietorships or partnerships. They are also subject to double taxation, as the corporation is taxed on its profits, and shareholders are taxed on the dividends received.

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Guide to Start Your Tennessee Corporation

The following is a detailed guide outlining the steps to establish a corporation in Tennessee:

Step 1: Choose a Corporate Name

Choosing a business name for your Tennessee corporation is critical in forming one. It must be unique and distinguishable from other existing Tennessee corporations, limited liability companies, and limited partnerships. To check the availability of your desired name for your Tennessee corporation, search the Tennessee Secretary of State Business Information Search database. If the name is available, you can reserve it for up to 4 months by filing a Name Reservation Request Form and paying the required fee. This ensures that your chosen name is secured while you work on other steps to form a corporation in Tennessee.

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Step 2: File Charter for Profit Corporation

To officially form a corporation in Tennessee, you must draft and file Charter for Profit Corporation with the Tennessee Secretary of State. This document includes essential information, such as the corporation’s name, purpose, Registered Agent, and the number of authorized shares. Providing accurate and complete information in your Charter for Profit Corporation is crucial for successfully forming your Tennessee corporation.

Once completed, submit the articles and the filing fee to the Tennessee Secretary of State‘s office. You can file online, by mail, or in person, whichever method is most convenient for you. Filing the Charter for Profit Corporation with the Tennessee Secretary of State is vital in forming your Tennessee corporation and establishing its legal existence.

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Step 3: Appoint Registered Agent

A Registered Agent is crucial in maintaining your Tennessee corporation’s compliance with state requirements. The Registered Agent acts as the corporation’s official point of contact with the state, receiving legal documents and correspondence on behalf of the corporation. Every Tennessee corporation must have a Registered Agent with a physical address to ensure seamless communication with the state government.

You can appoint an individual or a Registered Agent service in Tennessee for your corporation. When choosing a Registered Agent, ensure they are reliable and consistently available during business hours to receive and forward important documents to your corporation. Appointing a trustworthy Registered Agent is essential to successfully form and maintain a corporation in Tennessee.

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Step 4: Create Corporate Bylaws

Creating corporate bylaws is vital in establishing a well-organized and legally compliant business structure when forming Tennessee corporation. Corporate bylaws serve as a set of internal rules and procedures that govern the corporation’s management and operation, ensuring consistency and clarity in business operations.

Bylaws typically include information about the Tennessee corporation’s management structure, the rights and responsibilities of shareholders, directors, and officers, and provisions for annual meetings and decision-making processes. By outlining these essential components, corporate bylaws provide a clear and organized framework for running a successful Tennessee corporation.

Drafting and adopting bylaws should be a collaborative process involving the corporation’s initial board of directors. By holding an initial board meeting, directors can discuss, refine, and adopt bylaws that best suit the corporation’s needs and objectives.

Step 5: Issue Stock

Issuing stock is a fundamental aspect of starting Tennessee corporation, as it allows initial shareholders to invest in the company in exchange for capital contributions. The number of authorized shares is specified in the Charter for Profit Corporation, and the board of directors determines the value of each share.

When issuing stock for your Tennessee corporation, it’s essential to provide stock certificates to shareholders as a record of their ownership. Additionally, maintaining accurate and up-to-date stock ownership records is crucial for legal compliance and ensuring transparency in the corporation’s financial structure.

Step 6: Obtain an EIN

An Employer Identification Number (EIN) is a unique tax identification number assigned by the Internal Revenue Service (IRS) to your Tennessee corporation. Obtaining an EIN in Tennessee is essential for tax reporting, banking, and hiring employees, as it serves as the corporation’s identifier in these contexts.

Applying for an EIN is a straightforward process that can be completed online through the IRS website or by mail using Form SS-4. This important step in forming Tennessee corporation ensures your business can operate legally and fulfill its tax obligations.

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Step 7: Open a Corporate Bank Account

Opening a separate bank account for your Tennessee corporation is crucial to separating personal and business finances. This separation helps protect the corporation’s limited liability status and ensures accurate financial record-keeping for tax and legal purposes.

You will need your Tennessee corporation’s EIN, Charter for Profit Corporation, and corporate bylaws to open a corporate bank account. Some banks may also require a corporate resolution authorizing the opening of the account. By providing the necessary documentation and opening a dedicated bank account, you are taking an essential step in establishing and maintaining a successful Tennessee corporation.

Opening a separate bank account for your corporation is essential to balance personal and business finances. You will need your EIN, Charter for Profit Corporation, and corporate bylaws to open a corporate bank account. Some banks may also require a corporate resolution authorizing the opening of the account.

Step 8: File a Statement of Information

Within the first day of the fourth month following the LLC’s tax closing month, you must file a Statement of Information with the Tennessee Secretary of State. This document is a vital update for the state regarding the corporation’s officers, directors, Registered Agent, and business address, ensuring that the Tennessee Secretary of State has accurate information about your corporation.

Filing an annual report in Tennessee is crucial in maintaining your corporation’s good standing. The statement and the required filing fee can be filed online or by mail. Regularly updating this information with the Secretary of State is key to managing your Tennessee corporation’s ongoing compliance requirements.

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After Forming a Corporation

Once you have successfully formed a corporation, there are several steps you must take next. Here’s a comprehensive list for your reference to ensure your newly formed corporation operates smoothly and within legal guidelines.

Obtain the Required Licenses and Permits

Depending on the nature of your Tennessee corporation’s business, you may need to obtain various local, state, and federal licenses and permits. These requirements can vary significantly depending on your industry and location, making it essential to research the licenses and permits necessary for your corporation to operate legally.

Once you have identified the necessary licenses and permits, begin the application process before commencing business operations. Ensuring your Tennessee corporation has all the required licenses and permits is crucial for legal compliance and avoiding potential penalties.

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Register for State Taxes

To form Tennessee corporation, you must register your corporation with the Tennessee Department of Tax and Fee Administration to pay state taxes. These may include employment taxes, use tax, and sales tax permits in Tennessee, depending on the nature of your business.

Consult with a tax professional to ensure compliance with all state tax requirements and to understand the types of state taxes that apply to your Tennessee corporation. Proper registration and payment of state taxes are essential for maintaining your corporation’s legal standing and avoiding potential penalties.

Maintain Corporate Records

Maintaining accurate corporate records is essential for legal compliance and to protect your Tennessee corporation’s limited liability status. Diligent recordkeeping ensures transparency in your corporation’s operations and supports decision-making processes.

Key records to maintain include minutes of corporate meetings, stock issuances, financial statements, and other essential documents. Keeping these records safe and organized allows you to effectively manage your Tennessee corporation and maintain its legal compliance.

Hold Annual Shareholders’ Meetings

One of the ongoing requirements for Tennessee corporations is holding annual shareholders’ meetings. These meetings allow shareholders to elect directors, review financial statements, and address other corporate matters, ensuring the corporation’s stakeholders are informed and engaged in decision-making.

To maintain legal compliance, document the proceedings of annual shareholders’ meetings with detailed minutes and store them in your corporation’s records. Doing so demonstrates that your Tennessee corporation is adhering to its legal obligations and protecting its limited liability.

Comply with Federal Tax Requirements

In addition to state tax obligations, your Tennessee corporation must comply with federal tax requirements by filing a corporate income tax return (Form 1120) with the Internal Revenue Service (IRS). Timely and accurate filing of tax returns is essential for avoiding potential penalties and ensuring your corporation’s ongoing compliance with tax laws.

Given the complexity of tax regulations, consulting with a tax professional when preparing and filing your Tennessee corporation’s tax returns is highly advisable. A tax professional can help you navigate the intricacies of tax laws, identify potential deductions and credits, and ensure your corporation meets all applicable tax requirements.

Seek Professional Advice

Forming and maintaining Tennessee corporation is an ongoing process that requires attention to various legal and regulatory requirements. As laws and regulations change, staying informed about updates affecting your corporation and its operations is essential.

One way to stay informed and ensure ongoing compliance is by seeking professional advice from attorneys, accountants, or other experts specializing in Tennessee corporation law. These professionals can provide invaluable guidance and assistance with forming and managing Tennessee corporation, including maintaining proper documentation, meeting regulatory requirements, and addressing legal issues.

Fees for Starting Tennessee Corporation

Here are some of the common fees associated when starting a corporation in Tennessee:

Name Reservation Request Form fee: $20 (online) and $20 (mail)
Charter for Profit Corporation filing fee: $108
Annual report (Statement of Information) filing fee: $20

Please note that these fees are accurate as of 2022. Double-checking the Tennessee Secretary of State‘s website for the most up-to-date fee information is always a good idea.

Importance of Incorporating a Corporation in Tennessee

Tennessee, also known as The Volunteer State, is one of the largest economies in the United States and offers a thriving business environment for entrepreneurs across various industries. Incorporating your business in Tennessee provides a strong legal foundation that can help protect your personal assets, increase credibility with customers and partners, and offer potential tax advantages.

By forming Tennessee corporation, you create a separate legal entity distinct from its owners, which can protect your personal assets from business liabilities. Additionally, Tennessee corporations can benefit from the state’s extensive network of resources, including incubators, accelerators, and business-friendly initiatives that support growth and innovation.

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Benefits and Responsibilities of Tennessee Corporation

Forming Tennessee corporation comes with several benefits, such as:

Limited liability: As a separate legal entity, a corporation provides limited liability protection for its owners (shareholders), shielding their personal assets from business debts and liabilities.
Increased credibility: Incorporating a business can enhance its credibility with customers, suppliers, and investors, making it easier to establish business relationships and attract capital.
Tax advantages: Corporations may benefit from various tax advantages, such as lower tax rates on retained earnings, the ability to deduct employee benefits, and potential eligibility for tax credits and incentives.
Perpetual existence: Unlike sole proprietorships and partnerships, a corporation has a perpetual existence, meaning it can continue to operate even if its owners (shareholders) change.

However, with these benefits come certain responsibilities, including:

Compliance with state and federal regulations: Corporations must comply with various state and federal regulations, such as filing annual reports, maintaining corporate records, and holding annual shareholder meetings.
Tax obligations: Corporations have specific tax obligations, including filing corporate income tax returns and paying applicable taxes.
Maintaining corporate formalities: To preserve limited liability protection, corporations must maintain corporate formalities, such as adopting and following bylaws, issuing stock, and documenting corporate decisions.
Registration and ongoing fees: Incorporating a business in Tennessee requires registration with the Tennessee Secretary of State and payment of initial and ongoing fees, such as filing fees for the Charter for Profit Corporation and annual report fees.

Understanding the benefits and responsibilities of forming Tennessee corporation is crucial for entrepreneurs seeking to establish a strong legal foundation for their businesses. By incorporating your business in Tennessee and adhering to the associated responsibilities, you can enjoy the advantages of limited liability, increased credibility, and potential tax benefits while operating in the state’s dynamic and innovative business environment.

FAQs

What is the legal process to start a corporation in Tennessee?

To start a corporation in Tennessee, you must file Articles of Incorporation with the Secretary of State’s office.

What are the requirements for incorporating a business in Tennessee?

To incorporate a business in Tennessee, you need to file the Articles of Incorporation, have a registered agent, and pay the filing fee.

How do I choose a name for my Tennessee corporation?

You can search the Tennessee Secretary of State website to make sure the name you want to use is not already taken, and then you can file a Name Reservation Application with the State of Tennessee.

How long does it take to form a corporation in Tennessee?

Corporations in Tennessee can typically be formed fairly quickly, usually within 7-10 business days.

How much does it cost to start a corporation in Tennessee?

The filing fee to start a corporation in Tennessee is $100.

Do I need a physical address to start a corporation in Tennessee?

Yes, you must have a physical street address in Tennessee as your registered agent for service of process.

What is a registered agent for a corporation in Tennessee?

A registered agent is an individual or corporation who agrees to receive legal paperwork and other documents on behalf of the corporation.

Can I be my own registered agent for my Tennessee corporation?

Yes, you can be your own registered agent as long as you have a physical address in Tennessee.

What other documents do I need to create and file after filing the Articles of Incorporation for my Tennessee corporation?

You will need to create and file organizational meeting minutes, bylaws, and annual reports with the State of Tennessee.

How often do I need to file annual reports for my Tennessee corporation?

You need to file an annual report every year on the anniversary date of your corporation’s incorporation in Tennessee.

How can I find an attorney to assist me with incorporating my Tennessee corporation?

The Tennessee Bar Association maintains a database of attorneys, or you can do an online search for Tennessee business attorneys.

Will my Tennessee corporation be taxed on both the state and federal levels?

Yes, Tennessee corporations will typically be subject to both state and federal taxes.

What type of corporation should I choose to incorporate in Tennessee?

Common options for incorporating include S-corporations, C-corporations and Limited Liability Company (LLC).

What is the difference between an S-corporation and a C-corporation in Tennessee?

The primary difference between an S-corporation and a C-corporation is the way they are taxed. S-corporations aren’t taxed as a separate entity while C-corporation are taxed separately.

How can I obtain a federal employer identification number (EIN) for my Tennessee corporation?

You can apply for an EIN online through the Internal Revenue Service (IRS) website, or you can apply via mail or fax.

Can I change the name of my Tennessee corporation after incorporating it?

Yes, you can file an amendment with the Tennessee Secretary of State to change the name of the corporation.

Can I register my Tennessee corporation online?

Yes, you can file the Articles of Incorporation online through the Tennessee Secretary of State’s website.

What are the penalties for failing to file annual reports for a Tennessee corporation?

If you fail to file your annual reports on time, your Tennessee corporation may be administratively dissolved, resulting in fees and penalties.

Can a foreign corporation do business in Tennessee?

Yes, foreign corporations can do business in Tennessee, but must first register with the Tennessee Secretary of State.

What are the benefits of incorporating in Tennessee?

Some benefits of incorporating in Tennessee include low filing fees, no corporate income tax and low property taxes.

What should I do if I want to dissolve my Tennessee corporation?

You must file a Certificate of Dissolution with the Tennessee Secretary of State.

Can I form a nonprofit corporation in Tennessee?

Yes, you can form a nonprofit corporation in Tennessee.

What are the requirements for operating a nonprofit corporation in Tennessee?

Non-profit corporations must follow state and federal requirements related to owning a tax-exempt organization.

How do I obtain additions to my corporation articles in Tennessee?

Corporations can include amended Articles of Incorporation that must follow due processes. Some examples of additional provisions include terms surrounding shareholders.

Question What’s important to consider when filing my Articles of Incorporation in Tennessee?

Getting proper corporate governance documents avoids legal pitfalls. Tennessee corporate lawyers can help guide you on this process.

What is a Tennessee state franchise tax registration?

It is the process corporations completed with Tennessee Department of Revenue to declare the lawful status and businesses running within the state.

How to maintain compliance for my Tennessee corporation?

Ensure you have necessary official records maintenance, director meetings, changes of officers, updates on statutory filings dues, etc.

To whom should I register shares and comply with securities laws in Tennessee?

Each is owned and registered and issued to the stockholder. The Corporation should comply with the State (&.y) securities laws as it applies within Tennessee.

Can I both form an LLC and then elect to have the IRS (Internal Revenue Service) tax me as an S-Corp in Tennessee?

Yes, You are able to change treatments if this proves to be a beneficial fiscal policy matching your vision.

What is a corporation?

A corporation is a legal entity that is separate from its owners.

How do I start a corporation in Tennessee?

To start a corporation in Tennessee, file the necessary formation documents with the Tennessee Secretary of State.

What documents do I need to file to form a corporation in Tennessee?

You need to file Articles of Incorporation with the Tennessee Secretary of State to form a corporation in Tennessee.

Can I form a corporation online in Tennessee?

Yes, you can form a corporation online in Tennessee through the Tennessee Secretary of State’s website.

How much does it cost to form a corporation in Tennessee?

It costs $100 to file Articles of Incorporation with the Tennessee Secretary of State to form a corporation in Tennessee.

Does Tennessee require registered agents for corporations?

Yes, Tennessee requires corporations to have a registered agent located in the state.

Who can be a registered agent for a corporation in Tennessee?

A registered agent for a corporation in Tennessee must be a Tennessee resident or a Tennessee corporation.

How do I obtain a business license in Tennessee?

You can obtain a business license in Tennessee through your local city or county business license office.

Do I need to obtain any other permits or licenses to operate a corporation in Tennessee?

There may be other permits or licenses required depending on the type of corporation and its activities. Contact the appropriate agencies for more information.

How do I register to pay Tennessee state taxes as a corporation?

You can register to pay Tennessee state taxes online through the Tennessee Department of Revenue’s website.

What taxes does a corporation in Tennessee have to pay?

A corporation in Tennessee may be subject to corporate income tax, franchise and excise taxes, and other taxes depending on the corporation’s activities.

What is the corporate income tax rate in Tennessee?

The corporate income tax rate in Tennessee is 6.5%.

What is the franchise and excise tax rate in Tennessee?

The franchise and excise tax rate in Tennessee varies and is based on a corporation’s net earnings or net worth.

How often does a corporation have to file taxes in Tennessee?

A corporation in Tennessee must file its annual report and pay its franchise and excise taxes once a year before the deadline set by the Tennessee Department of Revenue.

What is an annual report for a Tennessee corporation?

An annual report for a Tennessee corporation is a report that details a business’s income, expenses, and other financial information in the previous year.

Does Tennessee have a minimum corporate tax?

Yes, Tennessee has a minimum corporate tax of $100.

Can I change my corporation’s name in Tennessee?

Yes, you can change your corporation’s name in Tennessee by filing an amendment to your Articles of Incorporation with the Tennessee Secretary of State.

Can I dissolve my corporation in Tennessee?

Yes, you can dissolve your corporation in Tennessee by filing Articles of Dissolution with the Tennessee Secretary of State.

Can a disqualified director participate in meetings of the board of directors in Tennessee?

No, a disqualified director cannot participate in meetings of the board of directors in Tennessee.

Does Tennessee require corporations to maintain annual minutes?

Tennessee does not require corporations to maintain annual minutes, but it is recommended documentation to keep.

What is the state’s policy on harassment in the workplace in Tennessee?

In Tennessee, employers are prohibited from discriminating against employees based on their race, color, religion, national origin, sex / gender identity, pregnancy, and other protected characteristics.

Are Tennessee corporations permitted to hold virtual meetings?

Yes, Tennessee corporations are permitted to hold virtual meetings if allowed by the corporation’s bylaws.

What is the Tennessee Secretary of State’s telephone number?

The Tennessee Secretary of State’s telephone number is 615-741-2286.

What is the physical address for the Tennessee Secretary of State office?

The physical address for the Tennessee Secretary of State office is 312 Rosa L Parks Ave #313, Nashville, TN 37243.

Does Tennessee require corporations to have bylaws?

Yes, Tennessee requires corporations to have bylaws to govern the operation of the corporation.

How can I obtain a certified copy of my corporation’s filing documents in Tennessee?

You can request a certified copy of your corporation’s filing documents in Tennessee through the Tennessee Secretary of State’s website or by mail.

Can I file my corporation’s annual report online in Tennessee?

Yes, you can file your corporation’s annual report online in Tennessee through the Tennessee Secretary of State’s website.

Is it mandatory to have a physical address for a corporation in Tennessee?

Yes, it is mandatory to have a physical address for a corporation in Tennessee.

How to Save Money While Forming Your Tennessee Corporation

While it’s true that starting a corporation in Tennessee can come with a price tag, there are several ways that savvy business owners can save money during the formation process. By following these tips, you can bring down your costs and get your corporation up and running without breaking the bank.

One of the most effective ways to save money while forming your Tennessee corporation is by doing as much of the work yourself as possible. Many entrepreneurs opt to hire lawyers or incorporation services to handle the legal paperwork and filings involved in setting up a corporation. While these services can be helpful, they also come with a hefty price tag. By educating yourself on the requirements for forming a corporation in Tennessee and taking on some of the tasks yourself, you can significantly reduce your expenses.

Another way to save money during the formation of your Tennessee corporation is by utilizing online resources and tools. There are many websites and software programs available that can help guide you through the process of setting up a corporation, from drafting articles of incorporation to filing with the state. These resources are often much more affordable than hiring professional services and can provide you with the knowledge and support you need to successfully form your corporation.

When it comes to choosing a business name and location for your corporation, there are also opportunities to save money. Consider selecting a simple, straightforward name for your business that doesn’t require a costly trademark search or registration. Additionally, opting for a virtual office or shared workspace can help you save on rental costs while still providing your corporation with a professional address.

Finally, consider seeking out cost-effective ways to fulfill other legal requirements for your Tennessee corporation, such as obtaining an Employer Identification Number (EIN) or complying with state tax regulations. There are many online resources and government agencies that offer free or low-cost assistance with these tasks, allowing you to save money while ensuring that your corporation remains in compliance with the law.

In conclusion, forming a corporation in Tennessee doesn’t have to be an expensive endeavor. By taking a proactive approach, educating yourself on the process, and utilizing cost-effective resources, you can save money while successfully setting up your corporation. With careful planning and strategic decisions, you can establish a strong foundation for your business without breaking the bank.

Conclusion

Forming a corporation in Tennessee involves steps and ongoing compliance with state and federal requirements. By following these key steps and seeking professional guidance when necessary, you can successfully establish and maintain Tennessee corporation, enjoying the benefits of limited liability protection, increased credibility, and potential tax advantages. Visit LLCBase to know more about starting a corporation in Tennessee.