Form a Tennessee LLC or Incorporate Online
The process of setting up an LLC or corporation isn't too hard, in fact if you know what you're doing some would call it easy. Now, this isn't to say that everyone should go through the process of filing on their own. The reason is that the service fees for filing are often very low, kind of like hiring someone to mow your law, or wash your car. Anyone, can do it, but we often choose to hire people who are more skilled at a craft to help us along the way. The process of filing a corporate entity falls into this category. So, just know that you can find help if you need it, but before you go that route let's discuss some of the benefits of filing:
- Limited Liability Protection - both the corporation and LLC, limited liability company, we get the great benefit of separating personal and business assets. The limited liability protection is granted to registrants of either of these popular corporate entities. When you separate your personal and business assets, it is truly like the assets belong to two different individuals, and they actually do. For example, why would your friend Joe pay the debts for your business? The limited liability protection logic kinda goes like that. By keeping a distinct separation between your personal and business as you run the business, the courts typically grant the owners the same separation in the litigation process. So, as you operate your business always be sure to keep a distinction between the two assets and don't commingle assets, expenses, or liabilities. Make sure you pay yourself a salary, and that you don't use business expenses to cover personal items. Ask a CPA or attorney to know more about how this works for your situation.
- Pass through taxation - this taxation benefit can be obtained for either a corporation or LLC. When you file for the S corporation, you will be granted the use of pass through taxation for the business. The limited liability company, LLC, by default will have pass through taxation. If you in event choose to file a C corporation, for tax purposes the business will be operated similar to a stand alone entity. This means that the corporation is responsible for paying it's own tax obligations, and for filing it's own tax return. Or should I say the management of the corporation would be responsible for arranging for tax preparation, submission, and payments. By have a s-corp, and pass through taxation, this is a great benefit that allows the business to have the income pass directly through to the owners of the business thereby avoiding many cases that would result in double taxation. Double taxation is the event that occurs when a business is first taxed for income at the corporate level, then the shareholders are taxed secondly when retained income is distributed as a dividend to shareholders. As shareholders receive this dividend, effectively this is a second tax on the income that has already been paid to the government. So, you may want to talk to a CPA to see what situation and filing type is best for you.
Now, let's talk a little specifically about the two popular filing types that we are referring to.
Form a Tennessee LLC
The process of forming an LLC in Tennessee can be easy if you know what you are doing. Our information, tips, samples, forms, and links can lead you in the right direction to file on your own, or to find a reputable service that you can use to file. The limited liability company, or LLC, will help you to have pass through taxation and limited liability protection. The steps to form a Tennessee LLC are discussed now:
- You will need a business name that is distinguishable and non ambiguous. This means that is cannot be exactly like another name, nor can it be so similar that it could potentially confuse a prospective customer. The name must contain the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.”. Search for a TN LLC name using this link.
- Registered Agent - this is a person who will be responsible for receiving official mail and forwarding it to the appropriate people at the business. The registered agent must have a physical street address and cannot be a P.O. Box.
- You must state the closing month for the LLC.
- You must state whether the members(owners) or managers will run the business. The business can be member managed, or managed by managers. The member managed means the owners will run the business, while the latter means that it will be run by a manager who is not an owner.
- You need to provide the number or members (owners).
- You need to state the period of the LLC, which is typically perpetual. Perpetual means that their isn't an end date to the LLC. If their is an end date, then you can provide it here.
- You need to provide the address for the principal office.
- Next, the mailing address must be provided.
Please review the form, that is linked above, to see the exact form as well as the additional requirements that need to be addressed and answered.
Incorporate in Tennessee
In most states the LLC is more often filed. The reason a lot of people like the LLC is it is thought to be a little easier to operate, and by default it has pass through taxation. However, the S-corporation, can be filed for the corporate entity to achieve pass through taxation for the business. There are certain limits on the S corporation, for example, you can only have fewer than 100 shareholders. This will cover most small and medium sized businesses, however large corporations obviously cannot file the S corporation status.
Search for a Corporation Name in Tennessee
The corporation name has some certain requirements that must be followed before filing. For example, there are a number of reserved words that you must not use unless you get prior approval from the certain regulatory agency. Some of these examples are "Bank" and "Trust Company". The next type of filing issue related to the name is that each corporation name must contain the words “corporation", "incorporated", or "company" or the abbreviation "corp.", "inc.", or "co.". If you need to search for a corporation name in Tennessee use this link.Tennessee Secretary of State Links: