Tennessee Tax ID (EIN) Number & Business RegistrationPublished:
Looking to obtain your Tax ID Number in Tennessee? This short guide will walk you through everything you need to know about how to obtain a Tax ID and how to start a new business in the state of Tennessee. Whether you currently live in Tennessee or are thinking of moving there to start a business, you should know Tennessee is an especially welcoming state for entrepreneurs.
There are already more than 580,000 small businesses in Tennessee, which represent 99.5 percent of all Tennessee companies. Collectively, they employ more than 1.1 million people, or more than 42.9 percent of Tennessee employees. Economic growth in Tennessee is also more than the national average, with a whopping 8.7 percent gain in the number of new business filings in the first quarter of 2017. There will be plenty of other entrepreneurs to engage with and learn from as you build your business in this state. There are also dozens of resources available to entrepreneurs, including organizations like Launch Tennessee, and startup incubators and accelerators. And depending on where you want to start, Tennessee has a variety of options, from big cities like Knoxville, Nashville, and Memphis, to sparsely populated rural areas.
Steps to Obtain a Tennessee Tax ID & Business Registration:
- Legal Formation of your Tennessee Business
- Obtain your Federal Tax ID (EIN) Number
- Tennessee State Tax ID Number
- Tennessee Licenses & Permits
But before you get too excited about moving, you should know how to choose the best legal structure for your business. There are several structures to choose from, ranging from simple to complex, and your choice will impact not only your profitability, but also your growth potential and personal liability.
Let’s start with the easier types of businesses: sole proprietorships and partnerships. In a sole proprietorship, you’ll be starting and managing the business by yourself. You won’t have to file any complicated paperwork, and you can pay taxes on your earnings like you would any other personal income. Partnerships work mostly the same way, but involve two or more different owners. The biggest flaw in these business structures is their liability; if you violate a contract or do something improperly, you could be held personally liable.
That’s where LLCs and corporations become valuable. LLCs, C-corporations, and S-corporations all shield their owners from personal liability. They’re treated as separate legal entities, so if there’s ever a legal issue, the business is held liable, rather than the owners. Corporations provide more protection than LLCs.
Both LLCs and corporations must pay taxes in Tennessee. You’ll be responsible for filing an annual report, and paying a franchise tax based on the value of your business. When you file an annual report, you’ll pay a filing fee of $50 per member, with a minimum $300 fee. Corporations are also subject to federal taxes.
In addition to any taxes paid by the business, you may be responsible for taxes paid on income or profits you personally collect from the business. This results in double taxation in some cases, but gives you more control over when and how you’re personally taxed.
If you choose to start a sole proprietorship or partnership, you may be able to use your social security number (SSN) during the early stages of your business’s development but if you’re starting an LLC or a corporation, you need to have a Tax ID, otherwise known as an employer identification number (EIN).
For a basic understanding, you can think of your EIN as a type of SSN for your business. Remember, your company is treated as a separate legal entity, so it needs its own identification number. You’ll use your EIN when hiring employees, when opening a bank account, and in many cases, when registering your business with other partners and vendors. You’ll also use your EIN for keeping track of your business’s finances, and filing taxes at the end of the year. This is a federal requirement, and isn’t just for businesses in Tennessee.
The process of getting an EIN isn’t complicated, but it can still be confusing to new entrepreneurs. If you need help with the process, or just want to get your Tax ID as quickly as possible, you can apply online in just minutes.
Because Tennessee requires its businesses to pay a franchise tax and excise tax, you’ll need to get a state tax ID number for Tennessee. With that number, you’ll be able to file for state taxes; Tennessee charges a flat rate of 6.5 percent on any net earnings you have from doing business in the state. In some cases, your business will be responsible for paying a local tax to your city as well.
Again, this process isn’t terribly difficult, but it can be confusing and strenuous for new entrepreneurs. Thankfully, online Tax ID Obtainment Service can take care of your entire application on your behalf and get your Tax ID registered and delivered to you in 1 hour or less.
If you plan to operate a business in Tennessee, you’ll need to get a business license. The standard business license is for businesses making $10,000 or more, in a given year, and will require a $15 fee. You can also apply for a minimal activity license, which you can use for a business making between $3,000 and $10,000 a year.
In addition to those standard business licenses, you may be required to get a license or permit depending on the nature of your business, and the area in which you plan to operate. For example, companies that deal with public structures and those selling alcohol or tobacco require additional permits and/or licensure.
With your business plan, ID number, and licenses and permits in place, you should have everything you need to start collecting funding and turn the vision of your business into a reality. If it seems intimidating, don’t worry; once you build momentum, the pieces will come together quickly