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Tennessee Business License Basics

Tennessee Business License Basics

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Tennessee Business License Basics

Starting a small business in Tennessee often means registering with several federal, state, and local agencies. Let’s review common Tennessee business license registrations so your business starts off right.

Related: Guide to starting a business in Tennessee

Setting Up the Business

Before you can apply for business licenses, you should first establish the business structure. This decision impacts your legal responsibilities, taxes, and how much personal liability you might face. Here’s a brief explanation of each type of entity:

Sole proprietorship: This is the simplest form of business structure, where one person owns and runs everything. There’s no separation between the owner and the business, meaning the owner is personally responsible for all debts and legal actions against the business. Taxes are straightforward as the owner reports business income on their personal tax return.

General partnership: Similar to a sole proprietorship, but with two or more people running the business. Partners share profits and losses, and like sole proprietors, they are personally responsible for the business’s debts and legal issues. Partnerships also don’t pay taxes as a separate entity; instead, each partner includes their share of profits or losses in their personal tax filings.

Corporation: A corporation is a more complex entity that is separate from its owners, providing personal liability protection. Owners, known as shareholders, are not personally responsible for the corporation’s debts or legal problems. Corporations can raise money by selling stock and are taxed separately from their owners. This entity requires more requirements, like having board meetings and record-keeping.

Limited Liability Company (LLC): An LLC blends elements of sole proprietorships, partnerships, and corporations. Owners (members) have limited personal liability for business debts and actions. Like sole proprietorships and partnerships, an LLC can pass income directly to owners to avoid double taxation, a common issue with corporations. This structure offers flexibility in management and less strict requirements than a corporation.

What Licenses Do Tennessee Businesses Need?

With the business structure out of the way, we can begin looking at the different types of registrations businesses in Tennessee may need. There isn’t a standard business license, as requirements vary depending on where the business is located and what it does. Here is a general overview of the different registrations your business may need.

County Business Licenses

Most businesses in Tennessee (even home-based businesses occasionally) need to purchase an annual business license with the County Clerk in the county where the business is located and possibly with the Municipal Clerk if it is located within the city limits. The two common licenses are the Standard Business License and the Minimal Activity Business License.

Standard Business License: The Standard Business License is for businesses that gross more than $10,000 annually and are not exempt. You initially file for the Standard Business License with your county clerk and then file a tax return of your gross receipts (gross sales) with the TN Department of Revenue. Keep in mind that your tax year is based on your business’s fiscal year-end. The fee for the Standard Business License is $15 annually for each location.

You may also need to obtain a business license from your municipal clerk if your business is located within certain city limits.

Minimal Activity Business License: The Minimal Activity Business License is for businesses that gross more than $3,000 and less than $10,000 annually. You initially file the Minimal Activity License with your county clerk, but no annual report on gross receipts is required. Your license must be renewed at the end of the fiscal year-end of your business.  The filing fee $15 annually for each location.

You may also need to obtain a business license from your municipal clerk if your business is located within some city limits.

Some businesses don’t need to register for either a Standard or Minimal Activity Business License. Those include:

  • Businesses with gross revenue of less than $3,000 annually.
  • Certain Services (but not tangible property sales) – Exempt services generally include but are not limited to doctors, dentists, veterinarians, attorneys, accountants, insurance agents, loan companies, manufacturers, and farms.  They may be subject to business tax on sales. If you are unsure of your exempt status, check with your county clerk.

The cost of the business license varies by location but is typically less than $30.

Assumed Name Registration

While not a business license, it’s common for Sole Proprietorships and Partnerships operating under a business name that is different from the full name of the owner(s) to register for an Assumed Name (also known as a Doing Business As or DBA) with the Register of Deed’s Office in the county where the business is located.

Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For as little as $99, you can save a lot of time and know your business is in compliance with local, state, and federal requirements. 

Building & Zoning Permits

In Tennessee, businesses are required to obtain various permits and follow specific regulations when it comes to building, zoning, and signage. Here’s a brief overview of what you need to know:

Building Permits: Before starting any construction, renovation, or alteration of a commercial building, businesses must obtain a building permit from their local government’s building department. The process typically involves submitting plans, specifications, and other relevant documents for review. The Tennessee Department of Commerce and Insurance oversees building codes and standards across the state, but local governments may have additional requirements.

Zoning Permits: Zoning regulations determine how land can be used in specific areas of a city or county. Before establishing a business or constructing a new building, it’s essential to ensure that the intended use complies with the local zoning ordinances. In Tennessee, zoning is typically handled at the local level by municipal and county governments.

Building Signage: Signage regulations for businesses in Tennessee are primarily governed by local ordinances. Each city or county may have its own set of rules regarding the size, placement, and type of signage allowed.

Sales Tax Permit

Generally, businesses making sales within any county and/or incorporated municipality in Tennessee will need to register for and remit business tax.  The business tax consists of two separate taxes: the state business tax and the city business tax.  With a few exceptions, all businesses that sell goods or services must pay the state business tax.  This includes businesses with a physical location in the state as well as out-of-state businesses performing certain activities in the state.

Learn how to register for a Tennessee Sales Tax Permit from the Tennessee Department of Revenue.

Certificate of Resale

Businesses purchasing merchandise to resell will usually want to obtain a Tennessee Certificate of Resale (often referred to as a Resale Certificate) to avoid paying state sales tax for merchandise being resold to customers.

Professional License

A variety of professions in the state are regulated and need to be registered before offering certain services.  A few common professions that require licensing in Tennessee include; appraisers, home inspectors, food establishments, barbers, scrap metal companies, and many more.  

Employer Identification Number (EIN)

Many businesses register with the Internal Revenue Service (IRS) for an EIN (also referred to as a FEIN, Federal Employer Identification Number, or Federal Tax ID Number). The EIN is the business equivalent of an individual’s Social Security Number. Corporations, Limited Liability Companies, partnerships, and sole proprietorships with employees will all need to register for one. Sole Proprietorships without employees can use the owner’s Social Security Number.

Learn how to get an EIN

Next Steps

These are some of the most common business licenses a new business in Tennessee will need to register for. While it’s a good start, there are so many different licenses that may be needed, be sure to double-check with the City Clerk’s Office, Chamber of Commerce, and/or Economic Development office in your area before opening your doors.

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

Tennessee Business License Basics

Tennessee Business License Basics

2 Responses

  1. Im going to be an independant travel agent from home. What license do I need, Ein number, do i register with the city , i live in

    1. Hi Connie – Tennessee doesn’t require specific licensing for travel agents, but you may need some of the registrations in this article. You didn’t list the city you live in, but you may want to start with the Minimal Business Activity License as well as check with your local City Hall, Chamber of Commerce, and Economic Development department in your area for additional details as some places require all businesses to register, while others do not.

      The requirements for the EIN vary on your entity type, but in general you would only need one if you have employees, or have a partnership, LLC or corporation with multiple owners. To learn more about the different entities in Tennessee under Step 3 – https://startup101.com/tennessee/.

      Hope this helps you get started. Let me know if you have any other questions!
      Greg

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