How to Form a
Tennessee Corporation

Tennessee charges $100 to file Articles of Incorporation under Tenn. Code Ann. § 48-11-202 with the Secretary of State Division of Business and Charitable Organizations at tnbear.tn.gov. Expedited processing is +$20 for next-business-day (typical standard processing is 3–5 business days). Eleet AI charges $249 all-inclusive — $149 service + $100 state fee + registered agent for year one + filed documents delivered to your portal. National providers advertise $0–$299 formation but add the $100 state fee, $125–$299/yr registered agent, $50–$99 EIN upsell, and 'compliance packages' separately — real total lands $375–$750+. Tennessee's $100 base filing fee is well below the US median ($139) — WA $200, MA $275, CA $100+$25 SI, NY $125, PA $125 — making TN one of the more affordable formation fees among states with significant corporate economies.

Yes, as of Jan 1, 2021. Tennessee eliminated the HALL INCOME TAX (originally enacted 1929, a 6% tax on interest and dividends) through a six-year phase-down under Public Chapter 1057 of 2016: 5% in 2017, 4% in 2018, 3% in 2019, 2% in 2020, 1% partial 2021, 0% effective Jan 1 2021. Combined with Tennessee's longstanding absence of tax on wages or earned income, TN became the 8th US state with no broad-based personal income tax (alongside AK, FL, NV, SD, TX, WA, WY; NH joined in 2025). This is a genuine differentiator for high-income founders — and is a documented driver of Nashville/Franklin/Brentwood in-migration from CA/NY. BUT: Tennessee corporations and LLCs still pay FRANCHISE TAX (0.25% of net worth, min $100/yr) AND EXCISE TAX (6.5% of TN-apportioned net earnings) under Tenn. Code Ann. Title 67 Chapter 4 — effectively a state corporate income tax with a different name. So the headline is correct for individuals (no wage/dividend/interest tax); for entities, the 6.5% Excise Tax is a real business tax most competitor guides hide.

Tennessee replaces state corporate income tax with a combined Franchise + Excise Tax under Tenn. Code Ann. Title 67 Chapter 4 Parts 20 (Excise) and 21 (Franchise), administered by the Department of Revenue. EXCISE TAX: 6.5% of Tennessee-apportioned net earnings per Tenn. Code Ann. § 67-4-2007. Single-factor apportionment based on receipts/sales factor (TN moved to single sales factor in 2016 under Public Chapter 514). Applies to C-corps, S-corps (federal S-election NOT honored for TN Excise), LLCs, LPs, LLPs, and business trusts. FRANCHISE TAX: 0.25% of TN-apportioned net worth under Tenn. Code Ann. § 67-4-2108, minimum $100/yr. Net worth = assets less liabilities at year end. Returns filed on Form FAE 170 (Franchise and Excise Tax Return), due on the 15th day of the 4th month after fiscal year end (April 15 for calendar-year filers). Estimated payments required if tax liability exceeds $5K. Combined effective F&E rate on a profitable TN corp runs 6.75% — higher than NC 2.5% corp income + 0% franchise, comparable to FL 5.5%, well below CA 8.84%, GA 5.39%, AL 6.5%. Credits available: Jobs Tax Credit (§ 67-4-2109), Headquarters Tax Credit, Industrial Machinery Credit, Research and Development Credit.

On May 10, 2024 Governor Bill Lee signed Public Chapter 950 (SB 2103/HB 1893), eliminating the ALTERNATIVE MEASURE of Franchise Tax that had long required TN corps to pay on the GREATER of (a) apportioned net worth OR (b) the book value of real and tangible personal property located in TN. The property measure forced corps with significant TN real estate or equipment holdings to pay franchise tax even when net worth was negative or apportioned low. Plaintiffs had challenged the property measure as a dormant Commerce Clause violation (taxing interstate activity via TN-situs property). The 2024 reform retained ONLY the net-worth measure prospectively AND authorized REFUND CLAIMS for franchise tax paid on the property measure during tax years with filing deadlines Jan 1 2021 through Jan 1 2024. Refund claim window closed Nov 30, 2024, with ~$1.6 billion in claims filed. For corps forming in 2026 going forward, franchise tax is simply 0.25% × TN-apportioned net worth (min $100) — a material simplification. Our structural impact: TN became meaningfully more competitive for capital-intensive / property-heavy corps (manufacturing, real estate ops, data centers) vs previously where property-measure could bite hard.

The Tennessee Business Corporation Act (TBCA) — Tenn. Code Ann. Title 48 Chapters 11 through 27 — was enacted in 1987 under Public Chapter 242, replacing the prior 1968 General Corporation Act. It is based on the 1984 Model Business Corporation Act (MBCA) with subsequent amendments. Key sections: § 48-11-202 (Articles of Incorporation requirements — name, authorized shares, registered agent, incorporator, principal office), § 48-14-101 (corporate name standards — must contain "Corporation," "Incorporated," "Company," or abbreviation "Corp.," "Inc.," "Co."), § 48-15-101 (registered agent and office — every TN corp must continuously maintain a registered agent and registered office in TN), § 48-16-101 et seq (shares and capital — par value optional, no-par permitted), § 48-17-104 (shareholder action without a meeting — written consent permitted unless articles require otherwise), § 48-18-301 (director duty of care — good faith with the care of an ordinarily prudent person), § 48-12-102(b)(3) (optional limitation of director liability provision — TN's version of DGCL § 102(b)(7) exculpation, with carve-outs for loyalty breaches, intentional misconduct, unlawful distributions), § 48-18-403 (officers — TN requires at minimum a president and secretary; same person may hold both), § 48-20-102 (amendments to articles), § 48-21-101 et seq (mergers and exchanges), § 48-23-102 (dissenters' rights / appraisal), § 48-24-102 (dissolution), § 48-25-102 (foreign corporation qualification), § 48-26-203 (annual report). MBCA familiarity makes TN approachable for out-of-state counsel.

Under Tenn. Code Ann. § 48-26-203, every Tennessee corporation must file an Annual Report on or before the FIRST DAY OF THE FOURTH MONTH following the end of its fiscal year. For calendar-year corps (most), this means April 1. The base fee is $20 for a corporation with four or fewer officers and directors, with +$5 per officer or director above four (so a 5-person board pays $25, a 10-person board $50). Filed online at tnbear.tn.gov. The report updates: principal office address, registered agent and office, directors (names and business addresses), officers (names and business addresses), and principal office email. Miss the April 1 deadline and the Secretary of State begins administrative dissolution proceedings after 60 days. Reinstatement after administrative dissolution requires filing all missed Annual Reports plus a $70 reinstatement fee under § 48-24-203. TN's $20 base annual fee is among the lowest in the US (AL $0 post-2024-BPT-reform, NY $9 biennial, TN $20, NC $25, NV $650+, MA $125, WA $60, WY $60, DE $50–$200K franchise). Eleet AI offers Annual Report filing service at $79/yr for years 2+.

Separate from state F&E, Tennessee imposes a LOCAL BUSINESS TAX under Tenn. Code Ann. Title 67 Chapter 4 Part 7 — collected by the county clerk (and in some cities, an additional municipal business tax). Every business with a TN physical location must obtain a local business license for a minimum $22/yr AND pay business tax on gross receipts by classification. Rates vary by Classification 1A, 1B, 1C (Retail Sales 0.1%), 2 (Wholesale Sales 0.0375%), 3 (Retail Services 0.15%–0.3%), 4 (Manufacturing 0.05%), 5A (Motor Vehicle Dealers), 5B (Food/Drug). Filed annually by the 15th day of the 4th month after fiscal year end. Nashville/Davidson County, Memphis/Shelby County, Knoxville/Knox County, Chattanooga/Hamilton County each have slightly different collection rules and municipal add-ons. Davidson County (Metro Nashville) and Shelby County (Memphis) are the most stringent; some rural counties are notably looser. A corp with a Nashville office and a Memphis warehouse needs TWO local business licenses. Often the most-missed TN compliance item for out-of-state operators who focus only on state filings. The Department of Revenue and local clerks share data — a state F&E return without a corresponding local license triggers notices.

Tennessee imposes a 7% STATE SALES AND USE TAX under Tenn. Code Ann. § 67-6-202 plus LOCAL OPTION RATES up to 2.75% (Tenn. Code Ann. § 67-6-702) = up to 9.75% combined. TN and LA routinely trade the #1/#2 position for highest combined US sales tax. Origin-based sourcing for in-state retail sales. Collected by the Department of Revenue via TNTAP (tntap.tn.gov). Exemptions: qualified manufacturing machinery, industrial equipment under § 67-6-206, Headquarters Tax Credit purchases, Qualified Data Center certification (important for Memphis/Nashville data center corps — Google, Meta, Amazon Web Services, Facebook Fort Worth-style), resale, nonprofit. Groceries reduced to 4% state + local under Public Chapter 456 of 2017 but still taxable (unlike ~30 states that fully exempt groceries). Remote sellers collecting TN sales tax triggered by South Dakota v. Wayfair nexus thresholds: $100K TN sales/yr (lowered from $500K in 2020). Sales tax is a major consideration for TN retail/e-commerce corps — the combined 9.75% in Nashville, Memphis, and most major cities is at the high end of the US distribution.

Under Tenn. Code Ann. § 67-4-2109, Tennessee offers a HEADQUARTERS TAX CREDIT for corps establishing or expanding a qualified TN headquarters with: (a) ≥100 new full-time jobs, (b) average wages ≥150% of Tennessee's average occupational wage (2025: ~$87,000 target), (c) ≥$10 million capital investment. Credit = $10,000 per qualified job, taken against Franchise & Excise Tax, carryforward up to 15 years. Combined with the JOBS TAX CREDIT ($4,500/job for lower wage thresholds), the SALES AND USE TAX EXEMPTION for headquarters purchases, and the ECONOMIC DEVELOPMENT GRANTS negotiated project-by-project with the TN Department of Economic and Community Development (TNECD), TN assembles aggressive incentive packages. Recent anchor recruitments: Oracle Nashville Riverfront (~8,500 jobs committed, $1.2B investment, still under construction as of 2026), Ford BlueOval City Stanton ($5.6B, ~5,800 jobs), Amazon Operations Center Nashville Yards (~5,000 tech jobs, $230M), LG Electronics Clarksville ($250M), Mitsubishi Motors Franklin (American HQ relocation from CA 2019), AllianceBernstein Nashville (HQ relocation from NYC 2018, $70M + 1,000 jobs), Smile Direct Club Nashville (pre-SPAC collapse), FedEx (legacy Memphis). These incentives are meaningful for corps considering TN vs GA/FL/NC — TNECD actively competes for HQ wins.

Online filing via tnbear.tn.gov processes in 3–5 business days standard. Expedited processing for +$20 brings it to next business day (usually same day if filed before noon Central). Paper filings take 2–3 weeks. Eleet AI files online expedited by default and includes tracking updates to your customer portal. Once your Articles are stamped, you immediately need to: (1) obtain a federal EIN from IRS.gov (free, online, ~5 minutes), (2) register for TN Franchise & Excise Tax at tntap.tn.gov, (3) apply for the local business license at the county clerk's office where your principal office sits, (4) register for TN sales tax if you sell taxable goods/services. Before your Articles are stamped, you cannot open a business bank account in the corp name, sign contracts as the corp, issue stock, or make a federal S-Corp election retroactive to the formation date.

After your Articles are stamped: (1) Obtain a federal EIN at IRS.gov (free, 5 minutes). (2) Adopt bylaws — TN does not file bylaws with the state but every corp must adopt them under § 48-12-106 (typically at the organizational meeting or via written consent under § 48-17-104). (3) Hold the organizational meeting — elect directors, appoint officers (§ 48-18-403 requires at minimum a president and secretary; same person may hold both), adopt bylaws, authorize founder-stock issuance, set initial capitalization. (4) Issue founder stock and file Section 83(b) elections with the IRS within 30 days if stock is subject to vesting — missing the 30-day window is a tax error that cannot be fixed later. (5) Register for TN Franchise & Excise Tax at tntap.tn.gov (required even if no TN activity yet — min $100 franchise tax applies). (6) Apply for a local business license at the county clerk's office in the county where your principal office sits (and in any other county where you maintain a place of business). (7) Register for TN sales tax at tntap.tn.gov if you sell taxable goods/services to TN customers. (8) If you have employees: register with the TN Department of Labor & Workforce Development for unemployment insurance (jobs4tn.gov) and obtain workers' compensation coverage (private market; minimum 5 employees triggers mandate under Tenn. Code Ann. § 50-6-103). (9) Open a business bank account. (10) Calendar the Annual Report deadline — April 1 for calendar-year corps. (11) Calendar F&E return (Form FAE 170) — April 15 for calendar-year corps, estimated payments quarterly if liability exceeds $5K. (12) Calendar local business tax return — 15th day of 4th month after fiscal year end. (13) Consider federal S-Corp election (Form 2553) within 75 days of formation if the S-election fits — BUT note that TN does NOT honor the federal S-election for Excise Tax; the 6.5% Excise Tax applies to S-corp net earnings too.

If you are planning to raise venture capital, the answer is Delaware regardless of whether your engineering team is in Nashville, Chattanooga, or Memphis. Every Andreessen Horowitz, Sequoia, ICONIQ, Frist Cressey Ventures (Nashville), Martin Ventures (Nashville healthcare), and Council & Enhanced Capital term sheet defaults to DGCL. The NVCA Model Term Sheet, YC SAFE, Series Seed templates, and every major-firm Delaware-default assumption make DE conversion nearly inevitable for priced rounds. A DE-to-TN conversion is unusual; the cleaner path is to form a Delaware C-Corp from day one (Eleet AI offers de-corp-formation at $438 all-in — see our Delaware corporation formation guide), then foreign-qualify into TN at $100 + $20/yr Annual Report. The Nashville healthcare network, Memphis logistics talent, Chattanooga VW/gigabit fiber ecosystem, Knoxville ORNL + UT talent — all available to a Delaware C-Corp doing business in TN exactly as they would be to a TN-domiciled corp. Exception: a bootstrapped/TN-rooted founder building a profitable services or healthcare-adjacent business with no VC ambitions can domicile in TN — the no-personal-income-tax profile is advantageous for owner-operators taking distributions (combined with federal S-election treatment at the federal level, though not TN Excise). But if Series A is even possible within 24 months, form Delaware day one.

Form a TN corporation when your operations are genuinely Tennessee-rooted AND the no-personal-income-tax + Nashville healthcare / Memphis logistics / Chattanooga automotive / Oak Ridge nuclear ecosystem advantages outweigh the F&E tax + 9.75% sales tax + local business tax layer. TN is right for: (1) Nashville healthcare corps (HCA ecosystem, ~400 healthcare companies, genuine moat); (2) Memphis logistics corps (FedEx ecosystem, AutoZone suppliers, International Paper, rail + river + I-40 convergence); (3) Auto supplier corps with TN manufacturing nexus (Nissan Smyrna, VW Chattanooga, GM Spring Hill, Ford BlueOval City Stanton); (4) Bootstrapped profitable operators where no-personal-income-tax beats CA/NY/GA alternatives (a $500K-distribution Nashville services corp saves ~$30K/yr vs GA 5.39% or ~$55K vs CA 13.3%); (5) Oak Ridge / ORNL contractors + Y-12 suppliers; (6) TVA industrial customers; (7) Nashville music industry (Gibson, Sony Music Nashville, BMG, Big Machine, Curb); (8) Whiskey + spirits corps (Jack Daniel's regional ecosystem, Uncle Nearest Shelbyville, George Dickel). TN is NOT the right answer for: VC-bound tech startups (form Delaware, foreign-qualify into TN); anonymous holding companies (WY $60/yr anonymous or NM $50 + anonymous — TN Articles require incorporator + registered agent name on public record); pre-revenue cost optimizers (MS $50, NM $50, KY $40 beat TN's $100 — over 10 years the difference exceeds $500 on the base stack alone); pure real-estate holding corps with no TN nexus (form in the property's state); low-margin / high-gross-receipts retail where 9.75% sales tax + 0.1% local business tax bite; pure-services corps with no TN economic nexus (the Excise Tax 6.5% on TN-apportioned earnings kicks in only on TN nexus, but mere registration doesn't create nexus — however, maintaining a TN registered agent combined with any TN-source revenue activates F&E). The honest answer: if DE is plausible for funding, DE wins; if operational TN nexus is genuine and bootstrapped/profitable — especially in healthcare, auto, or logistics — TN's no-personal-income-tax profile is real and the F&E 6.75% effective is competitive vs CA/NY but materially higher than NC 2.5% corp income or FL 5.5% corp income + 0% franchise.