A Tennessee LLC operating agreement helps owners govern their company’s internal activities and manage their business’s financial situation. They can include information like members’ responsibilities and voting procedures in their operating agreement.
Once all company members have agreed to the proposed terms, they can sign the agreement and maintain a copy for future reference.
Is an LLC Operating Agreement Required in Tennessee?
No, an operating agreement isn’t required in Tennessee. However, it can help you ensure mutual understanding among company members and safeguard your company’s status.
Title 48, Chapter 249 of the Tennessee Code contains the Tennessee Revised Limited Liability Company Act. This act establishes guidelines for the governance of LLCs in the state.
Two statutes relate to operating agreements specifically, which are:
- § 48-249-203 (Operating agreement)
- § 48-249-204 (Amendment or restatement of articles of organization; amendment of operating agreement)
Costs and Fees
The cost of forming an LLC in Tennessee depends on how many members you want to add. The state charges $50 per member with a $300 minimum and $3000 maximum. So, even if you only have one or two members, you will still pay $300. But if you have more than 60 members, you don’t have to continue paying for each member.
In addition to the fee from the Secretary of State, you may also have to pay a filing fee if you file online. Plus, the state of Tennessee requires you to file an annual report with the Secretary of State. The cost of filing the annual report is the same as the original filing fee ($50 per person, between $300 and $3000).
If you’d like to reserve a business name, you can pay a $20 filing fee.
How to Form an LLC in Tennessee
Here’s a step-by-step look at how to form an LLC in Tennessee:
Step 1 – Choose a Name
The first step is to establish a name. Your business name has to contain the term “Limited Liability Company” or an abbreviation like “L.L.C.” It must also be unique from any other business entity registered with the state. You can check the Tennessee Secretary of State business name database for availability.
Step 2 – Find a Registered Agent
Your company must have a registered agent who agrees to accept any tax or legal documents addressed to the business. So, if the business gets sued, the registered agent will accept the paperwork.
The registered agent has to have a physical address in Tennessee. They must also be either:
- A Tennessee resident
- A business entity authorized to do business in Tennessee
You can choose someone from your company to be the registered agent or hire one through a registered agent service.
Step 3 – File the Articles of Organization
You can file your articles of organization in one of two ways, either online or via a paper form. Regardless of your filing method, your articles of organization will include the following information:
- A declaration of whether members or managers will manage the LLC
- The registered agent’s name and address
- The LLC’s name and address
- The LLC’s purpose
Step 4 – Draft an Operating Agreement
While an operating agreement is optional for LLCs in Tennessee, you can write one to establish specific policies and procedures for your business. In this document, you can specify whether you have a single-person or multi-member LLC, outline members’ voting rights, and explain members’ responsibilities.
Step 5 – Set up an EIN Number
Once you’ve received approval for your LLC, you must get an Employer Identification Number (EIN) from the IRS. This way, you can pay your taxes and meet any regulatory requirements for having employees.
Step 6 – File an Annual Report
As you continue to conduct business, remember to file the annual report and pay the necessary fee each year to remain in good standing. In addition to the established yearly fee, you’ll have to pay an additional $20 to update your registered agent’s name and address, if applicable.