Every business needs a solid legal structure and your business needs an employer Identification Number (EIN).
Legal structure
A legal business is good business.
The first step is to decide what kind of business entity (legal structure) is best for you. For a description of the pros and cons of legal structures, go to forms of business organization.
Employer Identification Number (EIN or FEIN)
Regardless of the structure (sole proprietor, partnership or corporation) your entity must obtain an Employer Identification Number (EIN) from the U.S. Internal Revenue Service. Banks often require an EIN for loans, and it can be used instead of your personal Social Security Number to protect against identity theft.
The Checklist
Step 1: Create a business plan
Turn your idea into a written, viable plan of action. A well-thought out business plan is necessary for obtaining loans and is a model for your success. Refer to the business planning section to get started.
Step 2: Decide on your business structure and register your business name
Careful consideration must be given to the management, structural and tax implications of your decision. While not a replacement for sound legal or tax advice, see forms of business organization.
- To register a business name for a sole proprietorship or general partnership; contact your local county recorder where you intend to do business. For Hamilton County Tennessee residents, you may visit the Hamilton County Clerk or submit your new business application online.
- To file a Corporation, LLC, LLP or Limited Partnership, contact the Secretary of State’s office for application forms and filing requirements. For Tennessee residents, check the availability of the name and file your business entity online.
Step 3: Get license requirements
The State may require additional licensing or business registration paperwork to get your business up and running. It is also important to check with city/town and county governments where you intend to do business to determine local licensing requirements.
Step 4: Obtain the necessary tax information
Depending on the size and business structure, taxation for small businesses can may be straight forward or complex. The tax liability for each business will be different, and you should consult your attorney and accountant regarding comprehensive tax planning.
Step 5: Identify sources of financing
Find funding information in the financing section of the website. Use the Resource Navigator to search for organizations that provide financing services.
Step 6: Learn about employer reporting requirements and responsibilities
As an employer, you will be responsible for additional employment insurance and worker’s compensation insurance. This includes applying for federal and state withholding numbers.
- For Federal Identification Numbers (EINs) contact the Internal Revenue Service or call (800) 829-4933.
- For State Sales Tax and State Withholding Tax contact the Tennessee State Department of Revenue. Chattanooga Office:1301 Riverfront Parkway, Suite 203 (across from Chattanooga Whiskey) 423-634-6266.
- For general questions on small business issues at the state level, contact the State of Tennessee Small Business Development Center or the Chattanooga center at the Tennessee Small Business Development Center.
- For a complete list of Tennessee State tax laws, click here. A few common tax laws can be found below, information is provided by the Tennessee State Department of Revenue:
- Business Tax
Generally, if you conduct business within any county and/or incorporated municipality in Tennessee, then you should register for and remit business tax. Business tax consists of two separate taxes: the state business tax and the city business tax.
Use Tax is the counterpart to the sales tax. All Tennessee residents, and businesses operating in the state, must pay use tax when goods are purchased from outside the state of Tennessee and brought or shipped into the state and the seller did not collect sales tax on the purchase. Purchases made from outside the state include, but are not limited to, mail-order catalog purchases, purchases made online, over-the-phone purchases and purchases made from a store located in another state. Use tax does not apply to the purchase of services.
If you are a corporation, limited partnership, limited liability company, or business trust chartered/organized in Tennessee or doing business in this state, then you must register for and pay franchise and excise taxes. The franchise tax is based on the greater of net worth, or the book value of real or tangible personal property owned or used in Tennessee. The excise tax is based on net earnings or income for the tax year.
Sales tax is Tennessee’s principal source of state tax revenue accounting for approximately 60% of all tax collections. The sales tax is comprised of two parts, a state portion and a local portion. The general state tax rate is 7%. The local tax rate varies by county and/or city. Please click on the links to the left for more information about tax rates, registration and filing.
The use tax is the counterpart to the sales tax. All Tennessee residents and businesses must pay use tax when the sales tax was not collected by the seller on otherwise taxable products brought or shipped into Tennessee. The use tax applies to all items otherwise subject to sales tax except for services and amusements.
Every employer in Tennessee is required to fill out a Report to Determine Status, Application for Employer Number (LB-0441). Submitting this form will determine the status of your liability for unemployment insurance. If you are liable for unemployment insurance premiums in Tennessee, you will be assigned an eight-digit employer account number (e.g., 0000-000 0).