Many LLC owners lump this tax in with other Tennessee costs. It isn't the $300 annual report fee. It isn't excise tax. It isn't federal income tax, and it has nothing to do with what you pay a registered agent.
This article breaks down the 2026 minimum, how net worth gets calculated, who actually owes the tax, filing deadlines, exemptions, and what to budget for beyond the floor amount.
Key Takeaways
- Tennessee's 2026 minimum franchise tax is $100, based on a 0.25% net-worth rate
- The tax applies even to LLCs with no profit, since it's tied to net worth, not income
- Franchise tax, excise tax, and the annual report fee are three separate Tennessee obligations
- Confirm current rates, deadlines, and exemption rules directly with the Department of Revenue before filing
What Is the Tennessee Franchise Tax Minimum for 2026?
The $100 minimum applies to virtually every covered entity registered in Tennessee, including inactive LLCs, subject to exemption and classification rules. The rate is 0.25% of Tennessee net worth (described on the return as 25 cents per $100 of net worth, or any major fraction of it). When that percentage calculation lands below $100, the LLC pays the floor instead.
Franchise tax is an entity-level charge for the privilege of doing business or maintaining a covered entity in Tennessee. It exists independently of how your LLC is taxed federally. A single-member LLC that's disregarded for IRS purposes can still owe this state-level tax in full.
Why the Property-Measure Repeal Matters
Tennessee used to calculate franchise tax on the greater of net worth or the value of real and tangible property. Public Chapter 950 (2024) eliminated that property measure for tax years ending on or after January 1, 2024. Net worth is now the standard base for ordinary filings.
One wrinkle survives: LLCs can still make an annual voluntary election to use the old property measure if it produces a higher tax liability, through a specific Schedule G election filed via TNTAP. This isn't something most LLCs would choose, but it technically remains on the books.
Example 1: A Tennessee LLC with $30,000 in net worth calculates 0.25% of that figure, landing well under $100. It pays the $100 minimum instead of the percentage amount.
Example 2: An LLC with $500,000 in Tennessee-apportioned net worth would owe $1,250 under the 0.25% rate, which exceeds the floor. The percentage calculation governs here, not the minimum.
These figures are for illustration only; actual liability depends on your LLC's specific net worth and apportionment.
How Is Tennessee Franchise Tax Calculated?
Net worth, for franchise tax purposes, means assets minus liabilities, generally computed using GAAP figures on Schedule F1 of the combined return. Some taxpayers may use their federal accounting method instead, provided it fairly reflects their financial activity.
A few adjustments can apply:
- Certain parent or affiliate indebtedness gets added back for inadequately capitalized corporations (not a general deduction for every LLC)
- There's no separate $500,000 net-worth exclusion under the current framework; that exclusion belonged to the repealed property measure
- Short-period returns can't be prorated below the $100 floor
Apportioning Net Worth Across States
If your LLC operates in more than one state, you don't pay Tennessee franchise tax on your entire net worth. Instead, you apply an apportionment ratio to determine the Tennessee-apportioned share. According to the Franchise and Excise Tax Manual, Tennessee uses a single sales factor formula for tax years ending on or after December 31, 2025. LLCs without apportionment entitlement enter 100%.
Franchise Tax vs. Excise Tax
You file both taxes on one combined return, which confuses a lot of business owners.
| Tax | Base |
|---|---|
| Franchise tax | Net worth (assets minus liabilities) |
| Excise tax | Net earnings or income for the tax year |
Filing one return doesn't mean you're calculating one tax. An LLC with substantial net worth but minimal profit could owe meaningful franchise tax while owing little excise tax, or the reverse. The $100 minimum is a floor on the franchise-tax side only. It doesn't cap your total combined liability if your excise tax or your percentage-based franchise calculation runs higher.
Who Must Pay Tennessee Franchise Tax?
Tennessee's franchise tax covers a wide net of entity types. According to current Department of Revenue guidance, corporations, LPs, LLCs, and business trusts that are chartered, qualified, or registered in Tennessee, or that do business there, generally fall under this tax, subject to exemption and classification rules.
What Triggers the Obligation
Registration with the Tennessee Secretary of State is one clear trigger. But "doing business" nexus can also apply without a formal registration, based on factors like:
- Commercial domicile or organization in Tennessee
- Use of capital within the state
- Systematic activity involving Tennessee customers
- Licensing of intangible property into the state
Tennessee also applies bright-line thresholds. Nexus generally exists if your Tennessee presence exceeds the lesser of these amounts:
| Factor | Threshold |
|---|---|
| Receipts | $500,000 or 25% of total receipts |
| Property | $50,000 or 25% of total property |
| Compensation | $50,000 or 25% of total compensation |
Falling below these numbers doesn't automatically mean you're safe: they're not formal safe harbors, just bright-line triggers.
Inactive LLCs Aren't Automatically Off the Hook
An LLC with zero sales, zero profit, or no current operations can still carry a filing obligation and owe the $100 minimum, simply because it remains registered. Tax liability and filing liability aren't the same question, and conflating them is one of the most common mistakes owners make.
Single-Member and Multi-Member Treatment
Federal classification doesn't control Tennessee's entity-level tax. A single-member LLC disregarded for IRS purposes still generally owes Tennessee franchise and excise tax, unless it qualifies for a narrow corporate-owner exception. Multi-member LLCs are typically treated as separate taxpayers.
Foreign LLCs (meaning entities formed in another state) that register to do business in Tennessee face the same obligations as domestic LLCs. Forming elsewhere doesn't eliminate your Tennessee footprint once you're registered or doing business there.
Exemption Categories
Tennessee recognizes specific exempt categories, including qualifying family-owned non-corporate entities (FONCEs), certain venture capital funds, industrial development corporations, and farming or personal-residence entities, among others. Each category carries its own ownership percentages and activity tests. Don't assume your LLC qualifies without checking the current conditions against official guidance. Exemption rules are detailed and entity-specific.
How to File and Budget for Tennessee Franchise Tax in 2026
Tennessee franchise and excise taxes are reported together on Form FAE170, filed and paid through the TNTAP portal. For a calendar-year LLC with a fiscal year ending December 31, 2025, the standard due date falls on April 15, 2026, the 15th day of the fourth month after year-end.
A 2026 Deadline Wrinkle Worth Knowing
The Department of Revenue issued relief tied to Winter Storm Fern, postponing filing and payment deadlines falling between January 22, 2026, and June 8, 2026, for taxpayers in specific designated counties. Check the Winter Storm Fern notice to see if your LLC's primary location qualifies. This relief doesn't apply statewide, and it doesn't push deadlines beyond June 8 for everyone else.
Separately, Tennessee offers an ordinary seven-month extension to file, but not to pay. If you request it, you still need to remit the lesser of 90% of current-year liability or 100% of prior-year liability by the original due date. Interest keeps accruing on any unpaid balance regardless of the extension.
Budgeting Checklist for 2026
Don't treat the $100 minimum as your total Tennessee cost. Build a realistic budget that accounts for:
- Franchise tax: verified minimum or percentage-based liability, whichever is higher
- Excise tax: based on net earnings, calculated separately on the same combined return
- Annual report fee: a separate $300 obligation owed to the Secretary of State
- Registered agent fees: ongoing annual cost for maintaining Tennessee registration
- Bookkeeping and tax preparation: necessary to calculate net worth and apportionment accurately
- Penalty and reinstatement exposure: costs if filings or payments slip past deadlines
For LLCs juggling multi-state operations or unclear nexus questions, getting the net worth calculation and apportionment right takes real accounting work. VJM Global supports businesses with accounting, tax-compliance review, and advisory services that help identify state-level filing obligations and prepare the financial data needed for returns like this one. That groundwork helps whether you're managing one state or several.
Always confirm current details directly through the Tennessee Department of Revenue and Secretary of State sites before filing. Tax rules, rates, and deadlines can and do change, and nothing here substitutes for current official guidance or a qualified tax professional's advice.
What Tennessee LLC Owners Often Miss About the Minimum
A surprising number of LLC owners assume a loss year means no franchise tax. That's wrong. Because the tax is based on net worth, not income, a struggling LLC can still owe the $100 minimum, or more, in a year it lost money.
Another common mix-up: treating the franchise tax minimum as the LLC's entire Tennessee bill. It isn't. Watch out for these separate obligations:
- Franchise tax minimum ($100) is separate from the annual report fee ($300)
- Excise tax runs independently and depends on net earnings
- Federal income tax obligations exist on top of all state-level Tennessee taxes
Skipping a filing, missing a payment, or keeping sloppy financial records creates real consequences, even for LLCs that expected to owe only the floor amount.
Delinquency penalties run 5% per month up to 25%. Payment delinquency beyond 90 days can trigger charter revocation through the Secretary of State.
Those risks climb further when the facts get more complex. If your LLC operates across multiple states, holds significant assets, has unusual ownership structures, or might qualify for an exemption, a generic online calculator won't cut it. Get advice tied to your net-worth base and filing posture before you lock in the return.
Conclusion
Tennessee's 2026 minimum franchise tax for a qualifying LLC is $100, built on a 0.25% net-worth rate that applies whenever the percentage calculation falls below that floor. It's one piece of a larger compliance picture that includes excise tax, the annual report fee, and your own bookkeeping and filing costs.
Accurate entity classification, complete financial records, and current official guidance matter more than assuming every LLC owes only the minimum. Before you file, confirm the 2026 FAE170 instructions directly with the Department of Revenue. Talk to a qualified tax professional if your LLC has multi-state operations, complex ownership, or a possible exemption worth pursuing.
Frequently Asked Questions
What is the minimum franchise tax amount in Tennessee?
The verified 2026 minimum is $100, based on a 0.25% net-worth rate that applies when the percentage calculation falls below that floor. Confirm this against current Tennessee Department of Revenue guidance before filing.
Was the tax deadline extended for 2026 in Tennessee?
A targeted extension applies through the Winter Storm Fern relief, postponing deadlines between January 22 and June 8, 2026, but only for taxpayers in specific designated counties. The standard April 15, 2026 deadline still applies everywhere else.
Who is required to pay franchise tax in Tennessee?
Domestic and foreign LLCs, corporations, LPs, and business trusts chartered, registered, or doing business in Tennessee generally owe franchise tax, subject to exemptions. Check both your nexus status and any applicable exemption category before assuming liability.
How are single-member LLCs taxed in Tennessee?
Federal disregarded-entity status doesn't remove Tennessee's entity-level tax. A single-member LLC typically still owes franchise and excise tax unless it meets a narrow corporate-owner exception.
Who is exempt from franchise and excise taxes in Tennessee?
Confirmed categories include qualifying family-owned entities (FONCE), certain venture capital funds, farming or personal-residence entities, and several other defined classifications. Eligibility depends heavily on ownership percentage, activity type, and statutory conditions specific to each category.
How do I get a franchise tax exemption in Tennessee?
Exemption generally requires filing the appropriate application or disclosure form with the Department of Revenue and meeting that category's ownership and activity tests, often with annual renewal. Exemption from franchise tax doesn't automatically exempt your LLC from excise tax or other Tennessee obligations.
