Introduction
Forming a Tennessee LLC and filing its annual report does not settle your tax obligations. The Secretary of State handles entity filings. The Tennessee Department of Revenue (DOR) handles tax accounts, and the IRS handles federal returns.
Which filings apply depends on ownership, federal tax classification, Tennessee activity, property, receipts, employees and sales. An LLC with no revenue can still have filings, and an out-of-state owner can still trigger Tennessee obligations.
This guide covers the taxes that may apply, common forms, deadlines, registration steps, recordkeeping and when to bring in a professional.
Key Takeaways
- Federal returns, Tennessee taxes, annual reports, business licenses and local filings are separate tracks.
- A federally disregarded single-member LLC can still owe Tennessee franchise and excise tax.
- Forms and deadlines depend on classification, fiscal year, activity and payroll.
- Confirm current rates and instructions with the IRS, DOR and Secretary of State before filing.
How Tennessee LLC Taxation Works
Federal tax classification is the starting point
Under IRS guidance, a one-member LLC is a disregarded entity by default. A domestic LLC with two or more members is taxed as a partnership. Either can elect corporate treatment on Form 8832, or S corporation treatment on Form 2553.
The default federal reporting path looks like this:
| LLC type | Federal reporting |
|---|---|
| Single member, individual owner | Owner's Form 1040 with Schedule C, E or F |
| Single member, corporate owner | Part of the corporate owner's return |
| Multi-member (partnership) | Form 1065 and Schedule K-1 |
| S corporation election | Form 1120-S and Schedule K-1 |
| C corporation election | Form 1120 |
A timely Form 2553 is generally due 2 months and 15 days after the tax year begins.
Pass-through treatment changes who reports the income. It does not remove state registrations, annual reports, payroll filings, sales tax or entity-level taxes.
Tennessee does not always follow federal classification
Under Tennessee Department of Revenue (DOR) guidance, a single-member LLC owned by an individual is generally a separate Tennessee franchise and excise (F&E) taxpayer. A disregarded LLC wholly owned by a corporation may be disregarded into its corporate owner for F&E. Tennessee recognizes a federal corporate-classification election.
A simple comparison:
- Jane owns a one-member LLC. Federally it is on her Form 1040. In Tennessee it generally files its own F&E return.
- A corporation owns a one-member LLC. The LLC may be folded into the corporation's F&E return.
- An LLC elected C corporation status. Tennessee treats it as a corporation.
Tennessee has no broad individual income tax. The Hall tax on interest and dividends was repealed for periods beginning on or after January 1, 2021. Business-level taxes still apply.
Determine obligations from the facts
Work through these questions:
- Who owns the LLC, and what is its federal classification or election?
- Does it have Tennessee nexus (organized there, property, receipts, payroll)?
- Does it sell taxable goods or services?
- Does it have employees?
- What are its gross receipts and business locations?
Nexus does not require physical presence. For F&E, any of these thresholds can create nexus:
- Tennessee receipts above the lesser of $500,000 or 25% of total receipts
- Tennessee property above the lesser of $50,000 or 25% of property everywhere
- Tennessee compensation above the lesser of $50,000 or 25% of total compensation
What Tennessee LLC Taxes and Filings Apply?
Franchise and excise tax
The Tennessee Department of Revenue administers two taxes with different bases:
- Franchise tax: 0.25% of net worth, with a $100 minimum
- Excise tax: 6.5% of net earnings, with a standard deduction of up to $50,000 for tax years ending on or after December 31, 2024
The property measure for franchise tax was eliminated for tax years ending on or after January 1, 2024. The base is now net worth, computed on Schedule F. For tax years ending on or after December 31, 2025, standard apportionment uses a sales-factor-only formula, with statutory exceptions.
Most Tennessee LLCs that are separate taxpayers must register and file. The current kit is FAE170, with FAE172 (estimated tax), FAE173 (extension) and FAE183 (exemption). Registration, returns and payments go through TNTAP, subject to a waiver.
Key timing rules:
- The return is due the 15th day of the fourth month after year-end (April 15 for calendar-year filers).
- A seven-month filing extension is available if the payment test is met. It does not extend payment, and unpaid tax accrues interest.
- Estimated payments are required when combined F&E liability is $5,000 or more.
Exemptions and special classifications
Exemptions are fact-specific. Don't assume one member, rental property, low income or disregarded status qualifies.
- Family-owned noncorporate entity (FONCE): at least 95% held by qualifying family members, and at least 66⅔% of activity must be passive-investment or farm activity. Industrial or commercial real estate rent doesn't count. File FAE183 initially and annually.
- Obligated member entity (OME): all direct members must elect to become obligated members, with documentation filed with the Secretary of State. Partial exemptions may need both FAE170 and annual FAE183.
- Series LLCs: the master and each series register with DOR and generally file separately unless they meet disregarded-entity criteria.
Business tax
Business tax is a gross-receipts tax, not a tax on net income or net worth. DOR administers the state tax, and cities may impose a municipal tax. Counties no longer do. County or city clerks issue local licenses, not DOR.
License thresholds:
- $3,000 or less in Tennessee gross sales: no license
- Above $3,000 and under $100,000: minimal activity license
- $100,000 or more: standard license, $15 per location
Rates depend on classification, and retailer or wholesaler status is set location by location. Minimum tax is $22 per location for most classes. The return is BUS 428, filed through TNTAP and due the 15th day of the fourth month after year-end. A final return is due within 15 days of selling or quitting.
Sales and use tax, payroll and employer filings
The state sales tax rate is 7% on most taxable goods and enumerated services, with food generally at 4%. Local rates add up to 2.75%. Only services listed in the statute are taxable, such as installation and repair.
Remote sellers must register after $100,000 in Tennessee sales in the prior 12 months. Returns go through TNTAP (return SLS450), due the 20th of the following month for monthly filers.
On payroll:
- Federal: Form 941 quarterly, Form 940 data, W-2 and W-3 for wages
- Tennessee unemployment: register with the Department of Labor and Workforce Development. Reports are generally due January 31, April 30, July 31 and October 31.
- Withholding: Tennessee has no state wage-income-tax withholding.
Annual reports and other non-tax filings
The Secretary of State annual report is entity maintenance, not a tax return. It is due the first day of the fourth month after fiscal year-end (April 1 for calendar-year LLCs).
The fee is $300 minimum for up to six members, plus $50 per additional member, capped at $3,000. File through the TNCaB portal. Missing it can lead to administrative dissolution.
Other filings run independently of tax returns:
- Local business licenses from county or city clerks
- A Certificate of Authority for foreign LLCs
- Delivery of articles to licensing authorities for professional LLCs
- Industry-specific permits
How to Prepare and File Tennessee LLC Tax Returns
Build a filing profile and register accounts
Before preparing returns, confirm:
- Legal name and EIN
- Ownership and federal classification, including any elections
- Fiscal year and principal activity
- Tennessee locations and registered agent
DOR's new-business process identifies the accounts you need, and registration generally uses an FEIN through TNTAP. One account doesn't cover the rest. F&E, business tax and sales tax each need their own registration, and unemployment insurance registers separately with the Department of Labor.
Assemble records
Collect:
- General ledger and bank statements
- Income and expense records
- Fixed-asset and Tennessee property details
- Payroll and sales-tax data
- Owner information and prior returns
- Estimated payments and exemption documents
Keep separate records for each location, series or business line where reporting or apportionment requires it. IRS recordkeeping rules generally require 3 years, 6 years for substantial omitted income and at least 4 years for employment tax. Tennessee business-tax records need at least 3 years.
Identify the forms
| Area | Likely forms |
|---|---|
| Federal | 1040 schedules, 1065 with K-1, 1120-S, 1120 |
| Tennessee F&E | FAE170 with schedules, FAE172, FAE173, FAE183 |
| Tennessee business tax | BUS 428 |
| Sales and use | SLS450 |
| Payroll | 941, 940, W-2, W-3 |
Related schedules cover apportionment, ownership, K-1 reporting and estimated payments. Schedule G applied to the repealed property measure.
Track deadlines, payments and extensions
For 2025 calendar-year returns filed in 2026, Forms 1065 and 1120-S are due March 16, 2026. Forms 1120 and 1040 are due April 15, 2026. Fiscal-year filers follow the third month (1065, 1120-S) or fourth month (1120, 1040) after year-end.
Form 7004 extends filing for business returns, and Form 4868 does so for Form 1040. Neither extends payment. Tennessee's delinquency penalty is 5% per month or part-month, capped at 25%. DOR installment plans generally require at least $300 owed and payments of $50 or more over 2 to 60 months.
Submit, reconcile and retain evidence
Before filing, tie the return to your books, federal filings, prior-year balances, owner schedules, property records, payroll reports and sales-tax records. File electronically through the IRS or TNTAP, then save the confirmation.
If a return is rejected, correct and retransmit it within the perfection period. File Tennessee amendments through TNTAP, and keep acknowledgments with source records.
Common Tennessee LLC Filing Mistakes and Special Situations
Two mistakes come up repeatedly:
- Assuming federal disregarded status means no Tennessee F&E filing
- Treating the Secretary of State annual report as a tax return
Higher-risk situations need fact-specific review:
- Corporate-owned single-member LLCs: Tennessee follows the corporate-owner exception.
- Foreign-owned disregarded LLCs: a reportable related-party transaction requires Form 5472 with a pro forma Form 1120. The penalty is $25,000 per failure.
- Series and affiliated LLCs: nexus is assessed entity by entity.
- Closures: file the final business-tax return within 15 days, then close the DOR account in TNTAP.
- Classification changes: elections are separate from Secretary of State filings, and late-election relief has conditions.
- Multistate operations and real estate transactions: apportionment and nexus questions multiply.
Professional help makes sense when ownership is layered, activity crosses state lines, or records are disorganized.
VJM Global is an accounting and tax-compliance firm for U.S. businesses and foreign investors. CPAs and CAs handle bookkeeping, financial reporting and recurring compliance.
The firm does not have a Tennessee office or provide Tennessee legal representation. It supports the accounting side with clean records and organized reporting.
Frequently Asked Questions
Does an LLC have to file a tax return in Tennessee?
Usually, yes, but it depends on federal classification, Tennessee's entity rules, nexus, activity and ownership. Income-tax reporting, F&E, business tax, sales tax and the annual report are separate obligations.
What taxes does an LLC pay in Tennessee?
Possible taxes include franchise, excise, business, sales and use, and employer-related taxes such as unemployment insurance, plus local obligations. Not every LLC owes all of them.
What forms are needed to file taxes for an LLC?
Forms vary by classification. They may include a Form 1040 schedule, 1065, 1120-S or 1120, plus Tennessee FAE170, BUS 428 and SLS450. The Secretary of State annual report is a separate filing.
Do Tennessee LLCs have to file an annual report separate from tax returns?
Yes. The annual report goes to the Tennessee Secretary of State and doesn't replace federal or Tennessee tax returns. Confirm the current due date and fee before filing.
Does Tennessee have a state income tax for LLC owners?
No broad individual income tax applies, and the Hall tax is repealed. The LLC may still owe franchise, excise, business, sales and payroll-related taxes, plus local obligations.
