Key Takeaways
- Tennessee has no state personal income tax — LLC owners pay federal income tax on profits only
- Franchise & Excise (F&E) Tax: Excise: 6.5% of net earnings (federal taxable income with Tennessee adjustments). Franchise: $0.25 per $100 of net worth, minimum $100/year., due 15th day of the 4th month after the tax year ends (April 15 for calendar-year filers)
- Sales Tax: 7% (one of the highest state rates in the US) (combined: Combined average around 9.61%, up to about 9.75% in Nashville)
- Annual Report due April 1 (1st day of the 4th month after fiscal year-end for calendar-year entities), $300 minimum for LLCs with 1–6 members, plus $50 per additional member above 6, capped at $3,000 fee
- Federal self-employment tax of 15.3% applies to net LLC profit regardless of state
- Tennessee automatically follows the federal S-Corp election with no separate state approval — but critically, the Franchise & Excise Tax applies identically whether the entity is taxed as a partnership, disregarded entity, or S-corp. Electing S-Corp status does nothing to reduce or avoid Tennessee's entity-level tax.
- Same-day formation and compliance filing available through LLC Attorney at no markup on state fees
Tennessee markets itself as a no-income-tax state, and for wages and salary that's true. But Tennessee LLCs face a real, mandatory entity-level tax most 'no income tax' states don't have: the Franchise & Excise Tax, which combines a net-worth-based franchise component (minimum $100) with a 6.5% excise tax on net earnings. This applies to nearly every LLC doing business in Tennessee — including single-member LLCs owned by an individual.
This guide covers exactly what a Tennessee LLC owes in 2026: the Franchise & Excise Tax and its exemptions, the state's unusually high combined sales tax rate, the member-count-based Annual Report fee, and why an S-Corp election won't reduce your Tennessee tax bill even though it can still cut your federal one.
Tennessee Personal Income Tax on LLC Profit
By default, a Tennessee LLC is a pass-through entity for federal tax purposes — profit flows to the owners' 1040s with no state income tax layered on top, since Tennessee taxes neither wages nor business income at the individual level. That's the good news. The catch is that Tennessee taxes the entity itself, not the owner, through the Franchise & Excise Tax described next — so 'no income tax' doesn't mean 'no state tax bill.'
Tennessee has no state personal income tax. Your LLC's profit passes through to your personal federal return, but there is no additional state-level income tax layer on top of it — a meaningful, permanent savings compared to income-tax states.
Tennessee's Franchise & Excise (F&E) Tax
Virtually every LLC doing business in Tennessee owes the Franchise & Excise Tax, filed annually on Form FAE170 — including LLCs with zero revenue, since the $100 minimum franchise tax applies regardless of profitability. Founders relocating from true no-entity-tax states like Wyoming, or from Texas LLCs under its no-tax-due threshold, are frequently caught off guard by this $100 minimum landing on an otherwise inactive entity. Only a narrow set of exempt entity types (nonprofits, certain family-owned entities meeting a 95%-family-ownership test, and others) escape the tax entirely.
This is Tennessee's headline LLC tax trap. Nearly every LLC registered or doing business in Tennessee owes it — including single-member LLCs owned by an individual (an SMLLC is only disregarded for F&E purposes if its single member is itself a corporation). A 2024 law (HB1893/SB2103) repealed the old alternative property-measure calculation, so the franchise tax is now based on net worth alone. Seventeen categories of entities are exempt, including a family-owned exemption whose ownership-counting rules broaden further on July 1, 2026. Electing S-Corp status changes nothing here — Tennessee taxes S-corps under F&E exactly like LLCs.
Tennessee Sales Tax
Most retail sales of tangible personal property and specifically enumerated services require registration and collection. Tennessee's 7% state rate is already among the highest in the country, and local option taxes of up to 2.75% push the combined average to roughly 9.61% — among the top few nationally.
- State rate: 7% (one of the highest state rates in the US), combined: Combined average around 9.61%, up to about 9.75% in Nashville
- Registration: TNTAP (Tennessee Taxpayer Access Point) registration, No fee fee with the Tennessee Department of Revenue (TNTAP)
- The Department of Revenue assigns your filing frequency — monthly, quarterly, or annual — based on your estimated sales tax liability volume.
Tennessee Annual Report Requirement
Tennessee requires every LLC to file Annual Report with the Tennessee Secretary of State (filed via the TNCaB portal), due April 1 (1st day of the 4th month after fiscal year-end for calendar-year entities). Filing fee: $300 minimum for LLCs with 1–6 members, plus $50 per additional member above 6, capped at $3,000.
Failing to file risks administrative dissolution by the Secretary of State — and note that online card payments carry a 2.29% processing surcharge, so budget slightly above the base fee if paying by card.
Reinstatement requires filing every delinquent Annual Report plus the accumulated fees, along with a reinstatement fee through the Secretary of State's office.
Federal Self-Employment Tax and How Your Tennessee LLC Is Classified
Regardless of which state you're in, LLC owners who materially participate in the business owe federal self-employment tax — 15.3% on net profit, covering Social Security (up to the $184,500 (2026) wage base) and Medicare (no cap).
Single-Member LLCs
A single-member Tennessee LLC defaults to a disregarded entity for federal tax purposes — you report income on Schedule C and compute self-employment tax on Schedule SE. Tennessee adds no separate income tax filing, but the LLC still owes the Franchise & Excise Tax at the entity level regardless of how it's classified federally.
Multi-Member LLCs
A multi-member Tennessee LLC defaults to partnership taxation, filing Form 1065 and issuing Schedule K-1s. Tennessee's F&E Tax applies identically to both structures — member count doesn't change the entity-level tax exposure.
Should Your Tennessee LLC Elect S-Corp Taxation?
An S-Corp election lets you split LLC profit into a reasonable salary (payroll-taxed) and distributions (not subject to self-employment tax), once the business is consistently profitable enough to justify the added payroll complexity.
Tennessee's treatment: Tennessee automatically follows the federal S-Corp election with no separate state approval — but critically, the Franchise & Excise Tax applies identically whether the entity is taxed as a partnership, disregarded entity, or S-corp. Electing S-Corp status does nothing to reduce or avoid Tennessee's entity-level tax.
Because Tennessee has no personal income tax, the entire state-level benefit of an S-Corp election is zero — the F&E Tax bill is the same either way. The savings calculus here is purely federal: reasonable-salary payroll tax versus full self-employment tax on distributions, with no Tennessee-side factor to weigh.
Tennessee LLC Tax Costs at a Glance
How to Handle Your Tennessee LLC's Taxes
If You Do It Yourself
Step 1 — Get your federal EIN before anything else.
Apply for your EIN for free directly at irs.gov — a purely federal application with no Tennessee-specific step.
Step 2 — Confirm your default federal tax classification.
A single-member LLC defaults to a disregarded entity (Schedule C); a multi-member LLC defaults to partnership taxation (Form 1065 plus Schedule K-1 for each member). Neither requires a separate election — this is automatic unless you file Form 8832 or Form 2553 to change it.
Step 3 — Skip state income tax registration entirely.
Tennessee has no state personal income tax, so there's no state withholding or estimated-payment system to register for on the income side.
Step 4 — Register for sales tax if you sell taxable goods or services.
File TNTAP (Tennessee Taxpayer Access Point) registration with the Tennessee Department of Revenue (TNTAP) at tntap.tn.gov, No fee fee. The Department of Revenue assigns your filing frequency — monthly, quarterly, or annual — based on your estimated sales tax liability volume.
Step 5 — Register for payroll/reemployment tax the moment you hire your first employee.
The moment you hire your first employee, register with the Tennessee Department of Labor and Workforce Development. The new-employer rate is 2.7% on the first $7,000 of each employee's wages.
Step 6 — Set up quarterly estimated tax payments.
Because Tennessee has no personal income tax, your estimated-payment obligations are federal income tax and self-employment tax, plus — separately — any estimated Franchise & Excise Tax your LLC owes at the entity level if your prior-year liability exceeded the safe-harbor threshold.
Step 7 — Calendar your Franchise & Excise (F&E) Tax due date.
Franchise & Excise (F&E) Tax (Form FAE170) is due 15th day of the 4th month after the tax year ends (April 15 for calendar-year filers), Excise: 6.5% of net earnings (federal taxable income with Tennessee adjustments). Franchise: $0.25 per $100 of net worth, minimum $100/year.. Missing it puts your LLC in bad standing with the Tennessee Department of Revenue.
Step 8 — File your Annual Report every Tennessee deadline.
Annual Report is due April 1 (1st day of the 4th month after fiscal year-end for calendar-year entities) with the Tennessee Secretary of State (filed via the TNCaB portal), $300 minimum for LLCs with 1–6 members, plus $50 per additional member above 6, capped at $3,000 fee.
Step 8 — Decide whether an S-Corp election makes sense once your LLC is consistently profitable.
Because Tennessee has no personal income tax, the entire state-level benefit of an S-Corp election is zero — the F&E Tax bill is the same either way. The savings calculus here is purely federal: reasonable-salary payroll tax versus full self-employment tax on distributions, with no Tennessee-side factor to weigh.
Step 9 — Watch for Tennessee-specific tax traps.
The single biggest trap in Tennessee LLC taxation is assuming 'no income tax' means 'no state tax.' The Franchise & Excise Tax's $100 minimum hits every qualifying LLC regardless of revenue, and it isn't avoided by electing S-Corp status or by structuring as a single-member LLC (unless the sole member is itself a corporation). Combined with a 7% sales tax rate — among the highest in the country — Tennessee's overall tax burden is genuinely higher than its 'no income tax' reputation suggests.
Step 10 — Keep business and personal finances completely separate.
Commingling funds is the single biggest reason courts pierce the LLC liability shield, and it also makes tax preparation far more error-prone. Run all business income and expenses through a dedicated business bank account and keep receipts.
If LLC Attorney Does It for You
- Submit your information at llcattorney.com — entity classification, expected revenue, and whether you'll be hiring employees or collecting sales tax.
- LLC Attorney obtains your EIN, registers you with the Tennessee Department of Revenue and Tennessee Department of Revenue (TNTAP) as needed, and sets up your compliance calendar for Annual Report and Franchise & Excise (F&E) Tax.
- Receive reminders before every deadline through your client portal, plus access to flat-fee attorney consultations (no retainer) when an S-Corp election or multi-state question needs a licensed professional's judgment call.
When Should You Talk to a Tax Professional About Your Tennessee LLC?
A CPA is worth engaging for every Tennessee LLC at formation, not just once profitable — to confirm whether your entity qualifies for an F&E exemption (especially the family-owned exemption, whose ownership-counting rules broaden July 1, 2026), to correctly compute the net worth and net earnings calculations on Form FAE170, and to plan around the fact that S-Corp election won't reduce this particular tax.
Is Tennessee a State Where Tax Complexity Matters More?
Tennessee's Franchise & Excise Tax is more involved than a flat fee: it requires computing both a franchise component (net worth-based, minimum $100) and an excise component (6.5% of net earnings with state adjustments), filed on Form FAE170 with real calculation work behind it — plus checking whether your LLC qualifies for one of the 17 exemption categories. This is a genuine departure from the simplicity most 'no income tax' states offer.
What You Actually Get With LLC Attorney's Tennessee Compliance Service
Tennessee's Franchise & Excise Tax catches a lot of founders off guard precisely because the state's 'no income tax' reputation suggests there's nothing to file. LLC Attorney's Tennessee service is built around getting your F&E exemption analysis and Form FAE170 right from day one, not after a penalty notice arrives.
- EIN obtained for you at no extra charge.
- State tax and sales tax registration handled as part of formation, starting at $49.
- An ongoing compliance subscription (available through an ongoing compliance subscription — contact LLC Attorney for current pricing) tracks every Tennessee deadline — Annual Report, Franchise & Excise (F&E) Tax, and registered agent renewal.
- Access to professionally trained Business Success Advisors at no charge, plus flat-fee attorney consultations (no retainer) for S-Corp election analysis and multi-state nexus questions.
Tennessee's biggest LLC tax risk isn't a rate — it's assuming there's nothing to file. LLC Attorney keeps your Franchise & Excise Tax and Annual Report obligations on track from day one.
Get Your Tennessee LLC's Taxes Set Up Correctly
Getting your EIN, tax registrations, and compliance calendar right from day one prevents expensive corrections later. LLC Attorney's Tennessee formation service starts at $49, and an ongoing compliance subscription (available through an ongoing compliance subscription — contact LLC Attorney for current pricing) keeps you ahead of every deadline after that. See our full pricing for all service tiers.
Frequently Asked Questions
Yes, and it's mandatory for nearly every Tennessee LLC. The Franchise & Excise Tax combines a franchise component (0.25% of net worth, minimum $100) and an excise component (6.5% of net earnings), filed on Form FAE170 by April 15 for calendar-year filers. It applies even to single-member LLCs owned by an individual and even at zero revenue — only a narrow set of exempt entity types escape it.
Only if you sell taxable tangible personal property or enumerated services. Register for free through TNTAP, then collect Tennessee's 7% state rate plus up to 2.75% in local option tax — a combined average around 9.61%, among the highest in the country.
Every Tennessee LLC files an Annual Report with the Secretary of State, due April 1, with a fee starting at $300 for 1–6 members (plus $50 per additional member, capped at $3,000). This is separate from — and in addition to — the Franchise & Excise Tax filed with the Department of Revenue.
Missing the Annual Report deadline risks administrative dissolution by the Secretary of State. Reinstatement requires filing every delinquent report plus accumulated fees and a reinstatement fee. Separately, missing the Franchise & Excise Tax deadline (Form FAE170) exposes the LLC to interest and penalties from the Department of Revenue on top of any Secretary of State consequences.
Tennessee's Franchise & Excise Tax applies identically whether your LLC is taxed as a partnership, disregarded entity, or S-corp — electing S-Corp status does not reduce or avoid it. The entire benefit of an S-Corp election in Tennessee is federal self-employment tax savings; there's no state-level upside to factor in.
A single-member Tennessee LLC defaults to a disregarded entity for federal tax purposes — you report income on Schedule C and pay self-employment tax via Schedule SE. Tennessee's Franchise & Excise Tax still applies at the entity level, since an SMLLC is only disregarded for F&E purposes if its single member is itself a corporation.
If your LLC does business in a state other than the one it's formed in — an office, employees, inventory, or significant sales there — you may have created nexus requiring registration and tax obligations in that state too. This is fact-specific and worth a conversation with a tax professional if you operate in multiple states.
For a typical Tennessee LLC with in-state owners and no employees: no state personal income tax, but the Franchise & Excise Tax (minimum $100, more if net worth or earnings are substantial), a $300+ Annual Report fee, plus federal income tax and 15.3% federal self-employment tax (up to the $184,500 Social Security wage base for 2026). Add roughly 9.61% combined sales tax if you sell taxable goods or services.
Yes. LLC Attorney's ongoing compliance subscription tracks your Tennessee filing deadlines, handles your Annual Report, and connects you with flat-fee attorney consultations (no retainer) when a tax question needs a licensed professional's judgment call.