Starting a Sole Proprietorship in Tennessee
A sole proprietorship is the simplest business form in Tennessee. To register, you can just start working under your legal name and use your Social Security Number as your tax ID. However, you might want to use a business trade name. The county clerk can tell you what your options are.
Sole proprietorships don’t protect your personal assets. If you form an LLC, your personal assets are protected in the event of a lawsuit.
Registration Process
To set up a fictitious name in Tennessee, file a Business Tax License Application with the county clerk’s office where you will operate. If working in multiple counties, repeat this in each. Some counties have a filing fee and may require paper registration.
To legally create a sole proprietorship in Tennessee:
- Choose a business name
- File an assumed name
- Apply for licenses, permits, and zoning clearance
- Obtain an employer identification number (EIN)
- Open a business bank account
Pros and Cons of Sole Proprietorships
Advantages of a sole proprietorship:
- Simplicity – minimal formalities and paperwork
- Full control – as sole owner, you control all decisions and operations
- Easy to dissolve or change form
Disadvantages:
- Unlimited personal liability
- Hard to raise money
- Limited life
Tax and Legal Considerations
With an LLC, your personal assets have liability protection. LLCs also offer tax flexibility that sole proprietorships don’t.
As a sole proprietor in Tennessee, you’ll need to navigate both federal and state tax obligations. Your business income and expenses will directly impact your individual tax liability.
The filing and issuing of DBA’s for sole proprietorships is done at the county level in Tennessee. To register your DBA you’ll need to submit your Assumed Name application to the county clerk’s office and pay a $15 filing fee.
No business entity is easier to start or faster to register in Tennessee than a sole proprietorship. Since no formal registration filings are required, a businessperson can decide to open a sole proprietorship and start the same day they make the decision.
DBA Registration
You don’t have to register your Sole Proprietorship with the Tennessee Secretary of State. It simply exists once you decide to start a business and engage in business activities. However, you may need municipal business licenses and may be able to file a DBA for your Sole Proprietorship at the county clerk’s office.
If you’re using any name other than the legal business name for conducting business activities, you need to register the assumed name in Tennessee.
While Tennessee does not require that a sole proprietorship be registered with the state, there are a few steps to take in order to set up the new business. These include:
- Select a legal name for the business
- Obtain licensing and permits
- Get an employer ID number
- Open business bank account