Exemptions from TN Franchise Tax
Certain limited liability companies, limited partnerships, and limited liability partnerships are exempt from franchise and excise tax if their activities are primarily farming or holding personal residences.
Tax Rates and Requirements
- The franchise tax rate is 0.25% of the greater of net worth or real and tangible property in Tennessee. The minimum tax is $100.
- The excise tax rate is 6.5% of taxable income.
Tennessee Sales Tax Holiday
Tennessee’s sales tax holiday runs from August 5, 2022, at 12:01 a.m. through August 7, 2022, at 11:59 p.m. During this period, there is no sales tax on most grocery and restaurant purchases.
Obligated Member Entity (OME) Definition
- An obligated member entity (OME) means unlimited liability protections and exemption from state taxes.
- OME includes limited liability companies, limited partnerships, or limited liability partnerships whose members or partners are fully liable for the entity’s debts and liabilities.
LLC Operating Agreement
An operating agreement is highly advisable in Tennessee for LLCs, although not required. This document establishes how an LLC will operate.
Franchise Tax and Excise Tax in Tennessee
- Franchise tax of 0.25% applies to LLCs in Tennessee with a $100 annual minimum payment.
- LLCs must also pay a 6.5% excise tax on net business earnings generated in the state.
LLC Membership and Benefits
- LLC membership units represent an ownership stake entitled to profits and voting rights.
- LLCs offer owners limited liability protection without the complexities of a corporation.
Registration and Taxes in Tennessee
- Entities must register for franchise and excise taxes through the Department of Revenue (DOR) either by mail or in person at a DOR location.
- The excise tax is like an income tax applied to businesses based on Tennessee taxable income.
Exemptions and Registration
Certain limited liability companies, limited partnerships, and limited liability partnerships that meet specific activity criteria are exempt from Tennessee franchise and excise tax.
Sales Tax Holiday
Tennessee’s sales tax holiday from August 5 to August 7, 2022, exempts most grocery and restaurant purchases from sales tax.