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Pass-Through Taxation: Tennessee LLCs are taxed as pass-through entities, with profits passing through to members who pay federal income tax on their share.
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Tax Requirements:
- Franchise Tax: Minimum $100 payment for all LLCs.
- Excise Tax: 6.5% tax on net earnings of business entities, including LLCs.
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Tax Obligations: LLC owners pay federal income tax on their portion of LLC income; no state income tax for Tennessee LLC members.
Taxation of Tennessee LLCs
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Tax Classifications:
- Single-Member LLC: Treated as a sole proprietorship for federal tax purposes.
- Multi-Member LLC: Classified as a partnership for federal tax purposes.
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Tennessee Tax Requirements:
- Franchise Tax: 0.25% of LLC’s net worth, with a minimum annual fee of $100.
- Excise Tax: 6.5% on Tennessee LLC’s taxable income.
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Formation Costs: Starting an LLC in Tennessee involves state fees ranging from $300 to $3,000 based on the number of members.