How to start a business in Tennessee in 14 steps (2025 guide)

Entering the world of entrepreneurship is a thrilling endeavor filled with potential, and there’s no better place to start your journey than Tennessee. Home to some of America’s most iconic destinations, including the Great Smoky Mountains and Music City, the Volunteer State offers a host of opportunities in tourism, entertainment, manufacturing, and agriculture, to name a few. With a mild climate, diverse landscapes ranging from the bluffs along the Mississippi River to the mountains in the east, and affordable cost of living, Tennessee is a great place to start a small business.

In this guide, we’ll walk you through how to get your venture off the ground, from choosing an industry to setting up a business bank account.

Why start a business in Tennessee in 2025?

In a recent study from CNBC, Tennessee was named the 8th best state for business in 2024. In the study, the state ranked #3 for the economy, #7 for infrastructure, #7 for cost of doing business, and #8 for workforce. 

The Volunteer State also has no income tax on wages. In fact, ThinkTennessee states that Tennessee has one of the lowest overall tax burdens in the nation, with the average effective tax rate for residents at just 7.6% (third lowest nationwide). For businesses, the effective tax rate stands at 4.5%, which is the ninth lowest in the country​.

Tennessee is also making it easier for small businesses to thrive. Thanks to the Tennessee Works Tax Act, more than 100,000 small businesses with annual gross sales under $100,000 are no longer required to file a business tax return or pay the business tax. This tax relief means entrepreneurs can focus more on growing their businesses and less on regulatory burdens.

Here are the topics we’ll cover in this step-by-step guide: 

• 14 steps to starting a business in Tennessee
• Step 1: Decide what type of industry is best for your business
• Step 2: Conduct industry research
• Step 3: Create a business plan
• Step 4: Choose your business entity
• Step 5: Secure funds: Tennessee small business funding, loans, and grants
• Step 6: Choose your Tennessee business name and Tennessee DBA
• Step 7: Pick a business location in Tennessee
• Step 8: Find a Tennessee registered agent 
• Step 9: Get a Tennessee EIN and file your tax and employer identification documents 
• Step 10: Register as a small business in Tennessee
• Step 11: Register for your business license and permits in Tennessee
• Step 12: Secure insurance for your Tennessee small business 
• Step 13: Prepare to pay taxes on your business in Tennessee
• Step 14: Set up your business bank account
• Additional resources to get your business started
• Frequently asked questions 

14 steps to starting a business in Tennessee

Whether you’re an aspiring manufacturer or a whitewater rafting guide, Tennessee likely has a place for your small business dreams. Follow these essential steps below that provide tailored insights and small business resources to help you turn your idea into reality.

Step 1: Decide what type of industry is best for your business 

First, figure out what industry you want to join. Maybe you have a new product idea you want to bring to the railroad business in Chattanooga, or you’re looking to open a wedding and event venue in Gatlinburg. Regardless of your small business idea, think about how your interests and skills match market demand. Be sure to reach out to your local chamber of commerce and research trends to identify service or product gaps you might fill.

Need some inspiration? Browse various small business ideas to help narrow down your options.

Step 2: Conduct industry research

Research industry trends, conduct a competitive analysis, and pinpoint what makes your offerings stand out. Tennessee’s top industries include tourism and outdoor recreation, entertainment, agriculture, manufacturing, transportation and logistics, and healthcare. Evaluate how your business concept might fit into or complement these industry sectors. A good place to start your research is the Tennessee Department of Economic and Community Development.

Step 3: Create a business plan

Start your Tennessee small business on a solid foundation and build a detailed business plan. Use it as a road map to determine where you're going and what your business concept will be, identify your target market, develop a marketing plan, create financial projections, and secure funding for your small business. 

Be sure to include this information in your business plan:

• Executive summary: Summarize your business concept, core objectives, and goals in a clear, concise format.
• Company description: Outline your company’s mission, background, and long-term vision.
• Market research and potential: Highlight your target audience, market size, and key industry trends.
• Competitive analysis: Evaluate competitors and explain what sets your business apart.
• Products and services: Provide a detailed description of your products or services and their value to customers.
• Marketing and sales: Detail your approach to attracting, engaging, and retaining customers.
• Business financials: Present financial projections, including revenue forecasts and cash flow analysis.
• Management and leadership: Share your team’s experience and qualifications.
• Funding request: Specify the amount of funding you need and explain how it will be allocated.
• Appendix: Include any supplementary materials, such as detailed financial data or research reports.

Take time to craft this plan. It’ll reinforce your business goals, attract potential investors, and serve as a guiding light to keep your venture on track. Use a free business plan template to get started and contact the Tennessee Small Business Development Center for hands-on assistance.

Step 4: Choose your business entity: Types of business entities in Tennessee

Decide what entity type you want your business to be. Whether you’re going it alone or you plan to create a more formal structure with shareholders, your business entity structure will determine how you pay taxes, the liabilities in your organization, and your business profitability and growth. Here are the main types of structures for Tennessee small businesses:

Sole proprietorship

A business owned and operated by one person, with no legal distinction between the owner and the business.  

General partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Corporation 

A legal entity separate from its owners, with shareholders who have limited liability for the company's debts and obligations.

Limited liability company (LLC)

A hybrid business structure combining the limited liability of a corporation with the tax flexibility of a partnership. Learn more about LLCs.

Step 5: Secure funds: Tennessee small business funding, loans, and grants 

Determine how you’ll raise capital. It can cost anywhere from a few hundred dollars to several thousand dollars to start a business in Tennessee. However, these costs will vary depending on your type of business and industry, required permits and licenses, and applicable startup costs like inventory, equipment, rent, utilities, and marketing.

Here are a few ways to secure funds: 

You should also explore state-specific funding options, including: 

InvestTN

InvestTN offers equity investments for early-stage startups and venture funds.

Entrepreneurship centers

With locations in numerous Tennessee cities, these centers provide resources, mentorship, and potential funding opportunities through a network of centers across the state.

SCORE Tennessee 

These locality-based chapters offer free and confidential business mentoring from experienced entrepreneurs. 

Fund Tennessee

Fund Tennessee is the state’s version of the SSBCI. It offers loan resources as well as business development planning support and technical assistance for small businesses.

Step 6: Choose your Tennessee business name and Tennessee DBA

Select a name for your business that will help differentiate yourself from competitors and communicate what makes your products or services unique. Tennessee requires a completely unique name for your business. When choosing something that reflects your brand identity, you’ll need to do an entity search with the Tennessee Secretary of State to ensure business name availability. 

Reserve your business name

Reserve your business name online through the Tennessee Secretary of State's Business Services Division. This reservation holds your name for 120 days, giving you time to file the necessary paperwork to register your business.

Filing a fictitious business name (DBA)

To file a DBA in Tennessee, you need to complete an online registration form (or fill out in person at your local county clerk's office) and file it with the clerk's office in the county where your business is located. There’s a filing fee associated with this process.

Step 7: Pick a business location in Tennessee

Decide what location is best for your business. Looking to set up shop in a bustling city or a more laid-back community? Whatever your preference, Tennessee offers a location to suit every business need. If your business lends itself to remote work, consider running your small business from home. It can help save on overhead costs like rent, utilities, and commuting. 

However, if you want to set up in a physical location, let’s look at a few standout cities that could be the perfect fit for you.

Nashville 

Tennessee's booming capital offers a vibrant market for a variety of businesses. Nashville's strong economy, fueled by tourism, healthcare, and a flourishing music industry, attracts a young and talented workforce. However, Music City’s cost of living can be higher than in other areas of the state.

Check out small business resources available through the Greater Nashville Regional Council. 

Chattanooga 

This scenic city in southeast Tennessee boasts a lower cost of living than Nashville while still offering a supportive environment for entrepreneurs. Chattanooga has a growing tech industry and a focus on innovation, making it a great choice for businesses in those sectors.

Explore business resources available through the Chattanooga Chamber of Commerce. 

Franklin 

Located south of Nashville, Franklin is a charming, historic city with a strong sense of community. The cost of living is slightly higher than the state average, but Franklin attracts customers with disposable income. This makes it a good location for retail stores, restaurants, and professional services.

Learn about available resources through the Williamson County Chamber of Commerce, which includes Franklin and its surrounding communities.

Step 8: Find a Tennessee registered agent

Your Tennessee business will need to have a registered agent, whether a professional service or an individual. Your registered agent acts as a point of contact for your business’ important state and legal mail. Requirements of a registered agent include that they have a physical mailing address (not a P.O. Box or remote location) in the state. They’ll also need to keep regular business hours.

You can also choose to be your own registered agent, or you can appoint a trusted friend or family member to do so, as long as they meet the above requirements. If you use a service for a Tennessee registered agent, you’ll pay a fee likely ranging from $50 to $250 per year. 

Step 9: Get a Tennessee EIN and file your tax and employer identification documents

An EIN (Employer Identification Number) is a nine-digit number the IRS uses to identify your business for tax purposes. Although Tennessee doesn't require a state EIN, you'll need one to file payroll taxes and federal tax returns, open a business bank account, and apply for loans. You can apply for a free EIN through the IRS website.

Step 10: Register as a small business in Tennessee

Register your small business with the Tennessee Secretary of State. Here are the requirements and associated fees for common business structures.

Step 11: Register for your business license and permits in Tennessee

Depending on your industry, you may need business licenses and permits to operate in Tennessee. Some localities also require permits, so perform your due diligence.

Do you need a business license in Tennessee?

In Tennessee, businesses with less than $3,000 in gross sales don’t need a business license. However, businesses with gross sales between $3,000 and $10,000 are required to get a minimal activity business license, while businesses that make more than $10,000 need a standard business license. Both licenses cost $15, and you get them from the city clerk and county clerk where your business is located.

You may need other licenses or permits, too, depending on your business location, industry, and activities. Contact your local municipality for specific licensing requirements when starting a business.

Examples of common licenses and permits in Tennessee:

• Seller's permit, which is needed to collect sales tax on products you sell
• Zoning permit, which may be necessary based on your business location and industry type
• Food establishment license for businesses that prepare and serve food to the public
• Building permit, which may be required for renovations or modifications to your business location
• Alcohol Beverage Commission (ABC) license for establishments selling alcoholic beverages
• Agricultural permits and licenses for businesses involved in agriculture, including livestock, poultry, and dairy production

Step 12: Secure insurance for your Tennessee small business

Protect your business assets and tangible property with the right business insurance to help mitigate costs from accidents, property damage, or liability. Extreme weather happens, so make sure you’re adequately protected if you have a brick-and-mortar store, warehouse, or industrial facility, and make sure you have liability insurance as well in case someone is injured on your business property or files a lawsuit against your company.

Types of small business insurance in Tennessee

Here are some common types of insurance your small business may need:

Step 13: Prepare to pay taxes on your business in Tennessee 

Make sure you understand all your Tennessee tax obligations before you begin operations. Many such taxes are industry-dependent, so do your homework. Tennessee is one of the few states that doesn’t collect individual income taxes. 

Let’s look at some of the frequent types of Tennessee business taxes:

Franchise tax and excise tax

If you operate a corporation, limited partnership, limited liability company, or business trust chartered, qualified, or registered in Tennessee or doing business in this state, then you must register for and pay franchise and excise taxes. The franchise tax is based on the greater of net worth or the book value of real and tangible personal property owned or used in Tennessee. The excise tax is based on net earnings or income for the tax year.

Sales and use tax 

Tennessee has a 7% state sales tax. Many localities (cities and counties) also add their own sales tax on top of the state rate, bringing the total sales tax to an average of 9.55% statewide. Businesses that sell taxable goods or services within Tennessee are required to collect and remit sales tax to the state.

Payroll taxes

If you have employees, you’ll be liable for payroll taxes, including state unemployment insurance tax, but there is no withholding for state income taxes.

Professional privilege tax

Certain professions in Tennessee, such as lawyers, accountants, and engineers, may be subject to an annual privilege tax.

Hotel/motel occupancy tax 

Lodging establishments in Tennessee typically collect an occupancy tax in addition to sales tax.

Federal taxes

In addition to state and local taxes, all businesses must pay applicable federal taxes, including:

• Federal income tax
• Self-employment tax (for sole proprietors and partners)
• Employment taxes (if you have employees), including the Federal Unemployment Tax Act (FUTA tax)
• Excise taxes (for certain industries)

To ensure you understand your federal tax obligations, check out these IRS resources: Publication 334, Tax Guide for Small Business and Publication 583, Taxpayers Starting a Business and Keeping Records.

Tax credits and incentives for Tennessee employers

Tennessee offers various tax credits and incentives to attract and encourage business growth. Here are a few examples:

• Job tax credit: Tax credits are available for businesses that create new jobs in Tennessee, particularly in economically distressed areas.
• Sales tax exemptions: Tennessee offers a variety of sales tax exemptions to certain industries and businesses, including agricultural operations and businesses with headquarters operating in the state. 

Visit the Department of Revenue for more information on tax incentives. 

Step 14: Set up your business bank account

One of the first things you need to do when starting a small business in Tennessee is set up a business bank account to manage your finances. Here’s how: 

1. Get your paperwork in order, from registrations and permits to licenses and your EIN, to open your small business bank account. 
2. Look for a bank that provides the loan products and services you need. 
3. Apply for a credit card either through your bank or a third-party company so you can begin establishing business credit and charging business-related expenses. 
4. Choose an accounting software and tie it to your business bank account to manage everything from payroll to invoicing. 
5. Find a professional accountant who understands your industry and Tennessee tax laws to help you navigate finances and other bookkeeping items.

Additional resources to get your business started

There are several state and federal resources that can support your business with guidance, training, potential funding and more.

State resources

Tennessee Small Business Development Center (TSBDC): The TSBDC offers free training, consulting, and resources to help small businesses thrive across the state. They provide assistance with business plans, loan applications, marketing strategies, and more.

Launch Tennessee: This public-private partnership is focused on supporting early-stage businesses through mentorship, capital access, and entrepreneurial events. Launch Tennessee also has seven regional entrepreneur centers where startups can connect and grow their networks.

Tennessee Department of Economic and Community Development (ECD): This department offers a range of grants and tax incentives for businesses, as well as technical support for industries across the state. They aim to help businesses thrive and contribute to the state's economic development.

Federal resources

Small Business Administration (SBA): The SBA supports small businesses through various loan programs, including the 7(a) loan, provides resources for government contracting, and offers counseling and training programs to help entrepreneurs start and grow their businesses.

Grants.gov: This centralized platform simplifies the process of searching for and applying for federal grants across various sectors. It also provides grant writing tips and has a Grants Learning Center featuring the basics of grants, eligibility, and more. 

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR): SBIR and STTR programs provide research and development funding to innovative tech companies. 

SCORE: SCORE is a national nonprofit organization that partners with the U.S. Small Business Administration (SBA) to provide free mentoring and educational resources to entrepreneurs and small business owners. While not a direct federal agency, SCORE is an independent organization with a network of volunteer business mentors across the United States.   

U.S. Department of Agriculture (USDA): The USDA website lists grants, loans, and other programs and resources for farmers and other businesses serving rural America.

Frequently asked questions

How long does it take to start a small business in Tennessee?

It will take a few weeks to a few months to start a small business in Tennessee. 

Does my Tennessee small business have to collect sales tax?

Any business that sells tangible property must collect sales tax in Tennessee.

Who must file a Tennessee business tax return?

If your business grosses more than $100,000 annually, you’ll need to file a business tax return in Tennessee. 

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