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Advantages of Incorporating a Business in Tennessee

There are a variety of start-up companies in Tennessee that you can form right from for profit corporations to limited liability companies (LLC), general partnerships (GP), limited partnerships (LP), limited liability partnerships (LLP), and much more. This is possible due to the good business climate and solid infrastructure. As a matter of fact, the state has also witnessed 42,914 new entity filings over the last twelve months with 237,921 businesses filing annual reports. The key business indicators suggest sustained economic growth in the volunteer state. The business climate however is driven by several aspects including various programs that provide incentives and salient benefits to all types of businesses being formed in the state.

Business Growth Incentive for New Businesses

Should you register a new company in Tennessee? The state of Tennessee witnessed 9,837 new entity filings (initial filings) by the 4th quarter of 2018, which is a strong 10.3% increase as compared to the same quarter last year. The number of start-up e quarter last year. The number of Tennessee includes 1,301 domestic “For-Profit” Corporations, 6,139 domestic LLC and 1,606 foreign business entities in the 4th quarter. There are a few advantages that play a key role in new entity formation and some of them are:

Advantage#1: The benefits of Incorporation or LLC formation


  • “Low or No” Taxes: One of the key advantages that you can enjoy if you register a new company in Tennessee are low or no taxes. These tax benefits are provided by a variety of state entities including the Tennessee Department of Economic Development and Tennessee Valley Authority among others. The Low tax or no tax translates into better bottom line for new businesses in the state. Some of them are:
    – No personal income tax
    – No sales tax on raw material
    – No sales tax on pollution control equipment
    – No state sales tax on manufacturing equipment
    – Reduced sales tax on energy fuel used by manufacturers
    – 1% tax credit on capital equipment
  • Pass through Taxation: If you register a new company in Tennessee as an S corporation then the corporation or firm will not pay any income tax. Instead, the income or loss of the corporation will be passed on to the stockholders.
  • Independent Life: One of the salient advantages of an S Corporation in Tennessee is that it enjoys an independent life. The death or incapacitation of a stockholder will not disturb operations of the business.


  • Flexible Profit Distribution: A start-up company in Tennessee which is an LLC has the benefit of being able to select different ways of distribution of profits unlike a partnership where the distribution is 50-50.
  • Tennessee Economic Development Incentive Programs: A start-up company in Tennessee, entrepreneurs, and small businesses require different forms of assistance to ensure sustainability of their start-ups and short or long-term growth. Hence, programs have been created to ensure businesses can achieve their short-term and long-term goals and these include:
    – FastTrack Infrastructure Program
    – Job Tax Credit
    – FastTrack Economic Development Fund
    – Enhanced Job Tax Credit
    – FastTrack Job Training Assistance Program
    – Industrial Machinery Tax Credit
    – Sales Tax Exemption program
  • Limited Liability: As an owner of a Tennessee LLC, you will be able to enjoy limited liability protection quite similar to what a corporation enjoys.

Advantage#2: Top Business Incentive Programs in Tennessee

Once you register a new company in Tennessee, there are several business incentives and programs that your company can benefit from. Let’s take a look at some of the top programs:

  • Valley Incentive Programs: The “Valley Incentive Programs” contains several different sub programs that provide economic incentives of varying degree. If you register a new business in Tennessee, you can benefit from the programs, which provide the following:
  • Investment Credit: The Investment Credit program is an economic development incentive program that is being offered jointly by TVA and various local power companies. This is a performance-based program that rewards business entities that are establishing as new or star-ups or existing businesses planning expanded operations. The awards as a part of the program are applied as a credit to the monthly power bills of businesses. A business entity can expect as much as 10-20 percent savings annually and this is over a 5 or 10 year period.
  • Loan Funds: This is another program targeted at a start-up company in Tennessee. Financing is made to newly established businesses in the state and the objective of this program is to stimulate job growth as well as leverage capital investment. The maximum loan amount available to businesses is $3 million and loan terms can vary from 5 to 20 years.

Are there any Disadvantages of Incorporating in Tennessee?

As a start-up company in Tennessee, you will be able to enjoy several benefits in the form of tax credits, grants, loans, and Opportunity zone programs, assistance in Infrastructure and Facilities Improvement, and much more. So, the big question is – are there any disadvantages? In reality, there are no disadvantages as such except the ones that are specific to the type of business you register like an LLC has a limited life and can get dissolved if a member dies. Similarly, incorporation can lead to higher overall taxes and this is where you can find relief in the form of the tax credit programs.

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