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Tennessee LLC |
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By Tennesse and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Tennesse LLC members, the name and address of your Tennessee registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Tennessee LLC formation documents assembled for application to the state of Tennessee.
Tennessee’s Business Tax Climate Ranks 15th
Tennessee ranks 15th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Kentucky (44th), Virginia (12th), North Carolina (30th), Georgia (20th), Alabama (16th), Mississippi (25th), Arkansas (43rd) and Missouri (11th).Tennessee’s State/Local Tax Burden in the Nation’s Bottom Five
Over the past 14 years, Tennessee’s tax burden has consistently been among the lowest in the nation. Estimated now at 8.5% of income, Tennessee’s state/local tax burden percentage stands at 47th nationally, well below the national average of 10.0%.
Tennessee’s Individual Income Tax System
Tennessee’s personal income tax system consists of a flat 6% rate on only dividend and interest income. All other personal income is not subject to state taxation. Tennessee’s 2002 individual income tax collections were $25 per person (43rd highest nationally).
Tennessee’s Corporate Income Tax System
Tennessee’s corporate tax structure consists of a flat rate of 6.5% on all corporate income. Among states levying corporate income taxes, Tennessee’s rate ranks 10th lowest. In 2001, corporate tax collections reached $117 per capita.