Choosing the Right Business Entity
The business entity you choose for your company depends mainly on the structure of ownership in the business, as well as the potential future of the business.
- If you’re the sole owner of the business, you might run a sole proprietorship or a single-member LLC. You don’t have to register a sole proprietorship. If you want legal and financial separation from your business, you can register an LLC.
- If you’re a small business with multiple owners, you could register for a limited partnership (LP), limited liability partnership (LLP) or an LLC. LLPs are most common for licensed professionals, such as attorneys or accountants.
- For a more complex business, you’ll likely choose between an LLC versus a corporation. A corporation is usually necessary if you want to bring on investors, and it might make it easier to sell the company in the future.
File Articles of Organization or a Charter
You can register a business in Tennessee online through the Secretary of State’s office. When you register a business in Tennessee, you file your articles of organization or a charter to form your company.
Articles of organization formally open an LLC, while a charter opens a corporation. The cost to file articles of organization for a new LLC in Tennessee is minimum $300 ($50 per member, minimum $300 and maximum $3,000).
You need to provide basic information about your LLC, including:
- Primary business address
- Business name
- Number of members
- Fiscal year close month
- Duration of the LLC
- Name and address of the registered agent (RA)
- Management structure of the business
Choose a Registered Agent
A registered agent is the person or business designated to receive and file legal and financial documents for your business with the state. You can list yourself or another member of the business’s management, or you can work with a professional Tennessee registered agent who handles legal documents for a fee.
Member-Managed vs. Manager-Managed
You have to note whether your business is member-managed or manager-managed if you register an LLC. “Managed” in this case refers to control over business operations (as opposed to lower-level “management” positions). Here’s the difference between member-managed and manager-managed businesses:
Member-managed means all the LLC’s members (owners) automatically operate the company. It’s the most common operational structure for a small business.
Manager-managed means you designate managers of the company. They can be members or not, and not all members need to be managers. This structure works best for a company that wants to attract silent investors, has a lot of owners and wants to consolidate leadership among a small number or needs to hire an experienced operator who isn’t an owner of the business.
Source link
