Setting up a Limited Liability Company (LLC) is simple in theory, but can be a complicated process in practice. The basic idea is to separate the personal assets of the company owners from those of the partners in the business. In return, the partners are liable for their own debts and losses as well as that of the company. But what is the status of these LLCs?
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Generally, an LLC is a legal entity that is entirely separate from the owners. There is only one board of directors and most of the operations and decisions are made this way. The IRS treats an LLC as a pass-through entity, which means it has no corporate taxes either. In most states, an LLC is not separate from its owners and must report any income or assets that it earns directly to the state tax authority. However, there are a few states that have laws that allow for the indirect taxation of the LLC's income by the shareholders.
To open an LLC in Tennessee, you need to register the business with the Tennessee Corporation Commission (TC). Every business, even a sole proprietorship, must register before it can take advantage of all the benefits available to registered businesses. If you don't register your business, you can still open one in the state. If you decide later that you want to operate your business as a sole proprietorship, you will still need to register it. Otherwise, you could face prosecution.
Operating Your Own LLC in Tennessee
If your business is a partnership, you will also need to register it separately. If you can prove that the business is operated exclusively for your benefit, you may escape the double taxation by stating that part of your income (or profit) is received by another person or entity and should not be taxed. This provision is called the "domestic production" clause.
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There are a couple of other things that you need to get familiar with. Like most other countries, Tennessee follows a standard format for filing income tax returns. All you need to do is fill out an online form and send it to the IRS. They will send your tax return to you usually within 3 weeks.
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To start your own LLC in Tennessee, you need to decide what kind of business you want to run. The Tennessee Corporation Commission will give you some useful information on that. After that, you have to go to the court and request an administrative proceeding, which is a formal meeting of the court to determine if your business is legally set up. If it is, then you just have to go to the court and file all the necessary paperwork. Otherwise, you will have to open up a case in court and deal with all the arguments that come along.
All the paperwork is not however the end of it. You also have to register the business with the county of your choice. This process is called "establishing a legal agent for the business," and it requires a completed application, fee, and a certificate of incorporation. The state of Tennessee has a specific procedure for how to go about this.
In order to be sure that your Limited Liability Company is open and active for doing business in Tennessee, you have to submit to a background check, and a credit report also. There are many places online where you can run these reports for free. Also, open records act websites publish information about any cases filed against an LLC in Tennessee. However, an LLC cannot have any public records listed on its website, as those are considered public information and are open to the public.
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