Starting a Business in Tennessee
A new business in Tennessee is not out of reach. So have you been wondering: how do I start a business in Tennessee? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Tennessee during a recession?
New Business in Tennessee: Pros and Cons
According to a 2016 article in Business Insider, Tennessee is in the middle set of ten states to start a new business in. This is for the entire nation. It has somewhat low living costs. But the state has poor labor force quality, productivity, and also startup activity scores. Still, CBS News named Chattanooga and Knoxville as two of the cheapest cities to start a new business in. Again, this is for the whole country.
Some Recent Changes
In 2018, Forbes listed Tennessee as number 12. But also in 2018, Fit Small Business placed Tennessee squarely in the middle, at number 25. Keep in mind, the three sites have differing methodologies.
So, which is right?
Forbes gives Tennessee high praise for its regulatory environment, economic climate, and growth prospects. The state also does better than average for business costs. But it’s below average for labor supply and quality of life.
Fit Small Business says Tennessee does best with cost of living and taxes. But it’s below average for labor market, a measure of the desirability of an area and the number of people with bachelor’s degrees. Fit Small Business gave Tennessee a rather low quality of life score, but keep in mind there are some subjective considerations in play. Tennessee also scored poorly, per Fit Small Business, for the costs of starting a business.
Only you can decide if it’s worth it to start a business in Tennessee. Plus, Tennessee has a Jekyll and Hyde vibe, where there are a number of decent-sized cities such as Knoxville, Nashville, and Memphis, but also a lot of rural areas. Hence the overall scoring for any of these three sites might not perfectly apply to specific parts of the state.
New Business in Tennessee: Initiatives
The Jobs4TN plan is a Tennessee business resource designed to promote growth industries, establish nine regional “jobs base camps,” and reduce regulations getting in the way of job growth. This plan includes the INCITE initiative, a $50 million project to increase the state’s innovation by providing startup companies with access to needed funding.
To help grow the state’s manufacturing base, some businesses in Tennessee do not have to pay sales tax on qualified machinery and industrial equipment. Manufacturers also can get sales tax reductions on energy, fuel, and water, as well as carry forward net operating losses for 15 years.
The state’s Job Tax Credit is a Tennessee business resource in the form of relief from franchise and excise taxes. Businesses which create at least 25 jobs in a year and meet minimum investment levels can get a tax credit of up to $4,500 per job. These credits can then be used to offset up to 50% of the business’s tax liability. If not used, the business can carry the credit forward up to 15 years for future tax relief.
As a Tennessee business resource for larger industries, the Job Tax Super Credit offers companies creating at least 100 jobs at specified wage standards up to a $5,000 tax credit per job. This can be used to offset up to 100% of the companies tax liability and it can be carried forward for up to 20 years.
Jobs 4 TN
According to Jobs 4 TN, the biggest growth industries in Tennessee are health care and social assistance; construction; management, scientific, and technical consulting services; automotive, architectural, and structural metals manufacturing; employment services; office administrative, financial investment and legal activities and services; chemical wholesaling; waste collection; alcoholic beverage wholesaling; transit and ground passenger transportation; warehousing and storage; and Investigation and security services.
Savvy business owners can take find new opportunities and advantage of the more seasoned industries in the area by offering goods or services such as data and other computer support like programming; trucking for any industry; safety equipment manufacture and distribution; and taverns and other hospitality outlets.
Here is exactly how to start business in Tennessee.
Start a New Business in Tennessee – Tennessee New Business Secretary of State Requirements
Register a Business Name
Check for business name availability on the Tennessee Secretary of State’s website.
For a corporation, a business owner must choose a unique name. Search online records and other archives and catalogs to make sure a name is not in use.
There is a database of corporations registered in Tennessee available for searches at the Tennessee government website.
Corporate Name Reservations
Name reservations are not required to incorporate a small business. But if a business owner wants to reserve a name for their corporation, they should submit a name reservation application to the office of the Tennessee Secretary of State.
The name reservation application form is available at Reserve a Tennessee Corporation Name on the Tennessee government website. The corporate name will then be reserved for a period of four months.
The fee to file a name reservation application is $20.00.
Business Permits and Licenses
The state has a one-stop website for Tennessee business licenses requirements.
Local Permits and Licenses
The Tennessee government has a one-stop website. It also includes lists of County clerk locations as well as city and county websites.
Start a New Business in Tennessee – Business Registration
Make sure to visit the Tennessee Secretary of State website. It has a pull down menu to help you drill down to the steps and forms you need to complete.
Be sure to register with the Tennessee Online Tax Registration page.
Start a New Business in Tennessee – Virtual Offices
Alliance Virtual Offices offers Tennessee virtual business office space in the following cities: Brentwood, Knoxville, Memphis, and Nashville.
Go to Regus for Franklin virtual office space and DaVinci for Tennessee virtual office space in Goodlettsville. For other areas of the state (such as Chattanooga), ask local business owners. Also try computer user groups for help in this area.
Other options may be virtual business office space in nearby states. These are Alabama, Georgia, and also Mississippi to the south. Kentucky and also Missouri are to the north. Arkansas is to the west, and North Carolina and also Virginia are to the east.
Start a New Business in Tennessee – Establish Business Credit
Small business credit is credit in a business’s name. It doesn’t link to a business owner’s personal credit, not even when the owner is a sole proprietor and the solitary employee of the business.
Consequently, an entrepreneur’s business and consumer credit scores can be very different.
Given that company credit is distinct from individual, it helps to safeguard an entrepreneur’s personal assets, in the event of court action or business insolvency.
Also, with two separate credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles purchasing power.
Another benefit is that even startup ventures can do this. Going to a bank for a business loan can be a recipe for frustration. But building business credit, when done properly, is a plan for success.
Individual credit scores rely on payments but also other factors like credit usage percentages.
But for small business credit, the scores really merely hinge on if a company pays its bills on time.
Growing company credit is a process, and it does not happen automatically. A small business will need to proactively work to establish small business credit.
Nevertheless, it can be done readily and quickly, and it is much faster than developing consumer credit scores.
Vendors are a big aspect of this process.
Accomplishing the steps out of sequence will result in repetitive rejections. Nobody can start at the top with business credit.
Start a New Business in Tennessee – Small Business Fundability™
A small business must be Fundable to lenders and merchants.
Hence, a small business will need a professional-looking website and email address. And it needs to have site hosting bought from a vendor like GoDaddy.
In addition, company telephone numbers need to have a listing on ListYourself.net.
Additionally, the company telephone number should be toll-free (800 exchange or the equivalent).
A company will also need a bank account dedicated solely to it, and it must have every one of the licenses necessary for running.
Dealing with the Internal Revenue Service
Visit the Internal Revenue Service web site and obtain an EIN for the company. They’re free of charge. Choose a business entity such as corporation, LLC, etc.
A business can begin as a sole proprietor. But they should change to a form of corporation or an LLC.
This is in order to limit risk. And it will take full advantage of tax benefits.
A business entity will matter when it concerns taxes and liability in the event of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. Nobody else is responsible.
Start a New Business in Tennessee – Starting Off the Business Credit Reporting Process
Start at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.
In this way, Experian and Equifax will have something to report on.
First you need to build trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can begin to get retail and cash credit.
These kinds of accounts have the tendency to be for the things bought all the time, like shipping boxes, ink and toner, and office furniture.
But first of all, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are frequently Net 30, instead of revolving.
So, if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.
Vendor Credit – It Helps
Not every vendor can help like true starter credit can. These are vendors that will grant an approval with marginal effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
Start a New Business in Tennessee – Monitor Your Business Credit
Know what is happening with your credit. Make certain it is being reported and address any errors as soon as possible. Get in the practice of taking a look at credit reports. And dig into the details, not just the scores.
We can help you monitor business credit at Experian, Equifax, and D&B for 90% less.
Update Your Information
Update the details if there are inaccuracies or the details is incomplete.
Start a New Business in Tennessee – Fix Your Business Credit
So, what’s all this monitoring for? It’s to challenge any mistakes in your records. Mistakes in your credit report(s) can be corrected. But the CRAs often want you to dispute in a particular way.
Disputing credit report mistakes usually means you precisely detail any charges you dispute.
A Word about Building Business Credit
Always use credit responsibly! Don’t borrow more than what you can pay off. Track balances and deadlines for payments. Paying in a timely manner and fully will do more to elevate business credit scores than just about anything else.
Building small business credit pays. Excellent business credit scores help a small business get loans. Your lending institution knows the company can pay its debts. They understand the small business is authentic.
The small business’s EIN links to high scores and credit issuers won’t feel the need to demand a personal guarantee.
Business credit is an asset which can help your company for years to come.
Learn more here and get started toward opening a new business in Tennessee.
Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.
Tennessee’s Response to COVID-19
So here is what Tennessee is doing about COVID-19. On March 12, Governor Bill Lee declared a state of emergency. One part of the declaration is that it allows the construction of temporary health care structures in response to COVID-19. It also permits the waiver of certain regulations on childcare centers.
The Governor has applied for Tennessee to be eligible for emergency disaster loans from the SBA for small businesses.
The Downtown Memphis Commission recently announced the Downtown Business Continuity Forgivable Loan Program. However, as of June 3, 2021, applications are closed.
On April 13, Memphis Mayor Jim Strickland announced the creation of two City of Memphis microloan programs. These programs are to help Memphis businesses experiencing hardships during the COVID-19 pandemic.