Tennessee at a glance
Partnership law
RUPA (revised)
LLC default split
Proportional to capital
Operating agreement
Not required
Community property
Opt-in available
Formation cost
$50 per member ($300 minimum)
Annual cost
$50 per member annual report fee ($300 minimum)
Tennessee has an unusual LLC fee structure: both the formation fee and annual report fee are $50 per member, with a $300 minimum. This means even a single-member LLC pays $300. Tennessee has no state income tax on earned income and offers opt-in community property.
Default partnership rules in Tennessee
Tennessee adopted RUPA, treating partnerships as separate entities with equal profit sharing by default. Partners have equal management rights and owe fiduciary duties.
The most important takeaway: profits are split equally by default in Tennessee, regardless of capital contributions. If you and a partner start a business and one of you invests $100,000 while the other invests $5,000, you still split profits 50/50 without a written agreement. This is true in every US state, including Tennessee.
LLC defaults in Tennessee
Tennessee allocates LLC profits and losses in proportion to capital contributions by default. An operating agreement is not required. The state has no income tax on earned income. Tennessee's unusual fee structure charges $50 per member for both formation and annual reports, with a $300 minimum.
Tennessee defaults to proportional distributions based on capital contributions, which aligns better with many founders' expectations than equal-split states. However, capital contributions alone rarely tell the full story. A founder contributing time and expertise may receive nothing if they didn't invest cash. An operating agreement can account for all types of contributions. Our equity calculator can help you determine a fair arrangement.
What happens when a partner leaves in Tennessee
Under Tennessee's RUPA, a partner's departure does not dissolve the partnership. The partnership continues, and the departing partner is entitled to a buyout at fair value.
A written partnership agreement should still address departure terms specifically, including how the buyout value is calculated, the payment timeline, and any non-compete provisions. While RUPA provides a default framework, the details of a buyout can still lead to disputes if not spelled out in advance. Understanding the concept of dead equity is important for managing these situations. Learn more about how dead equity affects businesses.
Marriage and business equity in Tennessee
Tennessee is an equitable distribution state but offers opt-in community property through a community property trust (effective 2010). Without the opt-in, business interests are divided equitably in a divorce.
Tennessee offers opt-in community property, which means couples can elect community property treatment for specific assets. Business owners should be aware that opting in could affect their business interests and should consult an attorney before making this election.
Formation and cost considerations in Tennessee
| Formation cost | $50 per member ($300 minimum) |
| Annual/recurring cost | $50 per member annual report fee ($300 minimum) |
| State income tax | No |
| Partnership law | RUPA (revised) — partnership continues after departure |
| LLC default distributions | Proportional to capital contribution |
| Operating agreement | Not required (strongly recommended) |
Frequently asked questions
How does Tennessee's LLC fee structure work?
Tennessee charges $50 per member for both formation and annual reports, with a $300 minimum. A single-member LLC still pays $300, while a seven-member LLC pays $350. The $300 minimum means small LLCs pay a flat rate regardless of member count.
Does Tennessee have a state income tax?
Tennessee has no state income tax on earned income. The state's Hall Income Tax on interest and dividends was fully phased out as of 2021. LLC income is only taxed at the federal level.
Does Tennessee offer community property?
Yes, Tennessee offers opt-in community property through a community property trust. This is primarily used for estate planning and requires an affirmative election.
What is the default LLC profit split in Tennessee?
Tennessee defaults to proportional allocation based on capital contributions. An operating agreement can establish a different arrangement.
Related resources
- Equity calculator: find a fair split for your business
- Does your small business need an equity agreement?
- Equity for small businesses: the complete guide
- Dead equity calculator: how much is yours costing you?
- Slicing Pie calculator
- What is an operating agreement?
- All 50 states: partnership and LLC default rules
Partnership laws in neighboring states
Disclaimer: This page provides general information about Tennessee partnership and LLC default rules and is not legal advice. Laws change, and the information here may not reflect the most recent amendments. The formation costs and annual fees listed are approximate and may vary. Consult a qualified attorney licensed in Tennessee for advice specific to your situation. Equity Matrix is a software tool for tracking contributions and calculating equity; it does not provide legal services.
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