Registering a sole proprietorship in Tennessee doesn’t involve the Secretary of State at all. The business exists the moment you start selling, and there are no articles to file to create it. What you almost certainly do need are a local business license from your county clerk (and city, if you’re inside city limits), an assumed-name filing if you’ll operate under anything other than your legal name, and a sales tax account if you sell taxable goods or services. Skip those and you’re looking at fines, back taxes, and a bank that won’t open a business account for you.
Why There’s No Secretary of State Filing
An LLC or corporation has articles to submit. A sole proprietorship doesn’t, because legally the business is just you. Tennessee’s Secretary of State plays no role in creating or tracking sole proprietorships.
That simplicity has a cost worth naming plainly: you and the business are the same legal person. Every business debt is your personal debt. A lawsuit against the business is a lawsuit against you, and your house, car, and savings are reachable by a business creditor. That exposure is the main reason some sole proprietors eventually convert to an LLC or corporation.
One upside of the structure: sole proprietorships are not subject to Tennessee’s franchise and excise tax, which includes a 6.5% excise component on net earnings and applies only to entities that provide limited liability protection to their owners.1Tennessee Department of Revenue. Franchise and Excise Tax Manual
The Local Business License You Probably Do Need
Tennessee ties your license type to your annual gross receipts in each jurisdiction where you operate.
- Under $3,000 in gross receipts: a minimal activity license is available for $15 but is not required.
- $3,000 to $99,999: you must get a minimal activity license from the county clerk, and from the city clerk too if you operate inside an incorporated municipality. The fee is $15, renewed annually for the same amount.
- $100,000 or more: you must get a standard business license. When you file your annual business tax return and pay what’s due, the county clerk renews the license automatically at no additional cost.
The thresholds apply per jurisdiction. Operating in both a county’s unincorporated area and inside a city can mean two separate licenses.2Tennessee Department of Revenue. Tennessee Works Tax Act Increases Business Tax Filing Threshold The license must be posted at your place of business before you begin operating.3Tennessee Department of Revenue. BUS-14 – County Clerks and City Officials Issue Business Licenses
One threshold change trips people up. The Tennessee Works Tax Act raised the business tax filing threshold from $10,000 to $100,000. If your gross receipts stay below $100,000, you still need the minimal activity license, but you no longer file an annual business tax return with the Department of Revenue.2Tennessee Department of Revenue. Tennessee Works Tax Act Increases Business Tax Filing Threshold
If you do have to file the annual business tax return, it’s due on the 15th day of the fourth month after your fiscal year ends. Calendar-year filers pay by April 15.4Tennessee Department of Revenue. Registration and Licensing
Registering a Trade Name (DBA)
Planning to operate under anything other than your full legal name? Register that trade name with the county clerk where your business is located.5U.S. Small Business Administration. Doing Business in the Tennessee District Tennessee formally calls this a Certificate of Assumed Name; most people call it a DBA.
The filing creates a public record linking the trade name back to you. Without it, banks will typically refuse to open a business account in the trade name, because they need to see that the name on the account belongs to an identifiable person. Fees vary by county, so check with your local county clerk for the amount.
A word of caution about the five-year assumed-name terms you may see referenced in Tennessee law: those apply to LLCs and corporations filing with the Secretary of State, not to sole proprietors filing at the county level. County practices on duration and renewal vary. Ask your clerk when you file.
Sales Tax Registration Through TNTAP
If you sell taxable goods or services, register for a sales and use tax account through the Tennessee Taxpayer Access Point (TNTAP). All sales tax returns and payments go through this portal electronically.6Tennessee Department of Revenue. Sales and Use Tax Registration Select “Register a New Business” on the TNTAP home page and follow the prompts.7Tennessee Department of Revenue. SUT-10 – Sales and Use Tax Account – Registering for an Account
Registration also gets you a Tennessee Sales and Use Tax Certificate of Resale, issued automatically. That certificate lets you buy inventory for resale without paying sales tax to your supplier. Print it from your TNTAP account once your registration is approved.8Tennessee Department of Revenue. Resale Certificate
To finish registration you’ll need your Social Security Number or an Employer Identification Number (EIN), and the physical address where you conduct business. If you work from home, use your home address, not a P.O. box. You’ll also identify your business classification using the 1987 Standard Industrial Classification (SIC) system; Tennessee uses SIC codes, not NAICS, to set your business tax rate, and the rate depends on your dominant activity and whether you sell at retail or wholesale.9Tennessee Department of Revenue. Tennessee Business Tax Manual
Professional Licenses for Regulated Fields
A county business license authorizes you to run a business in general. It doesn’t authorize you to practice a regulated profession. If your work falls into a licensed field, you need a separate professional license from the Tennessee Department of Commerce and Insurance before you offer those services.10State of Tennessee, Commerce & Insurance. Licensing and Regulations
The regulated list is longer than most people expect. It covers contractors and home improvement specialists, cosmetologists and barbers, real estate agents and appraisers, insurance agents, private investigators, alarm installers, architects, engineers, land surveyors, auctioneers, funeral directors, and collection agencies, among others. Operating without the required professional license can bring fines or a permanent bar from practicing. If you’re unsure, the Department of Commerce and Insurance keeps a searchable directory on its website.
What Changes When You Hire Employees
The moment you bring on your first employee, several new obligations kick in. Report any new or rehired employee to the Tennessee Department of Labor and Workforce Development within 20 days of the hire date.11Tennessee Department of Labor & Workforce Development. New Hire Reporting
You’ll also need to figure out whether you owe Tennessee unemployment insurance tax. Liability is triggered by any of these:12Tennessee Department of Labor & Workforce Development. Unemployment Insurance Tax
- Paying $1,500 or more in total gross wages in any calendar quarter.
- Having at least one employee during 20 different weeks in the current or preceding calendar year, regardless of wages.
- Being liable under the Federal Unemployment Tax Act (FUTA) and having at least one employee in Tennessee.
Domestic and agricultural employers have their own separate thresholds. On the federal side, having employees means you need an EIN from the IRS and must withhold federal income tax, Social Security, and Medicare from every paycheck.13Internal Revenue Service. Employer Identification Number
Running the Business From Home
Home-based sole proprietorships are legal in Tennessee, but local zoning may add a step. Many municipalities require a home occupation permit before you can operate from a residential address. Nashville, for example, requires an application that includes proof the business won’t violate HOA rules, notice to adjacent property owners, and documentation that the home is your primary residence.
Even where no permit is required, zoning ordinances typically restrict signage, customer traffic, noise, and storage of commercial materials at a residence. Violations can bring code enforcement action. Check with your local planning or zoning office before you set up.
The Taxes You’ll Actually Pay
Tennessee has no state income tax on earned or business income, and the old Hall Income Tax on investment income has been fully phased out. Sole proprietors file no state income tax return on their business earnings.
Federal taxes are a different story. As a sole proprietor you owe self-employment tax on your net business earnings for Social Security and Medicare. For 2026, the combined self-employment tax rate is 15.3%: 12.4% for Social Security on earnings up to $184,500, plus 2.9% for Medicare on all earnings with no cap.14Social Security Administration. Contribution and Benefit Base Report business income on Schedule C with your Form 1040, and pay self-employment tax with Schedule SE. Most sole proprietors also make quarterly estimated tax payments to avoid underpayment penalties.
You can use your Social Security Number on tax filings if you have no employees, but getting an EIN from the IRS is free, takes minutes online, and keeps your SSN off invoices and forms you share with clients. An EIN is required once you hire anyone.15Internal Revenue Service. Get an Employer Identification Number
Penalties for Skipping the Steps
Miss a return or a payment and the state adds 5% of the unpaid tax for every 30 days (or any fraction of 30 days) the balance stays outstanding, capped at 25% of the unpaid amount.16Justia. Tennessee Code 67-1-804 – Delinquency – Negligence – Fraud – Dishonor of Check – Exceptions Interest accrues on top of the penalty.
Operating without a required license is itself a violation. County clerks and city officials can refuse to issue or renew a license if you have outstanding tax obligations, and you can’t legally operate until the license is issued and displayed at your business location.3Tennessee Department of Revenue. BUS-14 – County Clerks and City Officials Issue Business Licenses Get the licenses before you open, file on time, and keep the certificates posted where they can be seen.