The Tennessee Nonprofit Corporation Act requirements are set out in Chapters 51 through 69 of Title 48 of the Tennessee Code and cover four things: how you form the corporation, how you govern it, what you file each year, and how you wind it down. Forming a nonprofit means filing a charter with specific statutory contents for a $100 fee. Keeping it alive means filing a $20 annual report every year, maintaining a registered agent, and honoring the fiduciary duties the statute places on directors. Getting any of it wrong can cost the organization its corporate existence, its tax exemption, or both.
Filing the Charter
The corporation begins when the Secretary of State accepts your charter. Before you file, pick a name that is distinguishable from every other entity on record and that does not suggest a purpose outside what the statute allows for nonprofits.1Justia. Tennessee Code 48-54-101 – Corporate Name The Secretary of State’s online business search will tell you whether a name is available.
The charter itself has to include the following:2Justia. Tennessee Code 48-52-102 – Charter
- The corporate name, meeting the ยง 48-54-101 rules.
- A statement of whether the corporation is a public benefit or mutual benefit corporation, and whether it is religious.
- The street address, zip code, and county of the initial registered office, plus the name of the registered agent.
- The name, address, and zip code of each incorporator.
- The street address and zip code of the principal office.
- A declaration that the corporation is not for profit.
- Whether the corporation will have members.
- Provisions describing how assets will be distributed on dissolution.
If the organization plans to apply for 501(c)(3) status, the charter also needs purpose language limiting activities to exempt purposes and directing that assets go to another tax-exempt organization on dissolution. The IRS looks for that language before it will grant recognition. The filing fee is $100.3Tennessee Secretary of State. Business Forms and Fees
A Tennessee nonprofit must continuously maintain a registered agent in the state. The agent can be a Tennessee resident or a business entity authorized to operate here, and the agent’s job is to accept legal documents on behalf of the corporation.4FindLaw. Tennessee Code 48-55-101 – Registered Office and Registered Agent If the agent resigns or can no longer serve, you have to designate a replacement promptly.
After the charter is filed, the corporation needs an Employer Identification Number from the IRS, even if it never hires an employee.5Internal Revenue Service. Employer Identification Number The EIN is required for bank accounts, tax filings, and any federal exemption application. A Tennessee charter creates a nonprofit corporation; it does not create a tax-exempt organization. Federal exemption is a separate application with the IRS, and any Tennessee tax exemption is a further separate application with the Department of Revenue.
Bylaws and Conflict of Interest Procedures
Bylaws are not filed with the state, but the board or incorporators must adopt them. They cover how directors and officers are elected, when the board meets, what constitutes a quorum, and how the bylaws can be amended. They cannot conflict with the charter or with Tennessee law.
The statute deals with director self-dealing through what it calls conflicting interest transactions. When a director or officer has a financial interest in a transaction, the conflicted person must disclose the relevant facts, and at least two qualified (disinterested) directors must vote to approve the transaction. The conflicted director may not take part in the deliberation or the vote.6Justia. Tennessee Code 48-58-703 – When Directors or Officers Conflicting Interest Transaction Is Effective Tennessee law does not require a written conflict of interest policy, but the IRS asks about one on Form 990 and treats its absence as a governance concern.
The corporation must keep minutes of all board meetings and make them available for inspection by directors. Members, if the corporation has any, have their own inspection rights over certain records during regular business hours.
Director Duties and Personal Exposure
Every director must act in good faith, with the care an ordinarily prudent person in a similar position would use, and in a manner the director reasonably believes serves the corporation’s best interests. Reading the financials, showing up, and asking questions is the baseline. Directors can rely on reports from officers, employees, counsel, accountants, and committees they reasonably believe are competent, but reliance stops protecting them when they know something that makes deference unreasonable.7FindLaw. Tennessee Code 48-58-301 – General Standards for Directors
The duty of loyalty means putting the corporation’s interests first. Self-dealing is the usual failure point, and it has to run through the conflicting interest procedure to be effective. Federal law adds another layer with real teeth. A disqualified person who receives an excess benefit from a 501(c)(3) faces an initial excise tax of 25% of the excess, plus 10% on any organization manager who knowingly approved the transaction. Failure to correct within the required period triggers an additional 200% tax on the disqualified person. The manager’s tax is capped at $20,000 per transaction; the disqualified person’s exposure has no cap.8Office of the Law Revision Counsel. 26 US Code 4958 – Taxes on Excess Benefit Transactions The related private inurement rule prohibits any of the organization’s net earnings from benefiting a private individual with an interest in its activities.9Internal Revenue Service. Inurement/Private Benefit Charitable Organizations Boards that benchmark compensation against comparable organizations and record the analysis in the minutes give themselves the strongest defense.
The Tennessee Annual Report
Every Tennessee nonprofit files an annual report with the Secretary of State. The report lists the legal name, principal office address, and the names and addresses of officers and directors. The fee is $20, and the report is due by the first day of the fourth month after the fiscal year ends.10Tennessee Secretary of State. Create an Account in TNCaB to File an Annual Report For a calendar-year nonprofit, that is April 1. Missing the deadline is the most common route to administrative dissolution.
Federal Filings That Pair With State Status
Most tax-exempt organizations also file an annual information return with the IRS. Which form depends on size:11Internal Revenue Service. 2025 Instructions for Form 990-EZ
- Form 990-N (e-Postcard) for gross receipts normally $50,000 or less.
- Form 990-EZ for gross receipts under $200,000 and total assets under $500,000.
- Form 990 for gross receipts of $200,000 or more, or total assets of $500,000 or more.
Miss three consecutive years and federal tax-exempt status is automatically revoked, effective on the due date of the third missed return. Getting it back means filing a new exemption application and paying the user fee again.12Internal Revenue Service. Automatic Revocation of Exemption This tends to happen quietly when a volunteer treasurer moves on and no one picks up the filing.
A nonprofit that earns $1,000 or more in gross income from activities unrelated to its exempt purpose must also file Form 990-T and may owe unrelated business income tax on that revenue, subject to a $1,000 specific deduction.13Internal Revenue Service. Publication 598, Tax on Unrelated Business Income of Exempt Organizations
Charitable Solicitation Registration
Any nonprofit that solicits donations from the public in Tennessee must register with the Secretary of State’s Division of Charitable Solicitations and Gaming and renew that registration each year.14Tennessee Secretary of State. Charities Initial registration carries a $50 nonrefundable fee. Organizations with gross revenue over $1 million (excluding grants from government agencies and private foundations) must file an audited financial statement prepared by an independent CPA.15Tennessee Secretary of State. Rules of the Tennessee Division of Charitable Solicitations – 1360-03-01 Smaller organizations file their IRS return.
Fundraising events add a federal disclosure rule. When a donor gives more than $75 and receives something of value in return, the nonprofit must provide a written statement telling the donor that the deduction is limited to the amount above the value received, along with a good faith estimate of that value.16Office of the Law Revision Counsel. 26 US Code 6115 – Disclosure Related to Quid Pro Quo Contributions Gala tickets and benefit dinners are the usual triggers.
Employees and Volunteers
Nonprofits with employees owe the same payroll taxes as any other employer, with one exception: 501(c)(3) organizations are automatically exempt from the Federal Unemployment Tax, and the exemption cannot be waived. Social Security and Medicare taxes still apply.17Internal Revenue Service. Exempt Organizations What Are Employment Taxes
Volunteers are allowed to give their time freely for civic or charitable reasons. Reimbursing out-of-pocket costs like meals and mileage does not turn a volunteer into an employee, and volunteers can be included in group insurance plans.18eCFR. 29 CFR Part 553 Subpart B – Volunteers The label breaks down when a paid employee “volunteers” for the same work they are paid to do, or when stipends grow large enough to look like wages. The Department of Labor can reclassify the relationship as employment when that happens.
Dissolving a Tennessee Nonprofit
How you dissolve depends on whether the corporation has members. A nonprofit without members can be dissolved by a majority vote of its incorporators or directors, followed by articles of dissolution filed with the Secretary of State. The articles must include the corporate name, the date of incorporation, confirmation that the corporation has no members, and a statement that a majority authorized the dissolution and the date of that authorization.19Justia. Tennessee Code 48-64-101 – Dissolution by Incorporators or Directors If the corporation has voting members, the board first adopts a resolution recommending dissolution, and the members then approve it under the vote threshold set in the charter, bylaws, or default statute.
Once dissolution is authorized, the corporation has to notify creditors and give them a chance to submit claims. Known creditors get written notice with a specific deadline; unknown creditors are addressed through published notice. Any assets left after debts are paid must go to another tax-exempt organization or be used for similar charitable purposes. Distributing remaining assets to directors, officers, or other insiders violates both state law and the terms of federal exemption.
A corporation that simply stops operating without formally dissolving still exists on paper. It still owes annual reports, and penalties keep accruing.
What Falling Out of Compliance Costs
The usual penalty is administrative dissolution by the Secretary of State, triggered by a missed annual report, loss of a registered agent, or another filing failure. A dissolved corporation cannot enter contracts, accept donations, or conduct official business. Reinstatement requires an application confirming that the grounds for dissolution have been corrected and providing a compliant corporate name.20Justia. Tennessee Code 48-64-203 – Reinstatement Following Administrative Dissolution The statute does not set a hard deadline for applying, but the longer the gap, the more likely another entity will claim the name and the more skeptical funders will be about the compliance history.
Federal automatic revocation for three missed returns is a separate track with separate consequences: the IRS publishes revoked organizations on a searchable list, which many donors check before giving. Directors who approve improper transactions or ignore financial oversight can be assessed the federal excess benefit taxes personally. Violations of the state solicitation rules can draw enforcement from the Tennessee Attorney General’s Office, and in serious cases a court can order the corporation dissolved.21Justia. Tennessee Code 48-64-301 – Grounds for Judicial Dissolution