Business Startup Costs in Tennessee
Business Climate in Tennessee
Tennessee has dramatically improved its business competitiveness, rising from #38 to #8 on the Tax Foundation's 2026 State Tax Competitiveness Index. The state ranked #8 on CNBC's 2025 Top States for Business. Tennessee has no personal income tax on wages, a moderate 6.5% corporate tax rate, and has attracted major investments from companies like Oracle, Amazon, and Ford's BlueOval City EV manufacturing complex.
Regulatory Overview
Tennessee requires a Standard Business License if annual sales exceed $10,000, obtained through the county clerk's office. Businesses with $3,000-$10,000 in sales can get a Minimal Activity License instead. The regulatory environment is considered business-friendly, and the Tennessee Secretary of State provides online business registration. Professional licensing is handled through various state boards.
Key Facts
- Corporate income tax (Franchise & Excise Tax) rate is 6.5%
- No personal income tax on wages and salaries
- State sales tax is 7%, with combined local rates up to 9.75% — among the highest in the nation
- Ranked #8 on CNBC's 2025 Top States for Business
- Tennessee also levies a franchise tax based on net worth or property in the state
Top Industries in Tennessee
Cost Factors
Tennessee offers competitive startup costs with no personal income tax, moderate commercial rent, and below-average labor costs. Nashville has become significantly more expensive as the city has boomed, but Memphis, Knoxville, and Chattanooga remain very affordable. The combined sales tax rate (up to 9.75%) is one of the highest in the nation. The franchise tax on net worth can be an unexpected cost for capital-intensive businesses.
Quick Facts
| LLC Filing Fee | $300 |
| Secretary of State | https://sos.tn.gov/business-services |
| Workers Comp Rate | $0.88 per $100 of payroll |
| Avg Commercial Rent | $17/sqft/year |
Secretary of State Office
Tips for New Business Owners in Tennessee
- Obtain a Standard Business License from the county clerk if your annual sales exceed $10,000
- Register with the Tennessee Department of Revenue for your sales and use tax account and business tax account
- Be aware of Tennessee's dual corporate tax structure: the Excise Tax (6.5% on net income) and the Franchise Tax (based on net worth or property value) — both apply
- File your annual report with the Secretary of State by the first day of the fourth month after fiscal year end
Startup Costs by Business Type in Tennessee
| Business Type | Permits & Licenses | Insurance/yr | Cost Index | National Avg (Mid) | |
|---|---|---|---|---|---|
| Restaurant | $3,500 | $5,500 | 0.88x | $275,000 | Full breakdown → |
| Food Truck | $2,500 | $3,600 | 0.88x | $125,000 | Full breakdown → |
| Hair Salon / Barbershop | $1,400 | $2,800 | 0.88x | $100,000 | Full breakdown → |
| Cleaning Service | $125 | $850 | 0.88x | $10,000 | Full breakdown → |
| Landscaping Business | $250 | $2,300 | 0.88x | $50,000 | Full breakdown → |
Explore Tennessee by Business Type
Neighboring States
Compare startup costs in states bordering Tennessee:
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