Do I Have to Get a Tennessee LLC if I Do Business in Tennessee and Have an LLC in Another State?

by | Sep 12, 2022 | Business Law

Anyone conducting or transacting business in the State of Tennessee, who has their business registered in another state (for example, someone who has a Wyoming LLC but who runs their business out of a Tennessee location), must register with the State of Tennessee for a Certificate of Authority. That does not mean they have to have a Tennessee LLC, but they will have to pay fees and taxes that could make conducting business in Tennessee more expensive than they realize.

What is a Certificate of Authority in Tennessee And Why Do I Need One?

If you are what the State considers a “foreign corporation”, which means that your business entity was created in another state (for example, your LLC is registered in Wyoming—a state with very friendly laws toward businesses), you must get a Certificate of Authority from the Secretary of State of Tennessee prior to conducting business in the state. Some of these requests for the Certificate of Authority can be done online and some must be done the old-fashioned way (on paper and mailed.) It depends on what type of business entity you have whether it can be done online.

The Certificate of Authority allows your foreign company to utilize the power of the State court system to enforce your contracts and bring lawsuits against people who violate your company’s rights or the law as it relates to your company. Without this Certificate of Authority, your company cannot avail itself of the courts if you’re ever wronged. For example, say a vendor sold you goods for resale that turned out to be full of defects, and then refused to reimburse you for the damages. You’d like to sue them in court for the losses you’ve suffered, but if your company is registered in another state and you don’t have the Certificate of Authority from Tennessee, you cannot bring that lawsuit.

There are also fines associated with not getting the Certificate of Authority. It’s not a voluntary thing; it’s required. The State can contact any company out of the blue and tell them that they are being cited for failing to get a Certificate of Authority for their foreign company. According to the Tennessee statute, the fines will be: “an amount equal to treble [three times] the amount of all fees, penalties and taxes, plus interest, which would have been imposed by the laws of this state upon such corporation had it duly applied for and received a certificate of authority as required by this chapter, and thereafter had failed to file all reports required.” TN Code § 48-25-102 (2021) As of September 2022, the fees for filing for a Certificate of Authority in Tennessee are $600. And the taxes that your company might owe could be substantial on their own, but then multiplying them by 3 could very easily put some people out of business.

What Things Can I Do in Tennessee As A Foreign Corporation Without Having to Get a Certificate of Authority?

The Statute specifically lists these items as NOT considered conducting business in Tennessee, and it is not an exhaustive list, so it gives you an idea of what you can do safely without the Certificate of Authority:

  • Maintaining, defending, or settling any proceeding, claim, or dispute;
  • Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;
  • Maintaining bank accounts;
  • Maintaining offices or agencies for the transfer, exchange, and registration of the corporation’s own securities or appointing and maintaining trustees or depositories with respect to those securities;
  • Selling through independent contractors;
  • Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts;
  • Creating or acquiring indebtedness, deeds of trusts, mortgages, and security interests in real or personal property;
  • Securing or collecting debts or enforcing mortgages, deeds of trust, and security interests in property securing the debts;
  • Owning, without more, real or personal property; provided, that for a reasonable time the management and rental of real property acquired in connection with enforcing a mortgage or deed of trust shall also not be considered transacting business if the owner is attempting to liquidate the owner’s investment and if no office or other agency therefor, other than an independent agency, is maintained in this state;
  • Conducting an isolated transaction that is completed within one (1) month and that is not one in the course of repeated transactions of a like nature; or
  • Transacting business in interstate commerce.

The list of activities is not exhaustive, and is applicable solely to determine whether a foreign corporation must procure a certificate of authority and for no other purpose.

What IS Considered Transacting Business in Tennessee for Foreign Corporations?

Although the statute does not delineate what it considers transacting business, the following list is likely to be considered doing just that:

  • Having a physical presence in the state like an office, warehouse, or home based business.
  • Purchasing goods for the business and having them delivered to a Tennessee address.
  • Selling items online from a Tennessee location.
  • Offering services from inside the State of Tennessee.
  • Having employees who reside and conduct the work of your company inside Tennessee.

What Does This Mean For My Business As Far As Far As Costs Are Concerned?

In addition to getting a Certificate of Authority, your foreign business must also register to pay various taxes to the State and possibly to the related County and City as well. Some examples are:

  • Franchise and Excise taxes
  • Sales and Use taxes
  • Business tax for gross receipts
  • Liquor Taxes
  • Television and Telecommunications sales taxes
  • Hotel taxes for accommodations
  • Various other taxes imposed by local governments or agencies

As a business law practitioner in East Tennessee, Leigh Cowden, Attorney at Law, can help your business register for its Certificate of Authority and be aligned with all of the relevant taxing authorities to ensure you don’t end up with a big tax bill or fines from the government. If you’d like to know what your options are, we invite you to fill out our basic INTAKE FORM to get the ball rolling. We’ll contact you shortly after receiving it to discuss your matter and let you know how we might be able to help.