Sole Proprietorship in Tennessee: How to Start One

A sole proprietorship is the fastest and cheapest way to start a business in Tennessee. You do not need to file incorporation papers with the Secretary of State, pay corporate filing fees, or maintain separate business records. But that simplicity comes with a tradeoff: your personal assets are fully exposed to business liability.

This guide walks you through exactly what you need to do, in order, to launch a Tennessee sole proprietorship legally and avoid the most common pitfalls.

What Is a Sole Proprietorship?

A sole proprietorship is an unincorporated business owned and operated by one person. There is no legal separation between you and your business: you are the business. Income and losses flow directly onto your personal tax return. You keep all profits, but you also face unlimited personal liability for business debts and lawsuits.

Unlike an LLC or corporation, a Tennessee sole proprietorship requires zero formal filing with the state if you operate under your legal name. If you want a business name other than your own, you will need to file an assumed name (DBA) registration. That is the only state-level paperwork required.

Sole Proprietorship vs. Other Business Structures

Structure	Filing Required	Personal Liability	Estimated Setup Cost
Sole Proprietorship	DBA only (if needed)	Unlimited	$20 to $50
LLC	Articles of Organization ($300)	Limited	$300 to $500
Corporation	Charter ($100)	Limited	$100 to $400

Materials and Requirements You Will Need

Before you file anything, gather these items:

• Your full legal name and Social Security number
• A proposed business name (if using something other than your legal name)
• Your business address in Tennessee (street address, not a PO box)
• A description of what your business does
• Your phone number and email
• Business startup funds (your own capital)
• Access to the Tennessee Secretary of State online portal (free account at TNCaB)

You do not need a lawyer, accountant, or business license service to start. However, if your business involves regulated activities (alcohol, tobacco, firearms, food service, childcare), you will need industry-specific permits. We cover that below.

Step-by-Step: How to Start Your Tennessee Sole Proprietorship

Step 1: Decide on Your Business Name

You have two options:

Option A: Use your legal name. If your business is "Jane Smith Consulting," you can operate as a sole proprietor under your own name without any filings. You skip the DBA step entirely and go straight to the IRS and tax permits.

Option B: Use a business name. If you want to operate under "Smith Consulting Group" or any other name that is not your legal name, you will file a DBA (Doing Business As) registration.

Before settling on a name, check the Tennessee Secretary of State business entity search at https://tncab.tnsos.gov/portal/business-entity-search to confirm no one else has already claimed it. If you are using it as an LLC or corporation, you cannot use that same name for your sole proprietorship.

Step 2: File a DBA Registration (If Using a Business Name)

If you chose Option B above, file an Application for Registration of Assumed Name with the Tennessee Secretary of State.

What to file: Form SS-4402 (Application for Registration of Assumed Name)

Fee: $20

How to file: Online through TNCaB at https://tncab.tnsos.gov/portal, or by mail to the Tennessee Secretary of State, Division of Business and Charitable Organizations, 312 Rosa L. Parks Avenue, Nashville, TN 37243.

What to include on the form:

• Your legal name (the sole proprietor)
• Your proposed DBA name
• Your business address in Tennessee (must be a physical street address)
• A description of your business activity
• The start date of your business (use today's date or the date you plan to launch)

Processing time: Online filings are typically processed within 1 to 3 business days. The DBA registration lasts four years from the filing date and must be renewed before it expires.

Once filed, you can legally use your DBA name for business purposes: business cards, signage, bank accounts, contracts, and advertising.

Step 3: Get an EIN from the IRS

An Employer Identification Number (EIN) is a unique nine-digit number that identifies your business to the IRS. Even as a sole proprietor, you should get one. Why? It keeps your Social Security number off business documents, separates your business finances from personal finances, and is required if you hire employees or open a business bank account.

How to apply: Go to https://www.irs.gov/ein and click "Apply for an EIN Online." The application takes about 5 minutes and is free.

Timeline: You receive your EIN immediately online. You can print it right away and start using it the same day.

What to have ready:

• Your legal name and Social Security number
• Your DBA name (if applicable)
• Your business address
• A description of your business activity

Alternatively, if you want to apply by phone or mail, you can call the IRS at 800.829.4933 (toll-free), but the online method is faster.

Step 4: Register for a Sales Tax Permit (If Selling Taxable Goods or Services)

Tennessee state sales tax rate is 7 percent. If your sole proprietorship sells tangible goods or certain services, you must register for a sales tax permit with the Tennessee Department of Revenue.

When you need it: If you sell products like merchandise, food, or supplies. Service-only businesses (consulting, coaching, landscaping labor) often do not need a sales tax permit, but some services are taxable. Check the Department of Revenue list to be sure.

How to register: Go to https://www.tn.gov/revenue/taxes/sales-and-use-tax/registration.html and register through the online system.

What you will need:

• Your EIN (or Social Security number if you do not have an EIN)
• Your business name and address
• A description of what you sell
• Estimated monthly sales revenue

Cost: Registering for a sales tax permit is free. However, you will owe sales tax on your sales, which you collect from customers and remit to the state.

Filing frequency: Most new businesses file sales tax returns monthly or quarterly, depending on your sales volume.

Step 5: Get a Business License From Your County or City

Tennessee does not issue a single statewide business license. Instead, you register your business with the Department of Revenue through TNTAP (Tennessee Tax and Account Partner), then obtain a separate business license from your county and/or municipal clerk.

Registration with Department of Revenue (free): Go to https://www.tn.gov/revenue.html and register through TNTAP. This establishes your business in the state tax system.

Business license fee: $15 to the county or city clerk. Some counties charge slightly more. If your gross receipts are under $3,000 annually, you may not need a license, but check your county requirements to be sure.

How to apply: Contact your county clerk or city clerk (whichever has jurisdiction over your business address). You can usually apply online, by mail, or in person. Provide your business name, address, EIN, and a description of your business activity.

License types by revenue:

• Gross receipts under $3,000: typically minimal or no license required (confirm with your county)
• Gross receipts $3,000 to $100,000: minimal activity license
• Gross receipts over $100,000: standard business license

The license must be obtained and posted at your business location before you start operating.

Step 6: Open a Business Bank Account

This step is not legally required, but it is essential. A business bank account separates your personal and business money, makes accounting easier, looks more professional, and helps you prove income to lenders or investors.

What you will need:

• Your EIN (or Social Security number if you have no EIN)
• A form of ID (driver's license or passport)
• Your business address and phone number
• Initial deposit (varies by bank, often $100 to $500)
• Your DBA registration (if filing one) or copy of your business license

Where to open an account: Any bank or credit union. Many offer small-business checking accounts with no monthly fees if you maintain a minimum balance. Shop around for the best rates and features for your needs.

Tax Considerations for Tennessee Sole Proprietors

Federal income tax: Your business income is taxed as personal income on your federal tax return (Form 1040 plus Schedule C). You pay Self-Employment Tax (Social Security and Medicare), currently 15.3 percent of net profit.

Tennessee state income tax: Tennessee has no personal income tax. This means your business profit is not subject to state income tax. This is a major advantage for Tennessee sole proprietors.

Sales tax: If registered, you collect sales tax from customers and remit it monthly or quarterly to the Tennessee Department of Revenue.

Estimated taxes: If you expect to owe $1,000 or more in federal taxes for the year, you should make quarterly estimated tax payments. File Form 1040-ES with the IRS.

Record-keeping: Keep all business receipts, invoices, and expense records for at least three years. The IRS can audit sole proprietorships, and good records protect you.

Tips and Common Mistakes to Avoid

Do This

• File your DBA on time. Once it expires, you can no longer legally use that business name.
• Keep business and personal finances separate. Use your business bank account exclusively for business income and expenses.
• Pay quarterly estimated taxes if your profit is significant. Paying in full at tax time may result in penalties.
• Track all expenses: office supplies, equipment, mileage, home office costs, meals, and utilities. These reduce your taxable income.
• Renew your DBA before expiration. Tennessee sends reminders, but set your own calendar reminder as a backup.
• Consult a CPA or tax professional if you have complex income or multiple revenue streams.

Do Not Do This

• Do not mix personal and business money. This blurs liability protection and invites IRS scrutiny.
• Do not skip registering for sales tax if required. The state can assess back taxes, interest, and penalties.
• Do not ignore industry-specific licenses. Some businesses (contractors, salons, therapists) need state or local permits. Check before launching.
• Do not file late quarterly or annual taxes. Penalties and interest compound quickly.
• Do not assume sole proprietorship has liability protection. Unlike an LLC, your personal assets are at risk if someone sues your business.

When to Consider an LLC or Corporation Instead

A sole proprietorship is ideal for low-risk service businesses (consulting, freelancing, coaching) or very small operations. However, consider forming an LLC or corporation if:

• You operate a high-risk business (construction, rental property, childcare)
• You have significant assets to protect
• You plan to hire employees soon
• You want to appear more established or professional to clients
• You expect to reinvest profits and grow the business long-term

An LLC offers liability protection (your personal assets are shielded from business lawsuits) and costs only $300 in Tennessee. Many small business owners choose this over a sole proprietorship for that reason alone.

Expected Timeline and Results

From start to finish, you can launch a Tennessee sole proprietorship in 3 to 5 business days:

Step	Timeline
DBA filing (if needed)	1 to 3 business days
EIN application	Same day (online)
Sales tax registration	1 to 2 business days
Business license	3 to 5 business days (varies by county)
Bank account setup	Same day (in person) or 1 to 3 days (online)

Once complete, your sole proprietorship is legally registered and you can begin operating immediately. You will need to file an annual tax return (federal and any state returns), pay sales tax on schedule, and renew your DBA registration every four years.

Resources and Next Steps

Tennessee Secretary of State: https://sos.tn.gov/businesses

TNCaB Filing Portal: https://tncab.tnsos.gov/portal

Tennessee Department of Revenue: https://www.tn.gov/revenue.html

IRS EIN Application: https://www.irs.gov/ein

Sales Tax Permit Registration: https://www.tn.gov/revenue/taxes/sales-and-use-tax/registration.html

Find your county clerk: Search "[your county] clerk's office" online or contact your local courthouse.

Tennessee Small Business Development Center: https://www.tsbdc.org/ offers free business counseling and training.

Important Disclaimers

This article is informational only and does not constitute legal, tax, or accounting advice. Every business is unique, and requirements may vary based on your industry, location, and circumstances. Before launching your Tennessee sole proprietorship, consult a qualified business attorney and CPA to ensure full compliance with all state and federal regulations. If your business involves regulated activities, obtain industry-specific permits before operating.