Tennessee LLC Taxes Explained: F&E Tax Deep Dive (2026)
Tennessee has no personal income tax — but franchise and excise tax is a real, entity-level cost for most multi-member LLCs. Here's every layer, with an estimator that models both the exemption and the full tax bill.
A default Tennessee LLC is a pass-through: profits land on your personal return, and Tennessee levies no personal income tax on that income. Add 15.3% federal self-employment tax on 92.35% of net profit. Separately, most LLCs owe franchise tax (0.25% of the greater of net worth or real/tangible property in Tennessee, $100 minimum) and excise tax (6.5% of net earnings) — unless the LLC is a single-member, individually-owned, disregarded entity, which is generally exempt. Sellers collect 7% state sales tax plus local rates up to 2.75%.
- State personal income tax
- None
- Franchise tax
- 0.25% of net worth, $100 min
- Excise tax
- 6.5% of net earnings
- Single-member exemption
- Yes — if individually owned
- Sales tax
- 7% + local up to 2.75%
- F&E filing
- Form FAE170 via TNTAP
The Tax Layers in Tennessee
Federal: income + self-employment tax
Pass-through profits hit your 1040 at your federal bracket, plus 15.3% SE tax on 92.35% of net profit — this applies regardless of state.
Tennessee state income tax: none
The Hall tax on interest and dividends was fully eliminated in 2021. Tennessee levies no personal income tax on wages or business profit.
Entity level: franchise + excise tax (unless exempt)
The real cost most guides underplay — see the dedicated section below.
Sales tax: 7% + local (if applicable)
State rate plus local add-ons up to 2.75%. See Step 7.
Estimate Your Combined Bill
Tennessee LLC Tax Estimator
Models the F&E exemption vs. full tax · educational estimate
Franchise & Excise Tax, In Depth
This is the tax most "no income tax" articles about Tennessee never fully explain. Excise tax is 6.5% of your LLC's net earnings — functionally similar to a corporate income tax. Franchise tax is 0.25% of the greater of your Tennessee net worth or the value of real and tangible property owned in Tennessee, with a $100 minimum. Both apply to most multi-member LLCs and any LLC that elects corporate taxation, even if the LLC is currently inactive, unless properly dissolved or otherwise exempt. Legislation in 2024 (HB 1893/SB 2103) modified aspects of how Tennessee calculates and applies this tax — confirm current-year specifics with a CPA given the relatively recent changes.
The S-Corp Question
An S-Corp election changes federal taxation: reasonable salary (payroll-taxed) plus distributions that escape the 15.3% SE tax. File Form 2553 — never Form 8832, which is the C-Corp election. In Tennessee, electing S-Corp status specifically means your LLC is no longer eligible for the single-member disregarded-entity exemption, so you'll owe franchise and excise tax regardless of member count. Run the full math — federal SE-tax savings against the newly-triggered F&E tax — before electing, rather than assuming the S-Corp math works the same way it does in states with no entity-level tax. See the S-Corp election guide.
Your Tennessee Tax Calendar
| Date | What's Due |
|---|---|
| Apr 15 / Jun 15 / Sep 15 / Jan 15 | Quarterly estimated taxes — federal, on pass-through profit |
| April 1 | Annual report to the Secretary of State ($50/member, $300 min) |
| April 15 | Form FAE170 franchise/excise return (or exemption confirmation) to the Department of Revenue |
| Apr 15 | Form 1040 — no separate state income tax return needed |
| Monthly/Quarterly | Sales tax returns via TNTAP, if applicable |
Ahmad Adil's Take: I want to close this Tennessee guide the same way I opened it — the "no income tax" reputation is real, but it's genuinely only half the picture for a lot of LLC owners here. If you're a solo founder who stays a single-member, individually-owned, disregarded entity, Tennessee is honestly one of the better tax situations in this series: no state income tax, no franchise/excise once you confirm your exemption, just federal obligations and the annual report. If you bring on partners, elect S-Corp status, or take on outside investors, budget for the 6.5% excise tax as a real, recurring cost from day one — it's not a corner case here, it's the default outcome for most growing Tennessee LLCs.
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Tennessee LLC — FAQ
Ahmad Adil is the founder and CEO of LLC School. The figures here — the $300 minimum Articles of Organization, the $300 minimum annual report due April 1, and Tennessee’s franchise and excise tax — reflect current Tennessee Secretary of State and Department of Revenue guidance. This is educational content, not legal or tax advice.
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