You do not register a sole proprietorship in Tennessee with the Secretary of State. The business exists the moment you start working for yourself. What you may still need, depending on what you sell and how much you earn, is a county or city business tax license, a state sales and use tax certificate, and an assumed name filing if you plan to operate under anything other than your own legal name.1TN.gov. Registration and Licensing
There are no articles of organization, no state formation fee, and no annual report. You and the business are the same legal person, which is why setup is simple and why every business debt or lawsuit can reach your personal assets.
Business Tax License
Tennessee requires most businesses to hold a business tax license, and the tier depends on your annual gross receipts:2Tennessee Department of Revenue. BUS-15 Minimal Activity Licenses
- Under $3,000: no license required. You may still buy a minimal activity license for $15 if you want one.
- $3,000 to under $100,000: minimal activity license from your county or city clerk, $15.
- $100,000 or more: standard business license from your county or city clerk.1TN.gov. Registration and Licensing
Apply in person at the county or city clerk, or online through the Tennessee Taxpayer Access Point (TNTAP). A $15 registration fee applies either way.1TN.gov. Registration and Licensing Processing takes up to 10 business days, and you cannot operate until the license is issued and posted at your place of business.3Justia Law. Tennessee Code 67-4-723 – License – Issuance and Renewal Licenses renew annually.
At registration you also pick a business tax classification that matches your dominant activity — retail food, general retail, services, contracting, or the residual category — and the rate you owe depends on the classification you choose.4TN.gov. Classifications5Justia Law. Tennessee Code 67-4-709 – Tax Rates
Assumed Name Filing (DBA)
If you operate under your own legal name, skip this step. If you want to trade under any other name — say, Jane Smith doing business as Nashville Candle Co. — you file an assumed name application with the Tennessee Secretary of State on Form SS-4402. The fee is $20.6Tennessee Secretary of State. Division of Business Services Announces Online Assumed Name Filings7Tennessee Secretary of State. Business Forms and Fees The form asks for the trade name, a description of what the business does, and identifying information about you as the owner.
Sales and Use Tax Certificate
If you sell tangible goods or provide taxable services, you must register for a Sales and Use Tax Certificate before you begin operating. That applies even if the specific item you sell turns out to be exempt.8Tennessee Department of Revenue. SUT-10 – Sales and Use Tax Account – Registering for an Account Operating as a dealer without the certificate is a Class C misdemeanor.9TN.gov. Sales and Use Tax Manual
The state rate is 7%. Local sales taxes add 1.50% to 2.75% on top of that, so the total your customers pay varies by location. You collect the tax and remit it to the Tennessee Department of Revenue. Register through TNTAP. Regulated products like tobacco and alcohol carry separate permits and industry-specific taxes.
Federal Taxes You Will Owe
Tennessee does not tax earned income, and the older Hall Tax on interest and dividends was fully repealed for tax years beginning January 1, 2021.10Tennessee Department of Revenue. HIT-1 – Tennessee Income Tax on Interest and Dividend Income Federal tax still applies to everything you earn.
You report business income and expenses on Schedule C, which flows into your personal Form 1040. If net earnings from self-employment reach $400 or more, you also file Schedule SE and pay self-employment tax.11Internal Revenue Service. Topic No 407 Business Income The self-employment tax rate is 15.3% — 12.4% for Social Security, 2.9% for Medicare — applied to 92.35% of your net earnings. For 2026, only the first $184,500 of combined wages and self-employment income is subject to the Social Security portion; income above that ceiling is subject only to the 2.9% Medicare tax.12Social Security Administration. Contribution and Benefit Base You can deduct half of the self-employment tax you pay as an adjustment to gross income.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Because nobody is withholding tax from your income, you generally have to make estimated payments four times a year. This applies if you expect to owe at least $1,000 in federal tax for the year after any withholding and refundable credits.14Internal Revenue Service. Estimated Tax Underpay or skip a quarter and you can face penalties at filing time.
If You Hire Anyone
Bringing on even one employee changes what you have to register for. You need an Employer Identification Number (EIN) before filing any employment tax return.15Internal Revenue Service. Instructions for Form SS-4 Apply online through the IRS and you receive it immediately.16Internal Revenue Service. Get an Employer Identification Number
Each new hire completes Section 1 of Form I-9 no later than their first day of work. You complete Section 2 within three business days after that first day. If someone is hired for fewer than three business days, the whole form has to be done by the first day of employment.17U.S. Citizenship and Immigration Services. Instructions for Form I-9 Employment Eligibility Verification From there, you are responsible for withholding federal income tax and FICA from wages and paying the employer share of Social Security and Medicare.
The Liability Tradeoff
The reason people eventually leave the sole proprietorship structure is that it offers no legal separation between you and the business. A lawsuit or unpaid business debt can reach your personal bank accounts, home equity, and other assets. Two things reduce that exposure without changing entity type.
First, insurance. General liability covers physical risks: a customer slipping on your premises, property damage your work causes, advertising-related claims. Professional liability (errors and omissions) covers claims that your professional services caused a client financial harm. Which you need depends on what you do.
Second, keep the money separate. Running personal and business funds through the same account is not illegal, but heavy commingling makes your books unreliable and can prompt the IRS to look harder at your bank activity during an audit.18Internal Revenue Service. Examination of Income A dedicated business checking account keeps recordkeeping clean, makes filing easier, and lowers audit risk.