Coming to Tennessee
We’re still checking Tennessee’s rules against the current law, so the packet isn’t on sale yet.
Tell me when it’s readyWhat Tennessee expects from a new trade business
Tennessee's license line is $25,000, and you need the license before you even bid. Construction is also the one place comp reaches the owner personally unless you register an exemption. And an LLC here is expensive: a $300 filing, a $300 annual report and a yearly franchise tax, even if it sits idle.
The license starts at $25,000, and earlier in nine counties
The Board for Licensing Contractors requires a state license before you bid, offer or negotiate a price on a project of $25,000 or more, counting materials and labor. It's unlawful to contract or offer to without a license carrying a high enough monetary limit.
- Subs: electrical, mechanical, plumbing, HVAC and roofing need the license when their portion hits $25,000. Masonry subs need it at $100,000.
- Home improvement: a separate license covers residential remodeling from $3,000 to $24,999, only in counties that adopted the law: Bradley, Davidson, Hamilton, Haywood, Knox, Marion, Robertson, Rutherford and Shelby. It takes a $10,000 bond plus liability and comp insurance.
The same board also handles limited licensed electricians and plumbers. For smaller trade jobs, ask the local permit office what it accepts. Another state's license doesn't carry over here.
Source: TN Board for Licensing Contractors · TN Commerce & Insurance, Who is Required to be Licensed · TN Home Improvement Contractor · T.C.A. 62-6-103 (2023 code, Justia)
Who to call: an attorney near you
In construction, comp covers everybody, including you
Outside construction, Tennessee businesses need workers' comp at five employees. Construction is different. The Bureau of Workers' Compensation says construction businesses generally need coverage for everyone, business owners included.
To take yourself off the policy, you register with the state's Workers' Compensation Exemption Registry. You can qualify as a sole proprietor owning 100% of the business, a corporate officer, or an LLC member or partner with at least 20%. You can also qualify if you and family members hold at least 95%. The exemption lasts two years.
It covers only you. You still have to insure every employee, even if you have just one. An insurance agent who writes contractors can price the policy and walk you through the registry.
Source: TN Bureau of Workers' Compensation, Who Must Carry Insurance · TN Bureau of Workers' Compensation, Exemptions
Who to call: an insurance agent near you
Getting paid: Tennessee lien rules
We haven’t been able to check this one against an official source yet, so we won’t guess. Go straight to the state: lexisnexis.com/hottopics/tncode.
Who to call: an attorney near you
You pay tax on materials. Don't charge it on the job.
Tennessee's Department of Revenue treats contractors and subs as the end users of materials that go into real property. You either pay sales tax to your supplier or send use tax to the state based on what you paid. You should not charge your customer sales tax on those materials.
The line is whether the item becomes part of the property. The state's example: a new HVAC unit becomes real property, so you pay the tax when you buy it. A window AC unit stays personal property, so you can buy it on a resale certificate and collect tax from the homeowner.
The state's example for labor is the same split: no sales tax on service labor when the item is part of the real property. A CPA who works with contractors can sort out the gray items in your trade.
Source: TN Dept. of Revenue, Industry Specific Tax Manual: Contractors (June 2024)
Who to call: a CPA or tax pro near you
An LLC costs more here than almost anywhere
Tennessee charges $50 per member, with a $300 minimum and $3,000 maximum, both to form the LLC and for each annual report. For a one- or two-owner shop that's $300 to form and $300 a year. The report is due the first day of the fourth month after your fiscal year ends, April 1 on a calendar year.
Then comes franchise and excise tax, which LLCs have to register for and pay. Franchise is 0.25% of net worth with a $100 minimum, even if the company is inactive. Excise is 6.5% of net earnings. The return is due April 15.
The Hall tax on interest and dividends is repealed, but the F&E bill is the real tax on your LLC. When an S-corp makes sense is a numbers question. Have a CPA run it with F&E included.
Source: TN Dept. of Revenue, Franchise & Excise Tax · TN Dept. of Revenue, Hall Income Tax
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in Tennessee before you rely on it. Last updated November 2026.