StructureCost2026

Sole proprietorship vs LLC in Tennessee: which costs less (2026)

At $100,000 profit in Tennessee, a sole proprietorship costs $22,365 a year in tax and fees and a single-member LLC costs $27,161. On these figures a single-member LLC does not cost less at any profit up to $500,000.

More settings revenue, salary, filing status, payroll costs, PTET

+$4,796 a year

more for a single-member LLC than a sole proprietorship in Tennessee, at these numbers.

With these settings the switch does not pay at any profit from $10,000 to $500,000. Setting up costs $300 once in state filing fees.

Tennessee, 2026: $100,000 profit, single filer

ItemSole propLLCChange
Self-employment taxirs.gov, 2026 rates$14,130$13,155−$975
Federal income taxirs.gov, 2026 rates$8,235$7,106−$1,129
Annual Reportsos.tn.gov, checked Oct 23, 2026$0$300+$300
Tennessee franchise taxtn.gov, checked Oct 23, 2026$0$100+$100
Tennessee excise taxtn.gov, checked Oct 23, 2026$0$6,500+$6,500
Yearly cost$22,365$27,161+$4,796
What these figures count
  • State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
  • Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
  • The 20% qualified business income deduction with its income limits and the professional-service rule.
  • Yearly report fees, and a cost you can change for payroll and the business tax return.

Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.

Yearly cost at each profit level

ProfitSole propLLCDifference
$30,000$5,181$7,025+$1,844
$50,000$9,732$12,541+$2,809
$75,000$15,495$19,554+$4,059
$100,000$22,365$27,161+$4,796
$150,000$37,607$44,663+$7,056
$200,000$53,430$62,569+$9,139
$300,000$92,125$100,567+$8,442

Federal and Tennessee tax and fees, single filer, revenue 1.5 times profit, default salary for S and C corps. "Difference" is Single-member LLC minus Sole proprietorship.

What the switch takes in Tennessee

  1. File the Articles of Organization (Form SS-4270) with the state: $300 (fee).
  2. Get an EIN from the IRS (free, online) and open a business bank account in the new name.
  3. Federal return each year: Schedule C with your Form 1040, due April 15.
  4. State upkeep each year: Annual Report, $300 a year, due 1st day of the 4th month after fiscal year end (April 1 for calendar year). New for you: Tennessee franchise tax, Tennessee excise tax.

What changes between the two

A single-member LLC is a disregarded entity for income tax: it files the same Schedule C and pays the same self-employment and income tax as a sole proprietor. What it adds in Tennessee is $300 to form and Annual Report, $300 a year, plus Tennessee franchise tax and Tennessee excise tax.

What it gives: business debts and claims stay with the LLC, as long as business and personal money stay apart. Many banks, clients and platforms ask for one. It is also the step before an S corp election, with no new company needed.

Questions

Does an LLC save tax over a sole proprietorship in Tennessee?

No. It pays the same federal and Tennessee income tax and self-employment tax, plus the state's LLC fees and LLC taxes.

What does an LLC cost to start in Tennessee?

$300 to file the Articles of Organization (Form SS-4270).

How much does it save at $100,000 in Tennessee?

Nothing. Single-member LLC costs $4,796 a year more ($27,161 against $22,365).

More for Tennessee

Common cases in Tennessee

Other states