Tennessee LLC Tax Elections — S-Corp & C-Corp
Tax elections for Tennessee LLCs have a unique wrinkle: the franchise & excise tax applies at the entity level regardless of your federal classification. S-corp election still helps with federal SE tax but doesn't eliminate Tennessee's F&E. For the full tax guide. For formation, see how to form a Tennessee LLC.
How Elections Work in Tennessee
| Election | Federal Impact | Tennessee F&E Impact |
|---|---|---|
| Default LLC | Pass-through + 15.3% SE tax | F&E still applies ($300 min) |
| S-corp | SE tax only on salary | F&E still applies ($300 min) |
| C-corp | 21% federal corporate rate | F&E still applies ($300 min) |
Critical point: Unlike most states, Tennessee's F&E tax does NOT go away with S-corp or other elections. The 6.5% excise + 0.25% franchise applies regardless.
S-Corp in Tennessee
Benefit: Reduces federal SE tax (save ~$7,000-$10,000+/year at $120K+ income) Limitation: Tennessee F&E still assessed on LLC (6.5% excise on income + 0.25% franchise on net worth) Net effect: Still beneficial for high-income members, but less dramatic savings than in states where S-corp eliminates both SE tax AND state entity tax
FAQ
Ready to get started?
Get StartedDoes Tennessee require a separate state election?
No. Tennessee follows federal classification. File Form 2553 with IRS; Tennessee recognizes it automatically.
Is S-corp worth it in Tennessee?
Yes for reducing federal SE tax (savings of $5,000-$15,000+ annually at higher incomes). Just understand that Tennessee's F&E persists regardless.