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Rental property LLCs in Tennessee

Yes, you can hold a Tennessee rental in an LLC, but Tennessee costs more than most states. The state charges $50 per member, at least $300, both to form the LLC and every year after. The LLC can also owe state franchise and excise tax, unless a family-owned LLC earning mostly residential rent qualifies for the FONCE exemption. Moving a house in by deed can owe the state's transfer tax (how much depends on the deed form, below), and in Nashville it cancels any short-term rental permit.

Last checked 2026-10-21. General information, not legal or tax advice.

Local rental rules come first

Nashville short-term rentals. You can't list a property online until Metro Codes issues a permit (Nashville.gov STR checklist).

  • LLCs can't get owner-occupied permits. Those go only to natural persons who live at the property (Nashville.gov permit types).
  • New not-owner-occupied permits are issued only in listed mixed-use, office, commercial and downtown zones, never in AR2A, R, RS or RM zones. Existing permits there can be renewed but don't carry over if the property is sold or transferred (permit types).
  • Changing ownership cancels the permit, including a transfer from a person to an LLC. Permits can't be transferred and expire after 365 days unless renewed (Nashville.gov operation rules). Deeding a permitted house into your LLC means applying again under current zoning.
  • Not-owner-occupied application: proof all taxes are paid; the LLC's Articles of Organization linking it to you; a certified floor plan; at least $1 million per-occurrence liability insurance; a notarized affidavit; notice to adjacent owners; an HOA statement; and a responsible party within 25 miles. The permit fee is $313 (Nashville.gov checklist).
  • Operating rules: up to twice the sleeping rooms plus four occupants (max 12); one party at a time; collect room, occupancy and sales taxes (operation rules).

Memphis, Knoxville and Chattanooga each require permits or certificates for short-term rentals (Memphis Code ch. 5-44; knoxvilletn.gov; chattanooga.gov). Long-term rentals are governed statewide (below).

State business tax on short-term rentals. Short-term rental of vacation lodging, including your own home, is subject to Tennessee business tax; "short-term" means 180 consecutive days or less for business tax purposes. The property owner, or the property management company, must register in the county and city where the property is located as a Classification 3 taxpayer (TN Revenue BUS-38).

Franchise and excise tax, and the FONCE exemption

An LLC that's disregarded for federal income tax isn't disregarded for Tennessee franchise and excise tax, unless its single member is a corporation (TN Revenue F&E-3). Franchise tax is 0.25% of net worth with a $100 minimum, and excise tax is 6.5% of Tennessee taxable income (TN Revenue F&E-3; due dates and rates; F&E tax page).

FONCE exemption. A family-owned non-corporate entity (an LLC, LP or LLP) is exempt if both of these hold (TN Revenue FONCE page):

  1. At least 95% is owned by family members or their trusts or estates.
  2. At least 66.67% of its activity is producing passive investment income, or passive income plus farming.

How the test applies to rentals:

  • Rent from residential property counts as passive. Rent from commercial or industrial property doesn't.
  • "Residential property cannot have more than four residential units at any one location" (TN Revenue FONCE page). The limit is per location: a five-unit apartment building doesn't count.
  • To claim it, file Form FAE183 when you first apply and renew it every year (TN Revenue exempt entities page).

What the LLC protects, and what it doesn't

Tennessee's LLC law says that, with exceptions, "The debts, obligations and liabilities of an LLC, whether arising in contract, tort or otherwise, are solely the debts, obligations and liabilities of the LLC" (Tenn. Code Ann. § 48-249-114(a)(1)(A)). The exceptions, in subsections (d) and (f), cover sales tax and an LLC whose members agree to unlimited liability. And a member "may be personally liable by reason of such person's own acts or omissions" (§ 48-249-114(a)(2)).

  • Guarantees still bind you. A personal guarantee you sign for a lender is your own promise.
  • Your own acts are yours. A repair you make yourself, or your own negligence, isn't shielded by the LLC; ask a Tennessee attorney.
  • It isn't insurance. The LLC still needs coverage that pays claims and defense costs.

One LLC, or one per property?

Separate LLCs keep a judgment against one property away from the others, but in Tennessee each one costs at least $300 a year. Tennessee recognizes series LLCs: the Secretary of State's forms reference series LLCs under Tenn. Code § 48-249-309 (SOS foreign LLC application). Ask a Tennessee attorney whether a series fits. Tradeoffs: Should you have a separate LLC for each rental property?. Other states: Mississippi · Alabama · Arkansas · Indiana · Louisiana.

Form it where the property is, or register there

An LLC from another state applies for a Certificate of Authority under Tenn. Code § 48-249-904. The fee is the same $50 per member ($300 minimum, $3,000 maximum), and you need a certificate of existence from your home state dated within two months (SOS form SS-4233). You'd then pay Tennessee's annual fee on top of your home state's, which is why a Tennessee LLC is usually simpler.

What it costs the state

  • Articles of Organization: $50 per member, minimum $300, maximum $3,000. If the articles bar the LLC from doing business in Tennessee, it's a flat $300 (TN SOS Form SS-4270).
  • Annual report: the same $50-per-member fee ($300 to $3,000) (SOS FAQ: "The annual report fee for LLCs is $300 minimum up to a maximum of $3000").
  • Foreign LLC Certificate of Authority: $50 per member, $300 to $3,000 (SS-4233).
  • Name reservation: $20 (SOS Business Forms and Fees).
  • Franchise and excise tax unless exempt (above). EIN: free from the IRS.

See what services add: LLC services compared.

Forming the LLC, in order

  1. Pick a name containing "Limited Liability Company," "LLC" or "L.L.C." (SOS SS-4233 cites § 48-249-106).
  2. Name a Tennessee registered agent and office.
  3. File Articles of Organization online (TNCaB) and pay the per-member fee.
  4. Write an operating agreement.
  5. Get an EIN; open the LLC's bank account. Register for franchise and excise tax, or file the FONCE exemption.
  6. Check local rules, such as STR permits.

Forming the LLC doesn't move your deed

Moving a property in takes a deed from you to the LLC, recorded with the register of deeds in the county where it sits. The transfer can be taxed. Tennessee's realty transfer tax is $0.37 per $100, paid by the grantee (your LLC) and collected by the county register, who "is forbidden from recording the transfer until the tax has been paid" (TN Revenue Recordation Tax Manual).

  • On a warranty deed, the tax is figured on the greater of "the consideration for the transfer" or "the value of the property at the time of transfer" (Recordation Tax Manual).
  • On a quitclaim deed, "the tax base for a quitclaim deed is the consideration given" (Recordation Tax Manual).
  • The exemption list covers things like transfers between spouses and transfers into a revocable living trust, but not a transfer to an LLC (Recordation Tax Manual). The University of Tennessee's County Technical Assistance Service (CTAS) answers the same way: a transfer from an individual to an LLC is taxable.

Ask a Tennessee attorney which deed form fits and what it means for your title insurance.

Check the mortgage before you transfer

Federal law lets a lender enforce a due-on-sale clause, and a transfer to an LLC isn't one of the exceptions for 1–4 unit homes (12 U.S.C. § 1701j-3(d)). Fannie Mae allows a transfer to an LLC the borrower controls for loans it acquired on or after June 1, 2016 (Fannie Mae Servicing Guide D1-4.1-02). Ask your servicer in writing before you sign.

Insurance and taxes

Tell your insurer before title moves. Nashville short-term rentals need at least $1 million in per-occurrence liability coverage. For federal income tax, a single-member LLC is disregarded unless it elects corporate treatment (IRS). For Tennessee, see franchise and excise tax above.

Keeping each LLC in good standing

  • File the annual report and pay the fee every year, on or before the first day of the fourth month after the LLC's fiscal year closes: April 1 for a calendar-year LLC (Tenn. Code § 48-249-1017; SOS FAQ).
  • File the franchise and excise return, or Form FAE183 to claim FONCE.
  • Renew any STR permit within 365 days.

Before you file or transfer a property

  • Attorney: deed form, series vs. separate LLCs
  • Servicer: is the transfer allowed?
  • CPA: FONCE eligibility or franchise and excise return
  • Insurance agent: named insured, STR liability limits
  • City: Nashville STR permit (a transfer to an LLC cancels it)
  • Calendar: annual report, F&E/FAE183 due dates, STR renewal

Form it with Corpus

Corpus prepares and files your Articles of Organization and includes the first year of registered-agent service. The Tennessee page shows the current price. Corpus isn't a law firm: the deed, the loan, taxes and city permits are separate steps.

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Sources

Last checked 2026-10-21. Corpus is not a law firm and does not provide legal or tax advice.