Does hiring inTennessee create a tax presence..
Teamed hires your Tennessee employee directly, so payroll and franchise tax obligations sit with us, not your out-of-state entity.
At a glance
Tennessee tax presence, quickly
Tennessee taxes business activity through a combined franchise and excise tax system. The excise tax runs at 6.5% of net earnings, and the franchise tax is calculated on a margin basis with a minimum of $100. Registering a business entity with the Tennessee Secretary of State carries a formation fee of $300. Hire someone through Teamed instead, and none of that filing burden lands on you.
- Corporate income tax
- 6.5%
- Minimum franchise tax
- $100
- Franchise tax basis
- margin
- Formation / registration fee
- $300
How Tennessee taxes a business presence
Franchise and excise tax basics
Tennessee does not have a simple flat corporate tax. It runs a combined franchise and excise tax, and any company with a taxable presence in the state generally owes both. The excise tax portion is set at 6.5%, applied to net earnings from business done in Tennessee.
The franchise tax works differently. It is calculated on a margin basis rather than straight net income, and every entity subject to it owes at least the minimum franchise tax of $100, even in a year with thin margins. That minimum applies regardless of how small your Tennessee footprint actually is.
Why one employee can be enough
The registration trigger
Permanent establishment risk in the US usually starts small. One employee working from a home office in Nashville or Memphis can be read by the state as enough activity to require registration. Once that happens, you are inside the franchise and excise tax system, filing returns and paying at least the minimum franchise tax whether or not the role generates meaningful revenue.
Registering the entity itself is not free either. The Tennessee Secretary of State charges a formation fee of $300 to bring a business on the books, before any ongoing tax obligation even starts. For a company testing the Tennessee market with a single hire, that is a real cost attached to a decision you have not fully committed to yet.
The EOR alternative
How Teamed keeps the exposure off your entity
When Teamed employs your Tennessee hire, the legal employer of record is Teamed's own entity, already registered and already filing. Your company never opens a Tennessee registration, never owes the minimum franchise tax, and never carries the excise tax exposure that comes with a direct presence.
That structure buys you time. You get to prove out a Tennessee hire, a small team, or a market test, without deciding upfront whether the state is worth a permanent entity and the ongoing filings that come with it.
Before you commit
Sometimes an employer of record is the better fit
An employer of record is sometimes the better answer, not a lesser one, especially for a small or still-changing headcount, or while you are testing whether Tennessee is worth a long-term commitment. Talk to a member of the team about your specific plans, or run the numbers yourself through the crossover calculator, since the right call depends on salaries and how long you intend to stay.
Contractors, employer of record and your own entity all run on one platform at Teamed, so moving between them later does not mean changing provider or re-onboarding anybody. Real HR and legal experts handle the work rather than a ticket queue.
Talk to a member of the team and we will tell you plainly which one suits where you are. If you would rather look at the numbers yourself first, the crossover calculator models it on local salaries and employer costs rather than on a headcount rule of thumb.
Who carries it
Your own entity, when it's time. We set it up, migrate you in, and hand it back intact.
Global Entity and Employment Operations, which we call GEMO, is how Teamed forms your company, registers it for tax and payroll, runs it month to month and keeps its filings current, across 100+ countries. You stay the employer. We do the work behind it.
In Tennessee that means we can register the entity, take on the franchise and excise tax filings, and run payroll while your team is small. Once the headcount and commitment justify it, we transfer a clean, fully compliant entity to you, the same way across 100+ countries wherever your plans take you next.
They set up our EU entity and moved hires across without missing a payroll.
Questions
Tennessee tax presence, answered
Does a single remote employee in Tennessee create a tax presence?
It can. Tennessee's franchise and excise tax system does not require a large operation to trigger registration, and even minimal activity can be enough to bring you into the filing system. Using an employer of record avoids putting that question to the test with your own entity.
What is the minimum tax my company would owe if registered in Tennessee?
The franchise tax carries a minimum of $100, owed even if your Tennessee margin in a given year is small. That is separate from the excise tax, which is calculated at 6.5% of net earnings from business done in the state.
How is the Tennessee franchise tax actually calculated?
It is based on margin rather than a flat rate on income, which is different from how many states approach corporate tax. Every registered entity still owes at least the minimum franchise tax regardless of how that margin calculation comes out.
Is registering a Tennessee entity expensive to set up?
The Tennessee Secretary of State charges a formation fee of $300 to register a business entity, on top of whatever ongoing franchise and excise tax obligations follow. For a single hire or a market test, that upfront cost is worth weighing against using an employer of record instead.
When does it make sense to set up our own Tennessee entity instead of using an EOR?
That depends on your headcount, salary levels, and how long you plan to stay in the state, not a fixed employee count. The crossover calculator walks through those numbers, and a member of the team can talk through your specific situation.
Where these figures come from
Sources
Figures on this page are drawn from the Tennessee Department of Revenue's franchise and excise tax basics and from the Tennessee Secretary of State.
Looking for a job in Permanent Establishment Risk yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.