Tennessee Small Business Facts, Industries and Taxes

Tennessee taxes no one’s wages, but its LLCs pay a filing fee that climbs with the number of members and a state tax most owners never see coming. Around that particular setup runs a small-business economy 741,196 firms deep, 99.5% of all businesses in Tennessee.

Those firms employ about 1.18 million people, 41.5% of the state’s private workers. The SBA reports that “between 1998 and 2022, Tennessee small business employment grew by 12.7 percent, reaching 1.2 million employees in 2022.” Small firms did the recent hiring too: of the net jobs Tennessee gained in the year to March 2024, they accounted for 40,433, or 80.7%. What Tennessee makes, where the work sits, and the tax bill a new business faces round out the page.

Follow any figure to its source in the list that closes the page, all of it federal or Tennessee-state data.

A Base That Is Overwhelmingly Solo

Tennessee’s small businesses are small even by the usual standard. Of the 741,196, only 103,856 employ anyone, and 637,340, about 86%, are solo ventures carrying no payroll. The firms that do hire met a $60.8 billion payroll in 2022, a bit under two-fifths of the state’s private wage bill.

• The 637,340 nonemployer businesses booked $37.8 billion in receipts in 2022, most of them sole proprietorships.
• In the year to March 2024, 24,569 establishments opened and 20,866 closed, a net gain of 3,703.
• Small firms are 96.5% of Tennessee’s employers but cover 37.7% of private wages, which tells you a handful of very large employers carry most of the payroll.

Where the Payrolls Are Biggest

By headcount, health care is the biggest thing Tennessee does: 420,698 jobs, ahead of every other private sector. Manufacturing runs a close second, 362,430, the best-paid of the top three at $75,222, with retail third at 344,510. Restaurants and hotels come fourth, 316,498 jobs at the lowest big-sector pay, $27,443. Farther down sits the sector that defines one corner of the state: transportation and warehousing, 205,668 jobs at $70,843, the Memphis logistics machine. Professional and technical services, 177,897 jobs, pay a high $104,922. Construction (163,374) and wholesale trade (136,378) fill the next tier, and finance and insurance, 125,670 jobs, pays the best of the big sectors at $109,492.

• Pay tops out in management of companies ($125,258), information ($115,614) and finance ($109,492).
• The statewide private average is $67,904; restaurants and hotels ($27,443) and retail ($41,360) anchor the bottom.
• Manufacturing, at $75,222, pays above that average, a mark of the auto assembly work in the mix.
• Beyond autos, the factory base runs to fabricated metal (41,963 jobs), food (40,975), chemicals (27,079) and an appliance and electrical cell (21,639).

Cars, Cargo, and a Music Town

Three industries give Tennessee its character, and none is the biggest employer. The first is cars: the biggest factory sector is transportation-equipment manufacturing, 74,431 jobs, with the assembly cell alone paying $102,515, clustered across the middle-Tennessee suburbs. The second is cargo, in and around Memphis, where air freight and distribution make transportation and warehousing the region’s outsized second sector; statewide the couriers cell runs 58,431 jobs, warehousing 54,954 and trucking 56,245. The third is Nashville’s, where the performing-arts and spectator-sports cell pays $171,462, the highest of any industry cell in the state, next to a sound-recording cluster and the health-care-management business that lifts health care to number one statewide. Put together, these three are why Tennessee reads as a factory and logistics state, even though by headcount it is health care, manufacturing and retail that employ the most people.

Nashville, Memphis, and the Rest

The economy sorts into a handful of metros. Nashville, in Davidson County, is the largest labor market, 555,405 jobs at $83,096, built on health care, music and government. Memphis, in Shelby County, is the logistics capital, where warehousing and air cargo make transportation its outsized second sector, and it holds much of the state’s Black-owned business base. Williamson County, the affluent suburb south of Nashville, pays the most of any county, $87,286, on a corporate-headquarters finance cell. Knoxville and Chattanooga anchor the east, Chattanooga on an auto and industrial base, and Rutherford County, home to auto assembly, is the one large county where manufacturing is the top employer. Together those six counties hold well over half of all the jobs in Tennessee.

A Record Year for New Businesses

Tennessee starts a lot of businesses. New applications, the tax-ID registrations that stand in for a new business, hit a record of about 103,220 in 2025, up from roughly 94,261 in 2021 and high by any state’s measure. The catch is familiar: the applications most likely to hire, about 30,446, or under a third of the total, barely moved, so the growth is largely in solo ventures. Read the yearly totals as approximate, since they sum monthly figures.

The Owners, and a Memphis Story

Ownership in Tennessee looks like the state. Women own 45.0% of Tennessee businesses, close to their 47.4% of the workforce; veterans own 6.5%. The number worth pausing on is Black-owned business: Tennessee has 115,416, most of them around Memphis, but only 3,416 have employees. The other 112,000 have no employees, a wide base that has stayed light on payroll. The owner figures are all for 2022.

Loans, and What the State Ships

Federal small-business lending grew in Tennessee. SBA 7(a) lending, the everyday working-capital loan, ran to 1,021 loans worth $547 million in fiscal 2025, up from 819 a year earlier; the smaller 504 program, which funds buildings and gear, added 26. The export picture is bigger and lopsided. In 2023 the state’s identified exporters moved $35.9 billion in goods overseas; most of the 7,081, some 5,852, were small businesses, yet they carried only 15.8% of the value, about $5.7 billion, while a handful of large manufacturers accounted for the rest.

Where the $590 Billion Comes From

Tennessee’s economy came to $589.8 billion in 2025, roughly $80,000 for every resident, up from $561.2 billion in 2024; after inflation it grew 2.1%. Its largest slice by output is not a factory sector but real estate, $73.4 billion, ahead of manufacturing at $69.0 billion, then government and health care. The industries that give the state its identity, cars and cargo and music, sit lower in the dollar rankings than they do in its sense of itself.

The Smokies and the Rest

Tourism set a record in 2024, $31.7 billion in visitor spending across 147 million visits. The anchor is the Great Smoky Mountains, which drew 12.19 million recreation visits, more than any other national park in the country; the gateway county around Gatlinburg and Pigeon Forge alone saw $3.93 billion in visitor spending. It fed $3.3 billion into state and local coffers that year, and visitor spending has climbed faster in Tennessee than in the country as a whole since 2018.

No Income Tax, but a Per-Member Fee

The Fee That Counts Your Members

Forming a Tennessee LLC costs $50 per member, with a floor of $300 and a ceiling of $3,000, so an LLC with six or fewer members pays the $300 minimum and each member beyond six adds $50 until the fee caps out. The annual report that follows uses the same per-member math, due the first day of the fourth month after the LLC’s fiscal year ends. One exception is written into the form: an LLC whose articles bar it from doing business in Tennessee pays a flat $300 no matter how many members it has. Our guide to starting an LLC in Tennessee walks the filing and that first report in order.

No Income Tax, Two Other Bills

The headline is the one Tennessee is known for: no state income tax. The state never taxed wages, and the last piece, the Hall tax on interest and dividends, was repealed on January 1, 2021. But two taxes still reach a business. The franchise and excise tax lands on LLCs and corporations at the entity level, 6.5% on net earnings plus 0.25% on net worth, with a $100 minimum, so a Tennessee LLC is not the pure pass-through it is federally. And the sales tax is steep, 7% at the state level plus up to 2.75% local, among the highest combined rates anywhere, though groceries are taxed at a lower 4% state rate. Fresh in 2024, the franchise tax’s old property measure was repealed, so the tax is now figured on net worth alone. Tennessee has no state minimum wage, so the federal floor of $7.25 governs. A registered agent is still required. If you would rather not handle that or the paperwork, our registered agent services in Tennessee and best LLC services in Tennessee rankings do the comparison for you.

What a New Tennessee Owner Needs to Know

Sources

• Everything on the small-business side, from firm counts to payroll and ownership, is the SBA Office of Advocacy’s, out of its 2025 Tennessee Small Business Profile.
• For 2024 employment and pay, sector by sector and county by county, the source is the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages.
• Output figures, current-dollar and real, come from the Bureau of Economic Analysis‘s regional accounts.
• SBA loan volumes, both 7(a) and 504, are drawn by fiscal year from the agency’s FOIA loan file.
• New-application counts come from the Census Bureau’s Business Formation Statistics, and the self-employed tallies from its Nonemployer Statistics.
• The LLC fee is the Tennessee Secretary of State’s, and the no-income-tax, franchise-and-excise and sales-tax rules the Tennessee Department of Revenue’s.
• Visitor spending for 2024 is the Tennessee Department of Tourist Development’s, and the national-park visits the National Park Service’s.