Tennessee Offers Three Management Forms and Asks You to Choose One in Public
Tennessee did not adopt either uniform limited liability company act. It wrote its own, the Tennessee Revised Limited Liability Company Act, which governs every company formed on or after 1 January 2006 and is codified at sections 48-249-101 and following. Two features set it apart from anything else in the region.
The first is structural. Section 48-249-202(a)(4) requires the articles of organization to state whether the company will be member-managed, manager-managed or director-managed. Director management is a Tennessee invention: a board that runs the company the way a corporate board does, with a president appointed under section 48-249-401(d). That choice is a public filing, and the operating agreement has to be drafted to match it.
The second is philosophical. Section 48-249-205(a) records the express intent of the legislature that members may modify, alter or waive any provision of the act except the twenty-one items listed in subsection (b). Few states say it that plainly. General patterns are set out in the operating agreement essentials guide; the transactional page for this state is Tennessee operating agreement.
What the act supplies when the LLC documents are silent
Votes are counted per capita, in terms. Section 48-249-405(a) provides that each member, manager or director has equal voting power per capita with each other member, manager or director. Most acts imply this. Tennessee states it, which makes it harder to argue around.
Profits are split equally. Section 48-249-304(b) allocates profits and losses in equal shares where the LLC documents do not provide otherwise. Contribution size is irrelevant to the default.
Distributions are split equally too. Section 48-249-305(b) does the same for cash, including distributions on termination. Subsection (f) then says a member is entitled to a distribution before dissolution only as the LLC documents provide or by a majority vote of the governing body, so nothing is automatic.
Seven decisions need every member. Section 48-249-401(f) fixes the unanimity list, and it is short by regional standards: amending the operating agreement where no method is specified, certain articles amendments, compromising a contribution obligation, admitting a new member, and using company property to redeem an interest under a charging order.
Duties exist but are narrow. Section 48-249-403 limits the duty of loyalty to three items and the duty of care to refraining from grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. In a manager-managed or director-managed company a member owes no duties at all merely by being a member.
One member, and the paperwork the statute expressly invites
Tennessee is one of the few states whose act addresses the sole owner directly. Section 48-249-203(c) provides that an LLC with a single member may adopt, and if it does is bound by, an operating agreement between the member and the company. That removes the old objection that a one-person company cannot contract with itself, and it makes the document unambiguously enforceable.
Section 48-249-509 then gives the creditor of that member only the rights of a transferee of financial rights and calls the charging order the sole and exclusive remedy with respect to the membership interest or financial rights. The protection is real, and it protects an interest in a company, which is a claim the owner has to be able to evidence. Federal and banking treatment is covered in the single-member LLC guide, with state detail on the Tennessee single-member LLC page.
Ten Clauses, Written Against the Tennessee Revised Act
Section 48-249-205 is the map. Everything is waivable except twenty-one named items, and the phrase the act uses throughout is LLC documents, meaning the articles and the operating agreement read together. These ten clauses work inside that frame.
Tennessee at a glance
| Question | What the Tennessee Revised Act says |
|---|---|
| Governing act | Tennessee Revised Limited Liability Company Act, Tenn. Code sections 48-249-101 and following |
| Required by statute? | No. Section 48-249-203 is permissive |
| Form accepted | Written or oral, unless the articles or a written provision require writing |
| Filed with the state? | Never. No form, no submission, no fee |
| Management forms | Member-managed, manager-managed or director-managed, declared in the articles |
| Default voting | Equal voting power per capita, section 48-249-405 |
| Default distributions | Equal shares regardless of contribution, section 48-249-305 |
| Death of a member | Terminates the membership interest and opens a sixty-day option, sections 48-249-503 and 48-249-505 |
| Charging order | Sole and exclusive remedy, transferee rights only, section 48-249-509 |
| State fees you do pay | $300 to form, $300 for the annual report. Nothing for the agreement |
1. Members, financial rights, and governance rights
Tennessee splits a membership interest into governance rights and financial rights, and the split runs through the whole act. List each member with a percentage and state which rights attach. A holder of financial rights alone owes no duties and votes on nothing, which is exactly what a transferee or an assignee ends up holding.
2. Contributions, and the equal-shares rule that ignores them
Record the form, date and agreed value of every contribution under section 48-249-301, then note that sections 48-249-304 and 48-249-305 do nothing with that record on their own. Capture promised contributions too, since compromising a contribution obligation is a unanimous decision under section 48-249-401(f)(3).
3. Matching the agreement to the management form in the articles
The articles already say member-managed, manager-managed or director-managed. The agreement has to build that out: officer authority under section 48-249-402, the president a director-managed company must have, and removal procedures. A document describing managers while the articles say director-managed is internally inconsistent from the first page.
4. Weighting the vote, and pruning the unanimity list
Section 48-249-405(a) is explicit about equal voting power per capita, so weighting the vote to ownership takes an express clause. Then set thresholds for the decisions that matter, and review the seven-item unanimity list in section 48-249-401(f), which includes admitting a new member and redeeming an interest under a charging order.
5. Allocations, distributions and a tax draw
Displace equal shares with the agreed split, separate the allocation of taxable income from the distribution of cash, and add a mandatory tax distribution. Section 48-249-305(f) leaves interim distributions to the LLC documents or a majority vote, so silence means the members with the votes decide when anyone is paid.
6. Transfers, and what a transferee actually receives
Sections 48-249-507 and 48-249-508 already separate a transfer of financial rights from a transfer of governance rights, and the second needs member consent. Add the rest: a right of first refusal, permitted estate transfers, and a mandatory purchase on divorce, bankruptcy or expulsion. Also grant the redemption authority section 48-249-401(f)(6) contemplates.
7. Death, incapacity, and the sixty-day window
This is the Tennessee clause. Under section 48-249-503(a)(8) the death of an individual member terminates the membership interest. Section 48-249-505(b)(2) then suspends governance rights and opens a sixty-day option for the personal representative to force a purchase, followed by a sixty-day option for the company. If neither is used, the personal representative is admitted as a member automatically.
8. Dissolution, and the events you set yourself
Section 48-249-601 dissolves the company on the expiration of a term stated in the articles, an event specified in the LLC documents, member action under section 48-249-603, or a court order. Without a stated term the company is perpetual. Write the events you actually want. The filing sits on the Tennessee dissolution page, and an administratively dissolved company works through reinstatement.
9. Tax classification, and the franchise and excise exposure
Record the federal classification and test the allocations against it, since an S corporation election cannot carry preferred returns or special allocations. Tennessee also taxes most LLCs directly through franchise and excise tax, so the entity has a state return as well as a federal one, and the annual report is a separate obligation to the Secretary of State.
10. Amendments, disputes, and the record you keep
Section 48-249-204(c) governs amendment, and section 48-249-401(f)(1) makes it unanimous where the documents specify no method, so specify one. Section 48-249-406 lists the records the company must keep. Add the forum and the escalation ladder, and store the agreement with the articles and any Tennessee articles of amendment.
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What Happens When a Tennessee Member Dies
Most acts treat a deceased member's estate as a transferee and leave it there. Tennessee built a procedure. Section 48-249-503(a)(8) terminates the membership interest when an individual member dies, when a personal representative is appointed, or on a judicial determination of incapacity.
Section 48-249-505(b) then suspends the governance rights attached to that interest and starts a clock. For sixty days the personal representative may give written notice requiring the company to purchase the interest. If that option lapses, the company gets sixty days to give notice that it will purchase. If neither side acts, the governance rights are restored and the personal representative is admitted and substituted as a member without further action.
Section 48-249-506 supplies the valuation machinery. The company must communicate its determination of fair value and proposed payment terms within thirty days, with a statement of assets and liabilities, the latest balance sheet and income statement, and an explanation of the calculation. If no agreement is reached within one hundred twenty days, either side has a further one hundred twenty days to bring a proceeding, and the court's jurisdiction is plenary and exclusive.
Two consequences for drafting. Subsection 48-249-506(b) says a price or formula fixed by the LLC documents governs, so an agreed formula written today decides the number later. And a company that does nothing for one hundred twenty days has chosen, by default, to take a co-owner's heir on as a voting member.
Separateness, and Where the Tennessee Entity Line Is Tested
Section 48-249-116 states that an LLC is a legal entity distinct from its members, and section 48-249-114 keeps company debts off the members. Tennessee courts will still disregard the entity where it is being used as a sham to work an injustice, weighing the same facts every jurisdiction weighs: capitalisation at formation, whether funds and assets were kept apart, whether the company observed the formalities it set for itself, and whether the business was in substance the alter ego of its owner.
What Tennessee adds is a public commitment to check the record against. The articles state a management form. If they say director-managed and there has never been a board, a president or a resolution, the file contradicts the filing, and that gap is the first thing an opposing lawyer will find.
The document also answers the everyday version of the question. Section 48-249-406 lists required records; a bank opening an account under the beneficial ownership rule asks for the member schedule; a lender asks who is authorised to sign. A signed agreement with a contribution ledger and an authority clause answers all three, and a current certificate of existence is the cheapest evidence that the entity is being maintained.
Five Mistakes Tennessee Owners Keep Making
Two of these come from the management form in the articles. Three come from believing the default rules resemble other states.
Mistake 1: Using a template that knows only two management forms
Almost every template on the market offers member-managed or manager-managed. Tennessee has three, and the articles have already declared which one applies. A director-managed company running on a manager-managed template has no board procedure, no president clause and no way to show that the governing body ever acted, while the public filing says a board is in charge.
Mistake 2: Skipping the document because there is one member
Section 48-249-203(c) expressly contemplates an operating agreement between a single member and the company, which is an invitation, not a formality. Without it the sole owner has nothing that separates the company from the person, and the charging order protection in section 48-249-509 assumes there is a company whose interest can be charged.
Mistake 3: Leaving the death provisions untouched
Sections 48-249-503 and 48-249-505 run whether or not anyone has read them. Two founders with no buyout clause have agreed, without knowing it, that either widow may force the company to write a cheque within sixty days, or become a voting member if she does not. Neither outcome is usually what the founders wanted.
Mistake 4: Looking for the filing or the fee
There is neither. The operating agreement is never delivered to the Secretary of State and appears in no fee schedule. What Tennessee does charge is $300 to form the company and $300 for the annual report, both of which are real deadlines. Filing the agreement publicly would expose the member schedule and the contribution values for no benefit.
Mistake 5: Assuming the money follows the contribution
Sections 48-249-304(b) and 48-249-305(b) both say equal shares, and section 48-249-405(a) says equal voting power per capita. A company where one member funded eighty percent of the business and three others funded nothing has, on the statute alone, one vote each and a quarter of the cash each.
Three Tennessee Companies and the Clause That Decided It
Composite cases built from the patterns that recur under the Tennessee act.
Example 1: A Nashville studio services company and a sixty-day cheque
Two members ran a post-production business valued at roughly $1.6 million. One died. Under section 48-249-503(a)(8) the membership interest terminated, and under section 48-249-505(b)(2) the estate had sixty days to require the company to buy it. The personal representative gave notice on day fifty-one. The company owed a fair value determination within thirty days with financial statements attached, and a claim near $800,000 sat against a business whose main asset was a lease and a client list.
Example 2: A Knoxville logistics company where the board never met
Four founders filed articles stating director-managed because a lawyer had suggested it during formation, then ran the company as four equal partners with no board, no president and no minutes. When a freight claim went to litigation, the plaintiff produced the articles and asked which director had authorised the contract. Nobody had been appointed. The operating agreement was a generic manager-managed template that never mentioned directors.
Example 3: A Chattanooga brewery split four ways on paper only
One member put in $420,000, three others put in $20,000 each and their labour, and everyone described the split as sixty-forty. There was no written agreement. When a distribution of $200,000 was declared, section 48-249-305(b) allocated it in equal shares and section 48-249-405(a) gave each of the four an equal vote on whether to declare it at all. The majority funder held one vote out of four and a quarter of the cash.
The Financial Consequence of Relying on the Act
Tennessee imposes no penalty for having no operating agreement. There is no fine and no filing. These are the amounts the defaults move.
The sixty-day put on death. This is the largest single exposure in the Tennessee act. On a company worth $1.6 million, a fifty percent interest is roughly $800,000 payable in cash on terms a court will set if the parties cannot agree, with a thirty-day valuation obligation and a one hundred twenty day clock behind it. A formula in the LLC documents governs instead, under section 48-249-506(b), and costs nothing to write.
The equal-shares reallocation. A company distributing $200,000 a year among four members who believe the split is sixty-forty is $70,000 a year away from the statutory answer. Three years of that is $210,000 in dispute with nothing on paper.
The heir who becomes a member. If nobody exercises either option in section 48-249-505(b)(2), the personal representative is admitted as a member. In a two-member company that hands a spouse or a child half the votes on every future decision, including whether the survivor is paid.
The costs the state does charge. Formation is $300 and the annual report is $300, so the calendar does prompt an annual look at the entity, and that is the natural moment to reread the governance file. A company trading in another state adds foreign qualification and a second calendar, and keeping the registered agent current is what keeps the whole chain reachable.
How File.Business Drafts a Tennessee Operating Agreement
The intake opens with the articles, because Tennessee has already made the largest structural choice in public. Member-managed, manager-managed or director-managed drives officer authority, signing power and the whole approval architecture, and the agreement is drafted to the form actually on file rather than to a generic template.
The second pass is the death and termination machinery in sections 48-249-503, 48-249-505 and 48-249-506: whether to fix a valuation formula, whether to restrict the personal representative's option, and what payment terms apply. From there the work runs through the equal-shares displacement, the per-capita voting rule, the seven-item unanimity list, and duty modifications drafted inside the twenty-one non-waivable items in section 48-249-205(b). Delivery includes a member schedule formatted for a bank's beneficial ownership file, signature pages and an adopting consent. Adjacent work runs alongside: registered agent coverage, agent changes and assumed name filings. The flat fee is $99 and no state fee attaches, because there is no filing.
Template or drafted document
A single-member company can run on a careful template written to the Tennessee act, provided it matches the management form in the articles and contains a discretionary distribution clause. Every multi-member company earns a drafted document, and so does any company whose articles say director-managed.
The test takes one search. Open the template and look for the word death. If the document does not fix a valuation formula and payment terms for the sixty-day option in section 48-249-505(b)(2), the largest cheque the company may ever have to write is being left to a court.
Tennessee Operating Agreement FAQ
Does Tennessee require an LLC operating agreement?
No. Section 48-249-203(a) provides that all members of an LLC may enter into an operating agreement to regulate the affairs of the company and govern relations among the members, holders, managers, directors, officers and the company. It need not be in writing unless the articles or a written provision require it.
Do I file the operating agreement with the Tennessee Secretary of State?
No. There is no form for it, no filing channel and no fee, because it is a private contract. The state fees you do pay are $300 to form the company and $300 for the annual report.
What are the three management forms a Tennessee LLC can choose?
Member-managed, manager-managed and director-managed. Section 48-249-202(a)(4) requires the articles of organization to state which one applies, and a director-managed company must also have a president appointed by a majority vote of the directors under section 48-249-401(d).
How are votes counted in a Tennessee LLC with no agreement?
Per capita. Section 48-249-405(a) provides that each member, manager or director has equal voting power per capita with each other member, manager or director. Ownership percentage does not change the count unless the LLC documents say so.
What happens to a Tennessee LLC membership interest when a member dies?
It terminates. Section 48-249-503(a)(8) terminates the interest on the death of an individual member, and section 48-249-505(b)(2) then gives the personal representative sixty days to require the company to purchase it, followed by a sixty-day option for the company.
Can a Tennessee LLC creditor foreclose on a membership interest?
The act does not provide for it. Section 48-249-509 lets a court charge the member's financial rights, gives the creditor only the rights of a transferee, and states that the section is the sole and exclusive remedy of a judgment creditor with respect to the membership interest or financial rights.
Can a Tennessee operating agreement waive the statute?
Mostly, yes. Section 48-249-205(a) records the express intent of the legislature that members may modify, alter or waive any provision of the act in the LLC documents, except the twenty-one items listed in subsection (b), which include the duty of loyalty and the obligation of good faith and fair dealing.
Need a custom Tennessee Operating Agreement?
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Doing this in Tennessee specifically: Tennessee operating agreement covers the state detail. There is no state form and no fee, because the document is never filed.
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Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
