​Limited Liability Companies (LLCs) are the easiest and most inexpensive business structures that provide owners with protections against personal liability. The members of an LLC are not personally liable for the actions of the company and their personal assets are protected from the business’s creditors. They are the also simplest and most inexpensive business structure in the United States. Below are the steps necessary to forming an LLC in Tennessee.

1. Choose and Register a Name
Tennessee law requires that an LLC name must contain the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC.” After choosing a name for your LLC, you will need to register is with the Secretary of State in the state where you plan to conduct business. Your name must be unique and distinguishable from the names of other business entities already registered with the Tennessee Secretary of State. To ensure someone else is not already using your name, you can check for availability at the Tennessee Secretary of State business name database.

For a filing fee of $20, you may reserve a name of an LLC for up to four months and prior to filing articles of origination by filing an Application for Reservation of Limited Liability Company Name (Form ss-4228) and paying the required $20 fee.

2. Choose a Registered Agent
Tennessee law requires that every LLC must have an agent for service of process in the state. Your registered agent will be the person you designate to receive all official correspondence and legal papers including a lawsuit against the LLC. The registered agent may be a Tennessee resident or a business entity authorized to do business in Tennessee, and must have a physical street address in Tennessee. The registered agent must be chosen prior to filing articles of organization because most state require the registered agent’s name and address to be listed on the form.

3. File Articles of Organization
In Tennessee, an LLC is created by filing Articles of Organization (Form ss-4270) with the Secretary of State which officially brings your LLC into existence. The articles require basic information about your LLC such as the name, principal place of business, management type, name and address of the registered agent and the duration of the LLC if not perpetual.

The articles may be filed online, with an additional convenience fee, or by postal mail. The filing fee is $50 per LLC member. The minimum fee is $300 and the maximum fee is $3,000.

4. Obtain an Employer Identification Number; Business Licenses and Register with the Dept. Rev.
Any business that has employees or operates as a corporation or partnership is required by the IRS to have an EIN, a nine-digit number assigned to businesses for tax purposes. This rule is applicable because since LLCs are creatures of state law, they are classified for federal tax purposes as either a corporation partnership. An EIN may be obtained by completing an online EIN application on the IRS website. There is no filing fee.

Additionally, depending on its type of business and where it is located, an LLC may need to obtain other local and state business licenses.

Finally, in some instances, for example if the LLC will be selling goods and collecting sales tax, you will need to register with the Tennessee Department of Revenue. This can be done online or by completing a paper form.

5. Draft an Operating Agreement
Tennessee, like many states, does not require an operating agreement. Nevertheless, it is highly advisable and useful document to have. An LLC’s operating agreement should include detailed information about its management structure, including an ownership breakdown, by percentage member voting rights, powers and duties of members and managers, and how profits and losses are to be distributed.

6. Set Up a Business Checking Account
One of the most important things you can do to ensure that limited liability remains in place is to ensure you keep your business and personal finances separate. One of the most critical things you can do is t set up a small business checking account in the name of the LLC. Having a separate checking account for your LLC draws a bright line between business and personal affairs.

7. File Annual Returns and Pay Franchise and Excise Taxes
To administer you LLC each year you must file a annual report. All Tennessee LLCs and foreign LLCs authorized to do business in the state must file an annual report with the Tennessee Secretary of State. There is a $50 filing fee per member (minimum of $300 and maximum of $3,000). Annual reports are due on or before the first day of the fourth month following the LLC’s fiscal year closing. Finally, Tennessee also imposes a franchise tax and an excise tax on most LLCs.

A Limited Liability Company (LLC) is simplest and most inexpensive business structure in the United States whereby the owners or members of the LLC are not personally liable for the company’s debts or liability. Two advantages to purchasing a home using an LLC include privacy and protection. By choosing to buy a home using an LLC, the owners of the LLC remain anonymous as their name does not become a part the public record and they are personally protected from individual liability in the event of a lawsuit.

Privacy for Homeowners Because the LLC Is Listed as the Property Owner
An LLC is the preferred way to acquire property for buyers who do not want their names or addresses in public record. An LLC prevents a buyer’s name from entering the public record because the name of the LLC appears on all public records, and not the name of the members or owners of the LLC. Thus, for those who do not want others digging through public records and obtaining their names and addresses, the LLC is a perfect solution. By using an LLC, it is difficult for someone to figure out your address or how much you paid for a property unless they know the name of your LLC.

An LLC Provides Owners More Protection in the Event of a Lawsuit
If someone owns their residence in their name, anyone who is injured on their property can sue them directly. Any lawsuit that exceeds their homeowner’s insurance (and umbrella insurance) will place other assets––including savings, investments and home equity––at risk of being garnished to pay the rest of the damages.

On the other hand, the biggest advantage of an LLC is that the members are not personally liable for the actions of company. The members personal assets (homes, cars, bank accounts, investments, etc.) are protected from creditors seeking to collect from the LLC. Therefore, if you own your home in an LLC, then the lawsuit can only name the LLC, and the only assets that can be used to pay off the suit are those assets held in the LLC, which usually would be limited to your home.

Investors purchasing properties they intend to rent to tenants commonly use an LLC because of the liability protection offered by the structure. When owning property as an LLC, property taxes and other homeowner expenses are paid by the LLC. One additional cost with an LLC (in addition to start-up costs such as legal and filing fees), is an annual-report filing fee which varies from state-to-state.

Pursuant to 8 Del .C. § 220, stockholders of Delaware corporations the ability to inspect certain corporate books and records provided they have a “proper purpose” for seeking such materials. This statute can provide an important tool for stockholders seeking to investigate allegations of corporate wrongdoing.

What Must a Stockholder Establish to Enforce an Inspection Right Under Section 220?
First, pursuant to Section 220(b), the stockholder must make a demand under oath and state his status as a stockholder, and provide documentary evidence of his beneficial ownership of the stock, and state that such documentary evidence is a true and correct copy of what it purports to be. The demand must be directed to the corporation at its registered office in this State or at its principal place of business.

Then, in order to be able to enforce an inspection right under Section 220, the stockholder must establish both: (1) a “proper purpose” for the inspection (DGCL Section 220(b)); and (2) that the scope of the books and records the stockholder seeks to inspect is no broader than what is “necessary and essential to accomplish the stated, proper purpose.” Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del. 2002).

What Constitutes a Proper Purpose?
Section 220(b) defines a proper purpose as “a purpose reasonably related to such person’s interest as a stockholder.” Delaware court have recognized that alleged mismanagement, waste, or wrongdoing by fiduciaries as proper purposes for a books and records inspection and are frequently asserted by stockholders making inspection demands. However, the courts have also repeatedly recognized they may not be asserted in conclusory fashion to meet the proper purpose requirement. Instead, a stockholder must explain why that purpose is relevant to its interest as a stockholder; for example: to seek corporate governance or other reforms; to prepare for a proxy fight; or to file a shareholder derivative action.

To establish a proper purpose of investigating corporate, Delaware courts require “some evidence” suggesting a “credible basis” from which a court can infer that mismanagement might have occurred. A stockholder may meet this standard, by presenting evidence, in the form of “documents, logic, testimony or otherwise,” from which the court can infer wrongdoing. In determining whether there is a credible basis to infer wrongdoing or mismanagement, the Court of Chancery will consider allegations raised in a separate complaint to determine whether there is a credible basis to infer wrongdoing or mismanagement, when such complaint is supported by sufficient and extensive supporting documents and testimony.

For example, in In re UnitedHealth Group, Inc. Section 220 Litig., C.A. No. 2017-0681-TMR (Del. Ch. Feb. 28, 2018), the court granted plaintiff*s Section 220 demand. The Court found that allegations raised in a complaint filed by the U.S. Department of Justice against the Defendant corporation, UnitedHealth Group, Inc. established a credible basis to infer wrongdoing or mismanagement based on the allegations in the qui tam action, when such allegations were sufficiently supported by documentation and testimony.

What Documents Are Deemed Necessary when Investigating Wrongdoing?
Delaware courts have observed that the following materials are typically necessary and essential when investigating alleged wrongdoing: (1) minutes from relevant board meetings and board committee meetings; (2) materials provided to the board or its committees in connection with those meetings, including presentations made to the board or its committees; and (3) relevant corporate policies and procedures.

In order for a stockholder to obtain documents beyond relevant portions of board minutes and other board materials, and corporate policies and procedures, he must establish the requested documents are “necessary and essential.” Documents are “necessary and essential: when they: (1) address the crux of the stockholder’s stated purpose; and (2) are unavailable from other sources.

Finally, under the Garner doctrine, a stockholder may access a corporation’s privileged documents in certain circumstances on a showing of “good cause.” In determining whether good cause exist, because is a fact driven inquiry, courts may rely on a number of factors to find good cause, including: (1) the nature of the stockholder’s claim and its viability; (2) the necessity of the stockholder having the information and its availability from other sources; and (3) if the stockholder’s claim is of wrongful action by the corporation, whether the action is criminal, illegal, or of doubtful legality. Garner v. Wolfinbarger, 430 F.2d 1093, 1104 (5th Cir. 1970).