Tennessee is an excellent place to start a business because of its favorable regulatory climate, robust infrastructure, and proven dedication to promoting a business-friendly atmosphere. Tennessee has one of the lowest cost of living rates in the country, and residents pay no state income tax and have among of the lowest property tax rates in the country.
Here are a few small business statistics that show how entrepreneurs in Tennessee are making a positive impact on the state’s economy.
Quick Tennessee Small Business Statistics for Entrepreneurs
- Close to 99.5% of private enterprises in Tennessee are small businesses.
- 42.4% of employees in Tennessee work for small businesses.
- Military veterans make up 6% of employees and own 8.1% of small businesses.
- Racial minorities own 21% of businesses.
- The per capita disposable income in Tennessee is $46,900.
- Small businesses in Tennessee exported goods worth $4.2 billion in 2019.
- Manufacturing employs around 10,934 people in Tennessee.
- Tennessee has a five-year business survival rate of 50%.
- The per capita consumption expenditure in Tennessee is $36,340.
- The 2021 CNBC “Top States for Business” report ranks Tennessee fifth out of the 50 states.
Tennessee Small Business Statistics
1. What is considered a small business in Tennessee?
In order to establish a small business, entrepreneurs must adhere to industry standards set by the Small Business Administration (SBA), which defines a small business in terms of either the average number of employees over the past 12 months (1–500) or the average annual receipts over time ($16.5 million or less).
There are 636,842 small businesses in Tennessee that represent 99.5% of all private enterprises in the state. The state accounted for 101,631 of all new business applications submitted nationwide from January 2021 to January 2022 (5.8 million), the 18th highest number of applications among all states. Adjusting for population, though, Tennessee had 1,488 applications per 100,000 residents, which was more than the national average and ranked 24th among states.
When forming a limited liability company (LLC) in Tennessee, it’s best to employ an LLC formation service to prepare and submit your registration papers to the Tennessee Secretary of State on your behalf, saving you a lot of time and money. Read my review of the best LLC Services in Tennessee to find out which firm is ideal for your company.
2. How many people are employed by small businesses in Tennessee?
There are 1.1 million small business employees that account for 42.4% of Tennessee’s payrolled workforce.
Tennessee is one of five states without a minimum wage statute or exemptions for certain types of workers, such as tipped employees and full-time students. If a state does not have a minimum wage, the federal rate of $7.25 is applied. Because Tennessee does not have overtime legislation, federal overtime standards apply.
3. Tennessee small business statistics by industry
The construction industry is the largest single industry in Tennessee in terms of small business investment, with a total 75,877 firms currently operating in it. There are 65,876 firms in this industry that have no employees, 8,802 with 1–19 employees, and only 1,199 have 20–499 employees.
The utilities industry is the smallest in Tennessee with just 285 firms operating in it.
4. Tennessee small business ownership by ethnicity
The Volunteer State has a population of 6,975,218 residents. White/Caucasian Americans are the largest ethnic group in the state, representing 78.4% of the population. They are followed by Black/African Americans (17.1%), Hispanic/Latino Americans (5.7%), Asians (2%), American Indians and Alaska Natives (0.5%), and Native Hawaiians and Other Pacific Islanders (0.1%).
The data below show how small business ownership is distributed among these ethnic groups:
- White/Caucasian — 501,094
- Black/African American — 80,539
- Hispanic/Latino — 21,175
- Asian — 18,953
- American Indian and Alaska Native — 1,011
- Native Hawaiian and Other Pacific Islander — 200
5. Tennessee small business ownership by gender
Women own 235,863 small businesses in Tennessee. Around 221,000 of them are nonemployer businesses and another 14,863 have employees. Men own 345,442 small businesses in the state, and 288,000 of them have no employees, while 57,442 have employees on payroll.
There are also 20,432 small businesses that are owned by both men and women.
6. Business taxes in Tennessee
Standard LLCs are pass-through tax entities in most states, which means they do not have to pay federal or state income taxes. Instead, corporate revenue is dispersed to individual LLC members, who pay federal and state taxes on the amount they earn.
Tennessee, on the other hand, does not consider LLCs to be pass-through entities and instead requires them to pay both the state excise tax and the state franchise tax. Individual members, on the other hand, do not owe state tax on the share of the company’s net revenue they eventually earn.
it is possible to have your LLC classified as a corporation. In that case, the LLC would be subject to federal corporate income tax. However, this change in classification would not affect the LLC’s Tennessee tax obligations. The top corporate tax rate in Tennessee is 6.5%.
It is critical to always file your tax returns on time, or else your company may find itself in legal and/or financial difficulty. Hiring a qualified registered agent will significantly reduce your tax filing burden. To learn how, read my review of the best registered agents in Tennessee.
7. How COVID-19 affected small businesses in Tennessee
Tennessee has the 24th highest economic exposure to COVID-19 of all states in the US based on the percentage of employees working in industries with a high or medium-high degree of exposure to COVID-19.
Approximately 1,828,790 Tennessee employees work in sectors with a high or medium-high level of economic exposure to COVID-19, accounting for 51% of all employees. Also, 17% of all Tennessee employees, or 597,921 people, work in industries with a low or medium-low degree of economic exposure to COVID-19.
8. Small business financing in Tennessee
The Community Reinvestment Act (CRA) is a federal statute passed in 1977 to encourage depository banks to address the credit requirements of the communities in which they are established, especially low- and moderate-income areas.
Large banks are required by the Community Reinvestment Act to disclose new small business loans. In 2019, reporting banks gave out $1.9 billion in loans to Tennessee firms with less than $1 million in revenue. Total reported new lending to firms with loans of $100,000 or less was $1.4 billion, while total reported new lending to businesses with loans of $1 million or less was $5 billion.
9. Tennessee small business export statistics
According to the Census Bureau’s profile on importing and exporting companies, a total of 7,356 recognized firms exported items worth $29 billion from Tennessee in 2019. Approximately 6,070 (82.5%) of the exporters were small businesses that shipped items worth $4.2 billion, accounting for 14.6% of total exports by all recognized businesses.
The Final Word
Tennessee is preferred by businesses, investors, shareholders, and executives for its excellent fiscal management and major new investments in the business environment. Tennessee’s fiscal prudence has enabled the state to make significant improvements in public education, workforce development, and foreign commercial reach.
Tennessee is dedicated to improving residents’ lives through ambitious educational initiatives, and the state is now poised to be a major location for business owners for many years to come.
- CNBC – Top States for Business
- The Census Bureau
- Tax Foundation
- Tennessee Hot Jobs
- Center Square
- Tennessee Department Of Economic And Community Development
- US Small Business Administration