Hiring Employees in Tennessee LLC – Wages, Laws, Compliance Guide


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Any business structure or corporation stands firm on its foundation laid by the employees. An LLC is no exception to this rule. Hiring employees in your LLC comes with some rules, regulations. Before understanding the rules of hiring employees in Tennessee LLC, we must understand what an LLC means.

A Limited Liability Company is a business structure that protects the owners from any personal responsibility of the debts or liabilities arising out of the LLC. If an employee action succeeds to liabilities, the owners get the protection against it. LLCs are a combination of the characteristics of a partnership firm & a sole proprietorship. 

Hiring Employees in Tennessee

In order to hire employees in LLC in Tennessee, there are many requirements that a business has to fulfill. One should keep these points in mind while hiring employees in an LLC. These requirements include:

1. Federal & State Employment posters in Tennessee

The employers in Tennessee are required to show both Federal & State Employment posters mentioned in Equal Employment Opportunities Act, Americans with Disabilities Act, Fair Labour Standards Act (FLSA),  etc. You should seek professional help to fulfill all the norms or requirements.

2. Federal & State Required Forms

Hiring employees is a lengthier process that involves the filing of different forms & applications. Suppose you wish to hire employees in Tennessee. In that case, you must ask your employees to submit the Employment Eligibility Form, the Federal Tax withholding form, the W-4 Form, Workers Compensation Claim Form, Disability Self- Identification Form, U.S. Citizenship and Immigration Services Form, etc. These Legal forms are easy and free to download.

3. Requirements of Tennessee New Hire Reporting program

Employers of Business owners are bound by Tennessee’s New Hire Reporting Program, under which they have to submit a report consisting:

  • Company Name
  • Company Address
  • Company federal tax ID number
  • Employee’s Name
  • Employee’s Social Security Number
  • Employee’s Address
  • First Day of paid Work

In addition to the forms mentioned above, payments, taxes, tax forms, & requirements, there may be some additional compliance for hiring in Tennessee; you must adhere to those norms as well.

Can an LLC Hire Employees?

An LLC or a Limited Liability Company can be regarded as a corporation, partnership, or sole owner business. The owners of the LLC are often referred to as members. Individuals, Corporations &, in some cases, other LLCs can form an LLC as members.

The members form LLCs because of their limited or no liability provided to the owners or members. In the event of liabilities arising out of an employee’s action, the members of the LLC are not personally liable- the LLC is liable for the actionable claim.

Any LLC (even one with a single owner) can hire unlimited employees on wages or salary. (The single-member owner LLC may have different rules and regulations). In addition to the salaried employees, the LLC can appoint Independent contractors for certain tasks on a contract basis. 

Rules to Hire Employees in an LLC in Tennessee?

Just like any other business corporation, an LLC is also not immune from certain procedures & rules of hiring. An LLC files many documents & pays a number of taxes to various Government Agencies while hiring employees. Some of the essential rules or steps to hire employees in an LLC are:

  • Federal Employer Identification Number – Every LLC must obtain an Employer Identification Number (EIN) from the Internal Revenue Service. EIN helps report taxes & a few other documents to the IRS.
  • Employee Eligibility Form – It is mandatory for an LLC owner to check if the employee is eligible for employment in the U.S. An LLC has to ask the employees to submit the I-9, Employment Eligibility Verification Form to verify the identity of the employee & to authorize the employment. the I-9 form is a mandatory requirement while hiring an employee.
  • Employee’s Social Security Number – The employee has to have a valid Social Security Number (SSN) to work. LLCs have to ask the new employees to submit their SSN before employment. The SSN is helpful in payment & tax purposes.
  • Setting up a process for collection & payment of the appropriate taxes – There has to be a due process for the employees’ future collection & payment of taxes. This process needs to be set up by the employer (in this case, the LLC)
  • Employee handbook – In the hiring process, one of the crucial elements of hiring paperwork is an Employee Handbook. Although it is not essential in Tennessee, it is usually needed as one of the legal documents in many other states. An Employee Handbook consists of a complete list of all the basic rules & policies of the company.
  • Tennessee Payroll Taxes – An LLC that is running a business with employees or businesses with employees has to pay many federal taxes & state Taxes. Following the rules on payroll taxes is also an essential requirement.  After hiring employees, an LLC is subject to the State Unemployment Compensation Act. Under the said Act, an LLC will have to pay Unemployment tax to the state & to do that; the LLC must register itself with the Tennessee Workforce Commission. The process involves simple steps & can be completed in 20 minutes. 
    Payroll taxes also include Federal Income Tax withholding, an employer can withhold money from the employee’s account for the income tax.
  • Workers’ Compensation Insurance An LLC operating in the state of Tennessee has to carry workers’ compensation insurance & has to display relevant posters.
  • New Hire Report or Report of the New Employee – An LLC has to
    • Report about hiring the new employees in the form of “Report of New Employee(s)” to the Tennessee Workforce Commission within 20 days from the date of hire.
    • Deposit and report federal employment taxes as per the IRS procedures for payroll reporting & payment.

Laws Relating To Wages Of Employees

Tennessee labor and employment laws include a wide range of topics related to the employer-employee relationship. The business LLCs operating in Tennessee should comply with both the labor laws, the federal legislation as well as State regulations.

  • The federally determined minimum wage in the United States is $7.25 per hour. The minimum wage rate shall be equally applicable to all employers and employees unless they are exempted by any specific law.
  • Discrimination and retaliation against employees in a range of protected classifications are considered to be illegal in the State of Tennessee.
  • There are rules in Tennessee that govern lunch breaks and child labor.
  • Tennessee employers must give final pay after the termination of an employee.

Structure Of Wages Of Employees

As per the Tennessee Wage Regulation Act, “Wage-earners are protected from unfair pay practices”. As your payroll guide, we have listed the determining factors that play an important role in wage structuring in the State.

Tennessee Minimum Wage

There is no State-enforced minimum wage regulation in Tennessee. The qualified employees in Tennessee are entitled to the higher federal minimum wage, i.e., currently $7.25 per hour. However, certain classes of employees are exempted from the standard pay rule.

  • Tipped Minimum Wage: Tennessee businesses must obey the federal tip credit requirements since the state does not have its own tip and wage legislation. The employers in Tennessee businesses are allowed to pay such employees up to $2.13 per hour. In the end, the total earning of the employee should be equal to the federal minimum wage of $7.25 per hour.

Tennessee Overtime Wage

The employees working in the State of Tennessee are entitled to overtime compensation if they work for more than 40 hours in a given workweek. Any employee who works beyond 40 hours in a week shall be compensated at the rate of 1.5 times the usual pay rate of such an employee for the total number of extra hours worked.

Youth Labor

In Tennessee, minors are not allowed to work in any vocation that interferes with their education, health, or well-being. Minors are also barred from working in a range of vocations that require operating a vehicle, such as mining, logging, roofing, and excavating.

Tennessee Employee Rights

Federal and state laws protect employee rights during the course of their employment in Tennessee. The laws aim to strive for a balance in the bargaining powers between the employers and the employees. We have listed the basic rights guaranteed to the employees in the State.

Anti-discriminatory Rights

The Tennessee Human Rights Act (THRA) outlaws discrimination and harassment based on a variety of protected classifications, including race, color, caste, sex, religion, nationality, and creed, at the workplace. Employers should ensure a non-hostile environment for their employees at the workplace.

Equal Pay

Employers in the State are strictly prohibited from discriminating based on sex between employees in the same establishment by prioritizing any employee over another with respect to their reimbursement and compensation amounts. No employer shall offer a lower salary or wage than any employee of the opposite sex for comparable work on jobs requiring comparable skill, effort, and responsibility, and performed under similar working conditions.

Whistleblower Protection

The Tennessee Public Protection Act (TPPA) guards the employees against any form of retaliation from their employers. According to the Act, any employee who reports an unlawful act of their employers to any law enforcement body or governmental agencies should be protected against any form of discrimination or retaliation from their employers. Their jobs are protected from termination if they blow the whistle on their employers.

Workplace Safety

The business LLCs in Tennessee are required by the Tennessee Occupational Safety and Health Act (OSHA) to assure safe and healthy workplaces to their employees by adopting and enforcing protection standards, as well as providing necessary training, information, and support to the employees as and when required.

Final Pay

Employers must settle out the final salaries to employees who have been fired or quit by the next normal paycheck or 21 days following the date of discharge, whichever comes first.

How to Hire Employees Fast in Your Tennessee LLC

If you are a new business in Tennessee, you may be wondering how to hire employees fast. The state of Tennessee has strict rules when it comes to hiring employees. For example, you cannot hire employees from outside the state without a federal employer identification number. In addition, you can’t hire anyone under the age of 21 unless you have an employment contract signed with the Tennessee Department of Employment Services. To avoid running into trouble, make sure you hire only qualified employees who are authorized to work for your Tennessee LLC.

If you are considering hiring employees for your Tennessee LLC, there are a few things you need to do before you can hire workers. First, you need an EIN, or employer identification number, to operate legally. Your EIN is like a social security number, and you can get one for free if you choose the paper version. Next, you need to file for your business license. This license is required if you want to operate a business in Tennessee.

Once your Tennessee LLC has been formed, you must appoint a Registered Agent. This person is responsible for accepting state and legal mail on behalf of your business. The registered agent is listed on your Tennessee LLC’s Articles of Organization. The Secretary of State can accept applications by mail, online, or in person. You must pay a minimum fee of $50 for the state license, and an additional $250 for an employee’s payroll taxes.

FAQs

What Is an LLC?

An LLC is a business entity that can be treated as either a corporation, a partnership, or a sole owner business.

Is the LLC liable for damages caused by employees?

The owners of the company are not personally liable for the actions of the employees, the LLC is liable for any such actions.

What is the IRS Form I-9?

Before hiring an employee, under federal law, the business has to verify an employee’s eligibility to work in the United States with the (IRS Form I-9). The business owner also has to make sure the employee has a valid SSN or Social Security Number.

What is LLC self-employment?

LLC members, or LLC owners, are self-employed according to the IRS because they pay themselves through the earnings of LLC.

In Conclusion

All the LLCs with employees are bound by many rules and regulations with reference to wages. It is always advisable to register a registered agent service to understand the laws better. Feel free to share your feedback with us in the comment section below.

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