Tennessee costs more at the door than most states: at least $300 per LLC, $500 for the Rule 506 notice filing, and a franchise and excise tax that reaches LLCs other states leave alone. Each charge has an answer. A $150 exemption filing replaces adviser registration for most private fund managers, the tax code contains an exemption written for investment funds, and the state taxes no personal income at all. The trick in Tennessee is knowing which filings turn the defaults off.
The structure is the same as everywhere: federal law does the heavy work. Rule 506(b) exempts the offering from Securities Act registration, and Section 3(c)(1) of the Investment Company Act excludes the fund from the definition of an investment company at up to 100 beneficial owners. Securities sold under Rule 506 are covered securities under Securities Act Section 18(b)(4)(F), so Tennessee cannot impose registration or merit review on the offering. What it can require, and does, is a notice filing with a $500 fee.
Two Tennessee specifics deserve attention before the first sale. The state adopted the NASAA model private fund adviser exemption effective December 25, 2023, so a manager advising only qualifying private funds files a truncated Form ADV with the Securities Division for $150 instead of registering; before that date these managers had to register. And the notice deadline has teeth: under the Division's rule, a Rule 506 filing that lands more than 25 calendar days after the first Tennessee sale is a deficiency that cannot be remedied. Everything below traces to the Tennessee Code, the Division's rules, or official state pages, with citations on each requirement.
Five steps to launch in Tennessee
Generate Documents
FreeOffering documents come first because everything else refers to them. Hedgia generates the offering circular, both operating agreements, and subscription documents at no charge, whether or not you launch on the platform.
Create LLCs
A Tennessee fund uses two entities: a management company LLC and a fund LLC. Each files articles of organization with the Secretary of State for $50 per member, with a $300 minimum and $3,000 maximum. A typical new fund entity pays the $300 minimum. Hedgia forms both and obtains the EINs.
Create Accounts
Form D goes to the SEC within 15 days of the first sale. Tennessee then gets a copy of that executed Form D, a statement of the date of first Tennessee sale, and a $500 nonrefundable fee within 15 days of the first sale in the state. Hedgia prepares and submits both filings at your direction and sets up banking through Axos Bank.
Invite Investors
Under Rule 506(b) the fund can take unlimited accredited investors and up to 35 non-accredited purchasers who meet the rule's sophistication standard, with no general solicitation. Section 3(c)(1) caps the fund at 100 beneficial owners. A Tennessee manager relying on the private fund adviser exemption takes on one more condition: qualified clients only.
Start Your Fund
Once funded, operations begin: NAV tracking, management and performance fees, investor reporting, and K-1 preparation. Tennessee's recurring obligations are the annual reports, the notice renewal, the adviser exemption renewal, and the franchise and excise filings.
* $89/month includes 3 manager seats. Additional seats $30/month each. Plus 0.2% of AUM above $1 million, capped.
Tennessee requirements at a glance
The law behind each requirement
Rule 506(b): the federal exemption most funds use
Rule 506(b) of Regulation D exempts the offering from Securities Act registration. It allows unlimited accredited investors and up to 35 non-accredited purchasers per offering, with no general solicitation. Because Rule 506 securities are covered securities, states cannot layer registration or merit review on top; a notice filing, a fee, and consent to service of process are all a state may require.
- •Unlimited accredited investors; up to 35 non-accredited purchasers who meet the sophistication standard
- •No general solicitation or advertising
- •Form D due to the SEC within 15 days of the first sale
- •Covered security status under Securities Act § 18(b)(4)(F) preempts state registration and merit review
Tennessee's Rule 506 notice filing: $500 and a hard deadline
Tennessee cannot register or review a Rule 506 offering, so it requires a notice filing instead. The filing is a copy of the completed and executed Form D as filed with the SEC, a statement of the date of first sale in Tennessee, and the $500 nonrefundable fee, submitted to the Securities Division. A missed filing risks a stop order under T.C.A. 48-1-125(c), and unlike most states, Tennessee's rule sets a point of no return on lateness.
- •Due no later than 15 days after the first sale of the covered security in Tennessee
- •No separate consent to service of process; the executed Form D carries it. Form U-2A, the Uniform Form of Corporate Resolution, accompanies the filing if applicable
- •Effective for one year; a continuous offering renews before expiration with concurrent SEC amendments and a $100 fee, and electronic filing through the NASAA Electronic Filing Depository is permitted
- •A filing delay beyond 25 calendar days from first sale is a deficiency that cannot be remedied, and a filing more than 30 days after first sale draws a late fee in an amount the commissioner sets by rule; confirm the current amount with the Division
Adviser registration is the default, with two exits
T.C.A. 48-1-109(c) makes it unlawful to transact business from, in, or into Tennessee as an investment adviser or investment adviser representative unless registered or exempt. Registration runs through IARD on a calendar year basis: $200 for the firm and $50 per representative, expiring December 31 unless renewed. Two exits matter for fund managers: a de minimis exemption from the definition, and the private fund adviser exemption on the next card.
- •De minimis: a Tennessee domiciled adviser with fewer than 15 clients in the preceding 12 months, no general holding out to the public, and no registered investment company clients is exempted from the definition (Rule 0780-04-03-.05(1)(b))
- •An out of state adviser with no Tennessee place of business is excluded if its only Tennessee clients are institutional or it had no more than 5 Tennessee clients in the preceding 12 months (T.C.A. 48-1-102(13)(E))
- •Registered broker dealer agents, and partners, officers, directors, or employees of a registered investment adviser other than clerical staff, cannot use the de minimis exemption
- •Division guidance from July 2025: the de minimis exemption never excuses the custody rule; an adviser with custody of client funds or securities cannot rely on it unless it is an SEC registered adviser complying with SEC Rule 206(4)-2
The private fund adviser exemption: $150 and three fund conditions
Effective December 25, 2023, Tennessee adopted the NASAA model private fund adviser exemption. It covers an adviser domiciled in Tennessee that advises solely qualifying private funds as defined in SEC Rule 203(m)-1, with no Rule 506(d)(1) disqualifying events. Federal exempt reporting adviser status does not by itself excuse Tennessee registration; this state exemption is the piece that does, and it dovetails with the federal filing. An SEC registered adviser cannot use it and instead makes federal covered adviser notice filings of $100 initial and $100 annual under T.C.A. 48-1-109(c)(2).
- •File each report an exempt reporting adviser files with the SEC, the truncated Form ADV under SEC Rule 204-4, with the Division through IARD: $150 initial and $150 annual renewal
- •For a 3(c)(1) fund that is not a venture capital fund: every beneficial owner a qualified client under SEC Rule 205-3 at purchase, measured after deducting the primary residence from net worth; written disclosure of services, duties, and material information at purchase; and annual audited financial statements delivered to each owner
- •Employees of an exempt private fund adviser need no representative registration, and an adviser meeting the reporting and fund conditions is not subject to the state custody rule
- •An adviser that becomes ineligible has 90 days to register or notice file; funds formed before the rule with owners who are not qualified clients are grandfathered if the fund stopped admitting such owners as of the effective date
Section 3(c)(1): the 100 investor exclusion
A private fund avoids Investment Company Act registration through Section 3(c)(1), which excludes from the definition of investment company any issuer whose securities are beneficially owned by not more than 100 persons and which is not making a public offering. It is an exclusion from the definition, not an exemption, so the Act's registration machinery never attaches. In Tennessee the 100 owner ceiling pairs with the qualified client condition of the state adviser exemption.
- •No more than 100 beneficial owners of the fund's securities
- •No public offering, which pairs naturally with a 506(b) private placement
- •Counting beneficial owners has traps for entity investors; structure with counsel
- •Funds that outgrow 100 investors look to Section 3(c)(7), which requires every investor to be a qualified purchaser
The Tennessee tax layer, and the exemption built for funds
Franchise and excise tax reaches LLCs by default
Every LLC doing business in Tennessee with substantial nexus owes the excise tax, 6.5 percent of Tennessee taxable income, and the franchise tax, 0.25 percent of net worth with a $100 minimum, regardless of federal pass through status (T.C.A. 67-4-2007, 67-4-2119). A single member LLC that is disregarded for federal income tax is not disregarded for franchise and excise purposes unless its single member is a corporation. Both the fund LLC and the management company LLC are in scope unless an exemption applies, and the management company's fee income is active income, so it generally owes the tax.
The diversified investing fund exemption is written for funds
The diversified investing fund exemption in T.C.A. 67-4-2008 covers an LLC, LLP, LP, or business trust formed and operated for the primary purpose of buying, holding, or selling qualifying investment securities on its own behalf, where at least 90 percent of the cost of total assets sits in qualifying investment securities, bank deposits, and necessary office space and equipment, at least 90 percent of gross income is interest, dividends, and gains from those securities, and capital comes primarily, defined in the statute as over 50 percent, from investors unaffiliated with the fund. Qualifying securities are broad: stocks, bonds and other debt, options, warrants, repurchase agreements, loan participations, and interests in other funds. Claim it on Form FAE 183 and renew annually by the 15th day of the fourth month after year end. A fund running a direct lending strategy should confirm fit with the Department of Revenue or counsel before relying on it.
FONCE, OME, and venture capital exemptions rarely fit
The family owned noncorporate entity exemption requires at least 95 percent family ownership, so outside investors break it. The obligated member entity route requires members to assume personal liability for the entity's debts like general partners, which defeats the limited liability a fund vehicle exists to provide. The venture capital fund exemption covers a vehicle formed exclusively to buy, hold, or sell securities primarily in nonpublicly traded companies with capital primarily from unaffiliated investors, a fit for a VC style fund but not a trading fund. All three sit alongside the diversified investing fund exemption in T.C.A. 67-4-2008.
No personal income tax since the Hall tax repeal
Tennessee taxes no wage income, and the Hall income tax on interest and dividends was repealed for tax periods beginning January 1, 2021. Managers and Tennessee resident investors owe no state personal income tax on fund distributions. The entity level franchise and excise tax is the tax that matters, which is why the exemption filing above is worth the paperwork.
Tennessee costs more, but the exemptions are built and waiting
The mandatory state tab is $1,100: $600 to form both LLCs at the $300 minimum each, and $500 for the Rule 506 notice once the first Tennessee sale lands. The adviser layer adds $150 a year for most managers through the private fund adviser exemption, which asks three things of a 3(c)(1) fund: qualified client investors, written disclosure at purchase, and audited financial statements delivered annually. Those are real obligations, and the audit is the priciest, but they replace full state registration.
The tax layer is what separates Tennessee from its neighbors. The franchise and excise tax reaches both LLCs by default, so the fund should claim the diversified investing fund exemption on Form FAE 183 and renew it every year, while the management company budgets for tax on its fee income. In exchange, Tennessee takes nothing at the personal level: no tax on wages, and no tax on interest and dividends since the Hall tax repeal in 2021.
Hedgia forms both LLCs, obtains the EINs, prepares and submits Form D and the Tennessee notice filing at your direction, sets up banking through Axos Bank, and runs investor onboarding, NAV, fees, K-1 preparation, and reporting for $89 a month with $0 upfront. Registration and exemption decisions remain yours, made with your counsel. The decision rule for Tennessee: file the notice inside 15 days, file the adviser exemption, file FAE 183, and the state's expensive defaults never reach you.
Tennessee Department of Commerce and Insurance, Securities Division