Whether you’re starting a company, hiring your first employee, or trying to untangle a dispute with a business partner, you’re dealing with business law. It’s a broad area that covers pretty much everything related to forming, running, and eventually closing or transferring a business. This guide walks through the basics: what business law actually covers, the different types of business entities, and what Tennessee specifically requires of employers and business owners.
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Business law, sometimes called commercial law, is the body of law that governs how businesses are formed, operated, financed, and, when necessary, dissolved. It also covers the rules that govern relationships between a business and the people it interacts with, including employees, customers, vendors, and other businesses. In Tennessee, business law draws from several parts of the Tennessee Code Annotated, most notably Title 48 (corporations, LLCs, and other business entities), along with state and federal employment statutes, contract law, and various licensing and regulatory requirements depending on the industry.
Choosing and setting up the right legal structure for a business, whether that’s a sole proprietorship, partnership, LLC, or corporation.
The agreements that govern relationships with customers, vendors, contractors, and partners, and what happens when one side doesn’t hold up its end.
The rules governing hiring, wages, workplace safety, discrimination, termination, and the broader employer-employee relationship.
The permits, licenses, and industry-specific regulations a business needs to operate legally.
Protecting a business’s trademarks, trade names, trade secrets, and other intangible assets.
Leasing, buying, or selling property used for business purposes.
Conflicts between business partners, shareholders, or members, and how those disputes get resolved.
The legal process of buying, selling, or combining businesses.
The legal steps required to properly close down or wind up a business.
The business-specific tax obligations that come with different entity types and business activities.
Choosing a business structure affects everything from your personal liability to how you’re taxed to how much paperwork you’ll deal with. The main options in Tennessee include:
The simplest structure, with no legal separation between the owner and the business. It requires the least paperwork to set up, but the owner is personally liable for all business debts and obligations.
Two or more people running a business together without forming a formal entity. Partners are generally personally liable for the business’s debts, and each partner can typically bind the others in business dealings.
A partnership with at least one general partner, who manages the business and holds personal liability, and one or more limited partners, who typically have liability limited to their investment.
One of the most popular structures for small and mid-sized businesses in Tennessee, an LLC combines the liability protection of a corporation with more flexible management and tax treatment.
A more formal structure that exists as a separate legal entity from its owners, offering strong liability protection but generally more regulatory requirements, like a board of directors and required meetings.
Not a distinct entity type under Tennessee law, but a federal tax election available to eligible corporations (and some LLCs) that allows income to pass through to owners’ personal tax returns.
An entity formed for charitable, educational, religious, or other qualifying purposes, rather than for generating profit for owners, with its own set of formation and compliance requirements.
Tennessee employers have to navigate a mix of state and federal requirements. Here’s a closer look at the major areas.
Tennessee is an at-will employment state, meaning that, absent a contract or specific legal exception, either the employer or the employee can end the employment relationship at any time, for almost any reason. Important exceptions include terminations that violate anti-discrimination laws or retaliate against protected activity.
Tennessee doesn’t have its own state minimum wage law, so the federal minimum wage under the Fair Labor Standards Act generally applies. Tennessee also has its own laws governing pay frequency and final paychecks after termination.
The Tennessee Human Rights Act prohibits employment discrimination based on characteristics like race, sex, age, religion, national origin, and disability, generally paralleling federal protections.
Most Tennessee employers with five or more employees are required to carry workers’ compensation insurance, which provides benefits to employees injured on the job.
Employers have general obligations to maintain a safe workplace under both federal OSHA standards and applicable state requirements.
Tennessee employers generally must pay into the state’s unemployment insurance program, which provides temporary benefits to eligible workers who lose their jobs through no fault of their own.
Tennessee employers are generally required to report newly hired employees to the state within a set window, primarily to help enforce child support obligations.
Correctly classifying workers as employees versus independent contractors, and as exempt versus non-exempt for overtime purposes, is a frequent source of legal exposure.
Tennessee courts will enforce non-compete agreements, but only if they’re reasonable in scope, geography, and duration, and are otherwise necessary to protect a legitimate business interest.
Because employment law involves overlapping state and federal requirements, and the specific rules that apply can depend on the size and nature of a business, it’s worth reviewing your policies with an attorney rather than assuming a one-size-fits-all approach.
Tennessee is generally regarded as one of the more business-friendly states in the country, for a few common reasons.
Tennessee doesn’t impose a state income tax on wages, though the state does tax certain business income and receipts through other mechanisms.
Compared to many states, Tennessee has a reputation for lighter regulatory requirements and a more streamlined business formation process.
Employees generally can’t be required to join or financially support a union as a condition of employment.
Significant business growth and relocation in recent years, supported by state and local economic development incentives.
That said, “business-friendly” doesn’t mean “regulation-free.” Tennessee businesses still have to comply with licensing requirements, employment laws, tax obligations, and industry-specific rules, and the consequences for getting these wrong, whether through fines, lawsuits, or lost licenses, can be significant. Being in a favorable state doesn’t replace the need for sound legal guidance when forming or running a business.
Starting a business in Tennessee generally involves a few key steps.
Decide whether an LLC, corporation, partnership, or sole proprietorship best fits your goals and liability tolerance.
LLCs and corporations generally need to file formation documents, like a charter or articles of organization, with the Tennessee Secretary of State.
Most businesses need a federal Employer Identification Number from the IRS for tax purposes.
This may include sales tax, business tax, and other state-specific registrations depending on the nature of the business.
Requirements vary widely depending on industry, location, and business activity.
If you’re hiring, this means putting proper wage, classification, and workplace safety practices in place from the start.
This might include an operating agreement for an LLC, bylaws for a corporation, or a partnership agreement, depending on your structure.
A lot of business legal problems fall into a handful of recurring categories.
Partner and shareholder disputes, disagreements between business owners over management, profits, or direction.
Breach of contract, when a customer, vendor, or partner doesn’t follow through on agreed terms.
Employment disputes, covering wrongful termination claims, wage disputes, and discrimination allegations.
Non-compete and trade secret disputes, when a departing employee or partner allegedly violates restrictive covenants.
Business formation and structuring issues, problems from an improperly formed or poorly documented entity.
Licensing and regulatory compliance issues, arising when a business operates without proper permits.
Commercial lease disputes, disagreements between a business and a landlord over lease terms or obligations.
Debt collection and creditor issues, when a business needs to collect money it’s owed, or is facing collection efforts.
Mergers and acquisitions complications, disputes arising during the sale or combination of businesses.
Business dissolution disputes, disagreements over how to properly wind down a business and distribute assets.
Business law often overlaps with other legal topics.
Running a business involves a lot of moving legal pieces, and small mistakes in formation, contracts, or employment practices can create expensive problems later. At Dahl Family Law, we bring:
A clear understanding of Tennessee’s business formation and employment laws.
Careful attention to contracts, compliance, and entity structuring.
Experience handling partner, shareholder, and employment disputes.
Straightforward guidance whether you’re starting, running, or exiting a business.
It's not always legally required, but an attorney can help make sure your entity is formed correctly, your foundational agreements are sound, and you're set up to avoid common early mistakes.
Both offer liability protection, but they differ in management structure, formality requirements, and taxation. LLCs generally offer more flexibility and simpler compliance, while corporations follow a more rigid structure with a board of directors and required corporate formalities.
Yes. Absent a contract or specific legal exception, either an employer or employee can generally end the employment relationship at any time, though important exceptions apply, particularly around discrimination and retaliation.
Most Tennessee employers with five or more employees are required to carry workers' compensation coverage, though certain industries and business types may have different requirements.
Tennessee courts will enforce non-compete agreements, but only if they're reasonable in scope, geography, and duration, and genuinely necessary to protect a legitimate business interest.
Whether you’re forming a new business, managing employees, or resolving a dispute, having the right legal guidance protects your investment and your peace of mind.
Dahl Family Law provides representation in a wide range of family law matters, including:
This guide is intended for general informational purposes only and does not constitute legal advice. Business matters are fact-specific, and outcomes depend on the details of your situation. Please consult with a licensed Tennessee attorney regarding your specific circumstances.
