Forming an LLC in Hawaii
A limited liability company (LLC) is a business entity that many small businesses choose as a way to organize themselves when they are just getting started. An LLC is a great option for business owners looking to grow a small business and provide liability protection for their personal assets. If you have decided to form an LLC in Hawaii, here is a step-by-step guide for how to create a fully operational Hawaii LLC.
Steps to Forming an LLC in Hawaii
Name Your LLC
Creating a legally proper Hawaii LLC name and then protecting it is one of the first actions in LLC formation. This is a process that can be complex and time-consuming but is essential for the LLC to operate legally in Hawaii.
The first thing you have to do is create a great name. Hawaiian law requires that the business name be unique and different from any other company's name. You should do a name search on the Hawaii Business Registration Division's business name availability search page to make sure that your chosen name isn't already in use for an existing business.
This search is just a preliminary step to the state filing. You still need to go through the registration process to get your name approved by the state. The name you use to register must contain “Limited Liability Company" or one of these abbreviations:
The name of the LLC cannot use any variation of the word “corporation." It cannot use language considered obscene or that claims a profession or business affiliation that does not exist. Hawaii also allows you to reserve your business name through the Hawaii Business Express website for 120 days while the formation process is going forward. Reserving a name is not a guarantee that your name will be approved but prevents anyone else from using it for that time.
Get a Registered Agent
The State of Hawaii requires an LLC to have a registered agent for service of process before formally filing with the state. A registered agent is designated to receive process (legal documents) on behalf of the LLC. A Hawaii registered agent can be an individual or a company (domestic or foreign), but it must have a physical street address in Hawaii. New LLCs often choose to use a professional registered agent service.
File Your Articles of Organization
To register your new business in the state of Hawaii, you must file Articles of Organization for Limited Liability Company (Form LLC-1) with the Hawaii Consumer Affairs Business Registration Division (BREG). You can sign up for an eHawaii.gov account and file and get information through the Hawaii Business Express website. You can also file by mail or in person.
Articles must be typewritten or printed in legible black ink. If you need additional space, use an attachment that is typewritten or printed in black ink on 8-1/2 x 11 white bond paper, printed only on one side. The articles must be signed in black ink and certified by at least one organizer of the company.
Your Hawaii articles of organization will contain the following information:
- LLC name and mailing address
- Name and physical address of the registered agent
- Organizer name
- Additional members and their addresses
- Organizer signature(s)
The filing fee is $50 ($25 additional fee for expedited service). For mail or walk-in filings, payment by check or credit card is accepted. Checks should be made payable to the Department of Commerce and Consumer Affairs.
Draft an Operating Agreement
Although not required under Hawaii law, you should consider preparing an LLC operating agreement for your new business. This is not required under Hawaii law, but it is a good idea, to keep everybody's interests clear.
An operating agreement can come in handy in the event of a dispute between members. An operating agreement typically includes the following points:
- Percentage of members' ownership
- Voting rights and responsibilities
- Powers and duties of members and managers
- Distribution of profits and loses
- Holding meetings
- Procedures for transferring interests
Get an EIN
You must apply for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS) if your LLC will have employees or has more than one member. You can apply online through the IRS website. An EIN is similar to a Social Security number but assigned to businesses. You will be subject to all federal tax withholding rules.
Set Up Business and Tax Accounts
Your Hawaii LLC may need to apply for tax licenses from the Department of Taxation and register as an employer with the Department of Labor and Industrial Relations. You can register your LLC with Hawaii Tax Online to get a State Tax Identification Number (BB-1), file tax returns, make payments, and manage your accounts. You can check with Hawaii's Professional & Vocational Licensing Division (PVL) to find out if you need specific professional or vocational licenses to operate. You should also contact the county government where your LLC is located for information on special local permits and licenses that may be required.
LLCs in Hawaii are subject to specific business and tax requirements. To ensure your LLC's compliance with these requirements, be sure to familiarize yourself with the state's taxes, licenses, and permits.
State Business Tax
Businesses operating in Hawaii are required to register with the Hawaii Department of Taxation to obtain state licenses, permits, certificates, registrations, and exemptions.
State Employer Tax
If your LLC has employees, you need to withhold state income taxes on employee wages for services performed in Hawaii. For services performed outside of Hawaii, employers withhold if:
- Services are performed by an employee whose regular place of employment is in Hawaii
- Wages are paid out of an office in Hawaii or a field office of an LLC whose head office is in Hawaii
Sales and Use Taxes
Your LLC is subject to Hawaii's general excise tax if it receives income from conducting the following business activities in the state:
- Rental of personal or real property
- Business interest income
Business Licenses and Permits
Your LLC may be required to obtain certain federal, state, and local business licenses and permits depending on the type of business it conducts. A table summarizing the types of business licenses in Hawaii can be found on the Tax Department's website.
You should complete and submit the State of Hawaii's Basic Business Application to obtain a tax license for your LLC. Once received, you should display your tax license at your place of business.
Check with Hawaii's Professional and Vocational Licensing Division to confirm licensing requirements if you plan on providing a professional service. There are also local licenses and permits that you may need to get from the city or county government where your LLC is located.
Registration in Other States
If you want to do business in another state, you will likely have to apply to do business as a foreign LLC. You may need to show a certificate of good standing as part of the application process or provide some other proof of your LLC's valid existence and compliance with Hawaii law.
Each year your Hawaii LLC is active in Hawaii, you must file an annual report with the Department of Commerce and Consumer Affairs, Business Registration Division. The date your annual report is due depends on the date your LLC was organized as follows:
- Between January 1 and March 31, on or before March 31 of each year
- Between April 1 and June 30, on or before June 30 of each year
- Between July 1 and September 30, on or before September 30 of each year
- Between October 1 and December 31, on or before December 31 of each year
A $15.00 state fee must be paid upon the filing of your annual report. You should use the annual report to notify the state of any changes to your LLC's address. Annual reports must be signed by a manager of a manager-managed company or by a member of a member-managed company. Failure to file annual reports can result in a $100 penalty for every 30 days you are delinquent and termination of your LLC.