Key Things To Note When Forming an LLC in Hawaii
A limited liability company may be formed in Hawaii by submitting the required paperwork to the Hawaii Secretary of State. These papers, like all other business types for the state of Hawaii, can only be done electronically and include a filing charge of $50 for domestic companies and $100 for international businesses.
Both filing documents must be filled out and sent in compliance with Hawaii Revised Statute (CRS) 7-90-301. There will be no need to print and mail any of the necessary paperwork with the streamlined online forms, and most applicants will likely find the procedure far easier than anticipated.
EIN (Employer Identification Number)
You can receive an EIN by filling out a PDF Document (Form SS-4) from the Internal Revenue Service (IRS) or by applying for one on the IRS website. Any limited liability company that hires people involves an EIN in order to pay withheld taxes on such jobs, open bank accounts, register for credit cards, and otherwise function separately as a corporate organization.
Operating agreements are not necessary when establishing an limited liability company in Hawaii, but these operating agreements are highly essential. By forming an limited liability company operating arrangement, you are creating a guideline on how the Hawaii LLC will operate; basically, a model about how the business’s corporate relations will be organized. Creating such an operating agreement has been seen to prevent disagreements between staff and owners.
Renewal of LLC
Both corporate companies shall preserve their good reputation by sending an annual report to the Secretary of State. Renewals may be done electronically in a matter of seconds by utilizing the record identifier or ID search feature (found linked in the heading of this paragraph).
In the state of Hawaii, state authorities only need the registered agent information, the principal office address, and a few other bits of specific information. Both filers and the registered agent must request a $10 filing charge for their periodic report, but this filing fee will escalate if the renewal is late.
Steps To Start LLC in Hawaii
A limited liability company (LLC) is a legal arrangement for a firm. It blends the limited responsibility of a company with the independence and absence of formalities of a partnership or sole proprietorship. Any business owner who wishes to restrict his or her legal responsibility for company defaults and claims should think about creating a Hawaii limited liability company. The following are the measures to form an limited liability company in Hawaii.
1. Choose a Name for Your Hawaii LLC
According to Hawaii statute, an limited liability company’s name must include the term “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC.” “Limited” can be abbreviated as “Ltd.” and “Company” can be abbreviated as “Co.”
The name of your limited liability company must be distinguishable from the names of other corporate companies on file with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division.
Check the Company Registry Division’s business name database to see whether a name is available. A name may be reserved by sending an Application for Reservation of Name to the Company Registration Division. You may file either electronically or by mail. The reservation price is ten dollars.
When doing business in the real world, you are not forced to use the official legal name registered in your Articles of Association. You may instead use a trade mark, often known as a fictional company name, “DBA” (short for doing business as), or presumed name. In the state of Hawaii, simply begin using the name to describe your company.
In addition, you can file your business name with the Hawaii Department of Commerce and Consumer Affairs. You may apply the Application for Trade Name Registration online or via mail (Form T-1).
There is a filing charge of $50. Registration is not required and does not grant ownership rights, however it does notify anyone that you are claiming the term.
2. Appoint a Registered Agent
Any Hawaii limited liability company must have a registered agent in the state for service of process. There is a registered agent or corporate company that offers to sign court documents on behalf of the Hawaii LLC if it is sued. A registered agent may be a resident of Hawaii or a domestic or international company allowed to do business in Hawaii. A physical street address in Hawaii is needed for the registered agent.
3. File Articles of Organization
A Hawaii limited liability company is formed by filing Articles of Organization For Limited Liability Company with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division. The following elements must be mentioned in the articles during the llc formation:
- The name of the Hawaii limited liability company
- The LLC’s address
- The name and address of the LLC’s registered representative the names and addresses of all the limited liability companyll’s organizers the length of the Hawaii limited liability company if not perpetual a declaration as to if the Hawaii LLC would be handled by representatives or managers the names and addresses of the original managers if the Hawaii LLC is Manager-managed or the names and addresses of the initial members if the Hawaii LLC is Member-managed
- A disclaimer stating whether the LLC’s founders are responsible for the company’s debts and commitments, and the organizer’s signature
There is a $50 filing charge. The papers may be sent either online or via letter.
4. Prepare an Operating Agreement
In Hawaii, a Hawaii LLC operating agreement is not necessary, but it is strongly recommended. This is an organizational guide that outlines how the Hawaii LLC will operate. It outlines the representatives’ and managers’ privileges and duties, as well as how the Hawaii LLC will be handled.
It will even help you keep your limited liability by proving that your LLC is a distinct business company. In the absence of an operating agreement, your LLC’s operations would be governed by state LLC statute. An operating agreement does not need to be lodged with the Articles of Organization if one is established.
5. Obtain an EIN
And if the LLC has no staff, it must receive its own IRS Employer Identification Number (EIN) if it has more than one participant. If you create a one-member LLC, you must receive an EIN only if it would have workers or if you want to levy it as a company rather than a sole proprietorship (disregarded entity).
You will get an EIN by filling out an online application on the IRS website. There are no filing charges.
6. Open a business bank account
Keeping your personal and corporate accounts apart allows your accountant to prepare your taxes more efficiently. It may also be used to show that the organization is a different agency from you. If your accounts are intertwined, you may lose your personal money as well as your company profits in a dispute.
Well, the limited liability feature of your Hawaii LLC covers you, but how can anybody tell what money is yours and what belongs to the company if the finances are all merged into the same bank account?
Many banks would need evidence that the Hawaii LLC is licensed by a registered agent with the State of Hawaii in order to open an account. Expect to be sent the following forms:
- A stamped—or official—copy of your Articles of Organization
- A Certificate of Good Standing indicating that the organization is duly licensed by a registered agent as a Hawaii LLC.
- A duplicate of your EIN (unless you are a single-member LLC without any employees)
The first two papers are available for free printing from the Secretary of State’s website. Simply browse their company database for your Hawaii LLC.
7. Get a business license
A general business license is not needed in Hawaii, however you will need an occupational license to work in some controlled industries. Among the regulated occupations are:
Psychologists, psychiatrists, alcohol educators, and social services are also examples of professionals.
Engineers, developers, and landscape architects
Cosmetologists, barbers, nail designers, and estheticians are also examples of beauty professionals.
Electricians and plumbers
Check out the city-specific criteria for the cities in which you would be working. There may be general business licenses or industry-specific licenses. Denver, for example, does not require general licensing but does require permits for food peddlers, dry cleaners, child care centers, and other companies.
8. Open a wage withholding account
Do you plan to recruit staff and deduct taxes from their pay? The state of Hawaii then allows you to open a salary withholding account, which you can do for free online. If you’re recruiting W-2 workers or withholding taxes from 1099 contractors, you’ll need this. You will use this account to administer and reimburse deferred income tax.
9. File an Annual report
Both Hawaii LLC must file an annual report by a registered agent and incur a $15 filing charge. The information may be filed electronically, or you can print and mail the Domestic Limited Liability Company Annual Report form (Form C5). The state will give a report reminder annually to your LLC.
The annual report is due within the calendar quarter following the anniversary month of the founding of your LLC. If your LLC was created on July 15, for example, the report will be due next year between July 1 and—at the very least—September 30. In the year the domestic LLC was established, no annual report is expected to be submitted.]
Benefits of Creating an LLC in Hawaii
Personal responsibility insurance and pass-through taxes are the two primary advantages of creating an limited liability company in Hawaii. We’ll proceed with the most significant. Personal responsibility insurance is a privilege provided by all businesses and limited liability partnerships.
It creates a “security shield” between the personal assets and the assets of the company. If the company is prosecuted, you cannot use your personal assets to pay off any loans or obligations. The second advantage is that pass-through taxation is available to llc, sole proprietorships, and partnerships.
Your corporation is not taxed on its own under this principle. Instead, all corporate gains or expenses are reported on a personal tax return. You escape the downside that Corporations face: double taxation. Paying taxes at both the business and personal levels is referred to as double taxation.
LLC vs Corporation
An LLC is Cheaper to Create and Maintain
Unlike a corporation, forming and managing an LLC does not cost a lot of money. The Hawaii Secretary of State charges a one-time filing fee of $50 for the creation of an LLC. The Periodic Report, which is due once a year, costs just $10. It is therefore less costly to manage an LLC than it is to maintain a corporation.
An LLC has Less “Red Tape”
An LLC, unlike a corporation, is not burdened by strict organizational laws. It is not necessary to appoint a board of directors, employ corporate officers, or schedule corporate meetings. A company is liable for this.
An LLC is Not Subject to Double Taxation
As previously said, the gains and expenses of an LLC “pass in” on your personal federal tax return. That is not the case for a corporation, since its earnings are taxed twice. This ensures that earnings are levied at the corporation level, and then dividends are taxed again at the shareholder level.
A limited liability company (LLC) is a “pass-through” organization. This ensures that the earnings are charged at the same pace as your own. The LLC does not file income taxes with the IRS.
This is not to say that a Corporation has little potential for development. This isn’t the case. They are simply more difficult to manage and are best fit for businesses who need to attract capital from outside investors. Consider technology and startup firms.
To start an LLC could be a safer choice for business owners (especially those just starting out) who want to escape the hassle of operating a complicated corporate structure (but also want personal asset protection).
LLC vs a Sole Proprietorship/Partnership
An LLC Member Enjoys Personal Liability Protection
An LLC provides a “shield of security” between your personal assets and the assets of your company. When the corporation is prosecuted, only the company’s funds will be used to compensate off the LLC’s debts. In brief, your personal belongings (bank account, home, vehicle, etc.) are safeguarded and secure in the event that the company is sued.
There is no other precaution for a single proprietorship. Since the law considers you and your company to be the same thing, your personal properties will be included if your business is prosecuted.
The same holds true with a Partnership. There is no different agency formed in this situation. When the business is prosecuted, your and your partner’s personal properties will be used to pay off its debts.
Get Business Insurance For Your Hawaii LLC
Company insurance enables you to control costs while concentrating on the success of your LLC. The below are the most popular forms of company insurance:
- General Liability Insurance: This is a large insurance scheme that covers the corporation against claims. The majority of small companies obtain general liability protection.
- Professional Liability Insurance (PLI) is a form of company insurance that protects cases of malpractice and other business negligence for professional service suppliers (consultants, accountants, and so on).
- Workers’ Compensation Insurance: A form of insurance that protects staff who are sick, disabled, or killed on the job. Workers’ compensation policy is required by statute in Hawaii for companies with one or more staff, except officers and LLC registered agent.
Create Your Business Website
Creating a website is a significant move toward legitimizing the business. Any organization requires a website. And if you believe the company is too limited or in an offline market, if you do not have a website, you are losing out on a significant portion of future clients and sales.
Some people may believe that designing a company website is out of their control because they lack website-building expertise. Although this was a legitimate problem in 2015, online technology has seen substantial strides in recent years, rendering the lives of small business owners even easier. The below are the key explanations why you can not put off creating your website:
- Any legal company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
- Social networking accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for a business website that you own and manage.
- Website builder software, such as the GoDaddy Website Builder, have made it incredibly easy to create a basic website. You don’t need to employ a web developer or designer to build a website you’re proud of.
Send Out a Press Release
Press releases are one of the simplest and most effective ways to advertise the business. They are still one of the least expensive tactics since they:
- Gives advertising
- Establish your brand’s online presence Boost your website’s search engine optimization (SEO), drawing more customers
- Are a one-off commitment in terms of time and resources
- Have long-term advantages
Hawaii LLC Tax Filing Requirements
If you’re selling a physical item, you’ll usually need to apply for a seller’s permit online at the State of Hawaii’s website. This credential entitles a corporation to receive income tax on taxable sales. The sales tax, commonly known as the “Sales and Use Tax,” is a filing fee imposed by governments, cities, and towns on commercial purchases including the exchange of such taxable products or services.
If you have workers in Hawaii, you must apply with the Unemployment Insurance Tax and the Employee Withholding Tax electronically at the State of Hawaii’s website.
Federal LLC Formation Tax Filing Requirements
Most llc must file Form 1065 Partnership Return (most multi-member llc use this form) and Form 1040 Schedule C with the IRS each year (most single-member llc use this form). Your federal taxes would be affected by how you pay yourself as an owner.
Avoid Automatic Dissolution
When an LLC fails to file one or more state reports, it can face penalties and even automatic dissolution. When this occurs, LLC shareholders run the risk of losing their LLC limited liability rights. A good licensed registered agent service will help you avoid this by informing you of impending filing deadlines and sending information on your behalf.
If you want to recruit staff for your business, take these measures to keep in compliance with the law:
- Confirm the prospective employers are qualified to serve in the United States.
- Employees can be reported to the state as “recent recruits.”
- Employees can be equipped with employees’ compensation benefits.
- Employee taxes should be withheld.
- Print workplace compliance posters and display them in high-traffic parts of the workplace.
Minimum wage in Hawaii
The state minimum wage in Hawaii is $10.10 per hour. This is more than the federal minimum wage of $7.25 per hour. You have the right to the higher state minimum wage.
Frequently Asked Questions (FAQs)
Should I form an LLC in Hawaii?
Whether you are just starting out or have been working as a sole proprietor, you should think about creating an LLC. LLC restricst an owner’s legal responsibility for corporate debts and claims and has a great deal of versatility in terms of business control, management, and taxes.
How do I know if my LLC name is available?
It is important that the name of your LLC be distinguished from the names of all existing companies on file with the Hawaii Department of Commerce and Consumer Affairs Company Registration Section. To ensure that your suggested name is accessible, you may perform a free name search on their website.
How much does it cost to form an LLC in Hawaii?
The Hawaii Department of Commerce and Consumer Affairs Registration Division charges $50 to file the Articles of Organization. You can reserve your LLC name for $10.
Filing on your own is often the most cost-effective alternative, but processing all of the forms and filing them on your own can be challenging. Hiring a lawyer is another choice, but it would normally cost you hundreds, if not thousands, of dollars.
With bundles beginning at $49.00, Nolo’s Online LLC formation program will handle all of the paperwork and filings for you.
Do I need an operating agreement for my Hawaii LLC?
Operating agreements are not needed in Hawaii for LLC, however they are strongly recommended. An LLC operating agreement can help secure your limited liability status, avoid financial and managerial misunderstandings, and guarantee that you choose the laws that control your company rather than state law by design.
Do I need a business license in Hawaii?
Depending on the nature of your company and where it is based, your LLC can include additional local and state business licenses. Check with the community where the primary place of business is situated for municipal permits (or county if it is in an unincorporated area). See the state of Hawaii’s company records page for state-wide licensing advice.
Are there Hawaii business taxes I need to pay?
In certain circumstances, such as whether you want to sell merchandise and receive general excise tax, or whether you want to hire people, you must file the Hawaii Department of Taxation (DOT). You have the choice of registering online (via Hawaii Business Express) or on paper (Form BB-1).
Can a foreign LLC do business in Hawaii?
All LLCs created outside of Hawaii must register with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division in order to do business in the state. Foreign limited liability companies shall nominate a registered agent for operation of process who is physically located in Hawaii.
Fill out an Application for Certificate of Authority to file (Form FLLC-1). A Certificate of Existence from the international LLC’s home state, dated no more than 60 days prior to the filing of the certificate, shall accompany the completed document. There is a $50 filing charge. The form may be sent electronically or via mail.
Can I form a single-member LLC in Hawaii?
A Hawaii single-member LLC is treated the same as a multi-member LLC for most purposes of creation. The procedures for forming a single-member limited liability company in Hawaii are the same as those outlined above. When it comes to preparing a tax report, single-member LLCs have greater leeway.
Can I form a professional LLC in Hawaii?
If you wish to join an limited liability company in Hawaii to have a licensed registered agent service, you must first form a professional limited liability company (PLLC). Architects, lawyers, dentists, registered public accountants, and other professionals are examples of technical services.
In general, if you have a business that necessitates the acquisition of a Hawaii state license before training, you are a professional service. LLC may be created to offer professional services under Hawaii law.
However, only one type of service can be offered, and all of the LLC’s owners must be certified or registered to offer the professional service for which the LLC was established.
Can I dissolve my Hawaii LLC when I’m done?
If you decide to shutter the company and end all activities, you can properly disband your Hawaii LLC to reduce your responsibility for claims and government fines.
Do I need to get a DBA or Trade Name for my business?
Most limited liability company do not require a DBA. The name of the limited liability company LLC can serve as your business name. Similarly, you can accept checks and other payments under that LLC name too. However, if you’re looking forward to register a DBA if you would like to conduct business under another business name.
Conclusion: Start an Limited Liability Company in Hawaii Now!
If you want an easy, low-cost company that covers your personal properties in the event of a litigation, then forming an limited liability company in Hawaii is definitely the best choice for you. If you want a company that is easy, affordable, and protects your personal belongings, an LLC is the right choice for you.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.