Hawaii LLC – How to Start an LLC in Hawaii

Starting a Hawaii LLC is the right decision for any start-up. With a favourable work environment and diverse tax benefits, it is cost-effective to start any business here. Those who are newly setting up their business must know about the procedural steps to start a Hawaii LLC.

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By following the steps below, one can easily form an LLC. However, it is recommended to seek help from professional services to start your LLC in Hawaii to handle financial statements and other legal documents. Meanwhile, if you are thinking of setting up an LLC in another state, then do check out Start My LLC

How to Start an LLC in Hawaii

The following guide is simple but essential for all entrepreneurs, especially for start-ups. All these procedures are to be followed according to the state’s government guidelines. Make sure to be careful while moving forward with the steps.

Step 1: Decide a Name for Your LLC

The first step in your application for an LLC is to decide the name you want to give to your LLC. You have to choose a name that should be related to your business and should also be approved under the state government’s naming norms.

You should check the name you are thinking of giving to your LLC on the Secretary of State online services website or visit the Business Entity Search to check the name’s availability through the list of names. 

Here are some of the pro tips that will help you keep a name that will help you grow.

  • You should keep the name simple and try not to add some difficult words to the name. It can confuse the audience, and they won’t remember your name for a longer period.
  • There are some words like bank, attorney, and university, which you should avoid if not required. This is because such names are going to require an extra set of paperwork through a lawyer.
  • The name should also be available for making a website as you should keep the name of your business the same everywhere. Check if the name is still available for use with NameCheap and for web hosting, which is best to get now, check out Kinsta, and Google Suite, for your professional email account. 

For more requirements on naming your LLC, see other requirements.

Step 2: Assign a Registered Agent in Hawaii

After you have decided the name, you must choose a registered agent in Hawaii. The agent is going to work on your behalf. Agents are professionals and can be a person or a business entity. They will be responsible for receiving all documents. The documents consist of the tax forms, lawsuit notices, legal documents, and internal documents on their registered office in Hawaii.

Some of the professional service providers that can be your agent and also, are able to handle all your official notices are:

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The best LLC services that would help you ease into operating an LLC or even other business structures in Hawaii. From handling business license searches and filing to tracking upcoming filing deadlines and acquiring business insurance or professional liability insurance, an agent will answer all your questions and conduct all activities you need to set up your LLC. 

It would be so much time saved on your end if you avail of a registered agent’s service. You will have more time to focus on other business matters, not to mention you are guaranteed to meet every state requirement as you have experts handling everything. 

Step 3: File Certificate of Formation in Hawaii

The certificate of formation is the legal document that you are required to start your LLC in Hawaii. It establishes the type of LLC you are setting up, if member-managed or managers-managed.

Before you file the formation document, you need to attach documents such as name registration certificate, registered agent’s details, and/or employees’ details. The filing fee one has to pay is $50 plus a $1 State Archive Fee. 

Online Filing:

NOTE: But in some states, you are not allowed to fill the online form. For such people, there is a second option of sending the form through the mail.

File by Mail:

  • Download the original form from the Hawaii Limited Company Certificate of Formation site.
  • Fill out the form and send it through an email to the Secretary of State Office or county judge’s judge.
  • With this form, the legal document to be attached will be the above-mentioned formation documents along with your cheque.

Mailing Address:
Department of Commerce and Consumer Affairs
Business Registration Division
335 Merchant St.
P.O. Box 40
Honolulu, HI 96810

More Certification of Formation filing requirements in Hawaii is mentioned below.

Step 4: Create Your Hawaii LLC Operating Agreement

There are some major outlines and rules, regulations, and powers of attorney that become the LLC’s foundation. All of these rules and operational procedures are mentioned in the liability operating agreement. Also, when the agreement is formed, all the LLC members should agree with these rules. It will ensure that the limited liability company works smoothly and every person related to the company is on the same page.

If you want to start an LLC in Hawaii, it is not required legally to form a limited liability operating agreement. But if you want to save your business from any future conflict, it is advised that you should make this effective operating agreement.

Step 5: Filing a Hawaii LLC EIN

The E.I.N. is also known as the Employer Identification Number, which Internal Revenue Service provides. It is a nine-digit unique number given to businesses, and it is for tax purposes. When you are filing your limited liability company’s taxes, you need this number for the government official and taxation agencies; this is your identity.

You can file for the EIN online through the Hawaii Internal Revenue Service website under Register an Entity section. Why do you need an EIN? The EIN will help you contact a business bank and will help you process your bank application.

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935

To know more details about the documents required, you should jump to the ‘requirement section‘ below. 

Why Set Up an LLC in Hawaii?

What is an LLC in the first place? It is a type of business that protects you and your assets from issues like debts.

When you are willing to start an LLC in Hawaii, you should consider the following benefits. These benefits will be provided to your business with a bit of condition which your business needs to fulfill.

The Enterprise Zone of Hawaii

It is the most beneficial program specially tailored for the Hawaii LLC. The places listed under these special EZ zones are Honolulu County, Maui County, and Kauai county. The motive for which these zones are categorized is to increase the jobs in the city and business activity.

The benefits to the business are:-

  • The Hawaii LLC can save itself from excise duty if they start their operations in the EZ. The exemption provided is for 7 years.
  • A non-refundable IT credit is also provided to the LLC, and the amount given is equal to 80% of the tax filing that is done in the first year.

High Technology Business Investment Tax Credit

If your established LLC is qualified for the high technology businesses, you can benefit from this scheme. Under this, if your investment is increased, then a total of 10% of your investment is granted to you as a tax credit. Along with that, you can also enjoy a non-refundable tax credit on the tax liability of the year.

Pros of LLC

  • LLC does not have detailed formalities like minutes of shareholders’ and directors’ meetings like other corporations.
  • No restriction on LLC regarding the members and shareholders. One can structure the company as one are willing to.
  • Unlike corporations, the cash method of accounting is easy as LLCs don’t use the accrual method.
  • In an LLC, due to personal liability insurance, no shareholder and investor can possess the personal asset of the member.
  • Tax benefits such as unemployment insurance taxes on any coverage for employees, and have different tax classification options.

Cons of LLC

Cost of Incorporating an LLC in Hawaii

When you are thinking of incorporating, then you have to bear the following costs. They are divided into a stepwise pattern that you need to follow during formation.

  • The cost of registering your name is minor, which is around $10. The department of Commerce and Consumer Affairs of Businesses handles this task.
  • After that, there is a charge of filing articles of formation. This task costs you around $50, which is the least in most of the states around.
  • When you are forming an LLC, then you need an agent. They will help you with the task of formation and legal procedures, and you can find the agent in the amount of as little as $49. To know the best agents and their charges, click here. (best llc service linking)

Top Businesses in Hawaii State

Before you start an LLC in Hawaii, you should gain proper knowledge about the state’s economy. Along with that, you need to know about the top businesses of the state and their contribution.

Tourism Businesses

The state is best known for its tourist places, due to which the state is generating $21 billion from these businesses. This value accounts for 21% of the state’s GDP, making it the most contributing business category. According to the census, the state experiences around 9 million visitors annually, which is huge for this small island state.

Defense Businesses

The defense system of the USA government is of immense importance for the state from time immemorial. The state is famous for hosting all the defense activities like the Air force, Army, National Guards, Coast Guard, and Marine Army. The bases of all these armies have created an ample amount of jobs and have contributed around $7.8 billion to the state economy.

Agriculture Business

The state is very famous in the USA for supplying pineapples, nuts, macadamia, and coffee. Earlier, these commodities were the main part of the state’s economy, but with time people have shifted to tourism businesses. Still, agriculture managed to contribute around $5 billion to the state.

Low-Investment Businesses in Hawaii

Some of the small investment businesses are:-

  • Homestay Businesses
  • Touring Guides
  • Virtual agencies

Requirements for Setting up LLC in Hawaii

When you are setting up your LLC in Hawaii, then there are some basic requirements that you have to fulfill. They are mentioned below in detail.

LLC Name

First of all, you have to think of a name for your LLC. When you think of the final name, you should get it registered through Hawaii state’s official web portal. Before finalizing the name, it would be better that you check the availability of the name and also that it is feasible for your business or not. It would help if you thought from the customer’s perspective that you would attract with such a name. 

Directors or members

When you start an LLC, you must be some people in your mind that you want to do work with as members. You should have the current list of all those members with their approval to be a part of your LLC venture. Some points that you must always have in your mind when working for the list of directors is:-

  • The LLC can be started with one or more than one member. There is no restriction on the business owners. 
  • It is not required for the member to have a permanent residence in Hawaii to be a part of the LLC. 
  • The minimum age of the member should be 19. 
  • The complete legal name and address of the member must be required for Articles of Incorporation. 

Formation Articles

The articles of formation should be ready when you are forming an LLC. In these articles; you should mention the details about the business services, the members who are going to be the part of the business, and the profit division structure. The last one should be approved by every member so that there is no future conflict.

Along with that, there should be the agent certificate that you have appointed to help you with the step guide. The last thing that should be attached with the certificate of formation will be the services list. There must be some offering of your business which should be mentioned in detail.

Also, there should be a fixed value of stock required to be mentioned in articles of formation and address of the registered agent mentioned below. While selecting the business agent, you should ask them to always be available during office hours or not because they have to handle all the legal and tax documents.

Hawaii state’s demand is a bit different from the other states. Here the business entity needs to submit the form to the Judge of probate instead of the state’s secretary. 

Corporate records

The Hawaii LLC has to do different corporate reports before setting up. This included the initial reports that include the initial business privilege tax filing returns and annual reports. Both of these reports should be filed within two and one-half months after they start functioning. The next is the county filing that the business has to file before its incorporation. They must be submitted to the principal office for reference. With time, the requirement increases, which is discussed below. 

  • If any member has taken any action without a meeting, it must be added to corporate records. 
  • A copy of the original by-laws and the amendments that are made in them, later on, should also be added to the records. 
  • The complete communication of shareholders over three years should also be submitted. 
  • The recent annual report should be added to the corporate records. 

Taxes and licenses

The taxes of the LLC should be filed on time, and for that, E.I.N. is important. This should be applied when all the formalities are completed. Also, according to the service you are willing to provide, you have to look at whether the service requires an annual license to operate or not. If required, then you should go through the procedure of any license formation for your LLC office.

The taxation requirements are:-

  • Hawaii requires the annual report that you file with the Department of Revenue. In the annual report, the taxes added are  Business Privilege Tax Return and Annual Report, and Schedule AL-CAR. 
  • You should need a complete detail of every small to large state and center tax. 
  • There is a state tax identification number that a business must procure. 

It is always recommended to get professional help to understand more about the LLC requirements. Check out the top 5 LLC services to look for today. Below is the list of Best LLC services, 

Hawaii LLC Formation Summary

Time needed: 30 minutes.

To summarize, here are the simple steps for creating an LLC in Hawaii. To learn more about the steps in this list, simply click on them.

  1. Choose a name for your Hawaii limited liability company.

    The first step is to come up with a business name that includes the word “limited liability corporation” or one of its abbreviations (LLC or L.L.C.).

  2. Select a registered agent for your company.

    Selecting a registered agent for your LLC is needed in Hawaii. Check out our list of the top five LLC services in the United States.

  3. Create a certificate of formation.

    When forming an LLC, you must file a formation certificate. It may be referred to as any of the following, depending on the state: Articles of Organization, Certificate of Formation, or Certificate of Organization.

  4. Make an operating arrangement.

    When forming an LLC, an operating agreement is not a legal necessity, but it is strongly recommended.

  5. Obtain an EIN

    The Employer Identification Number (EIN), also known as the Federal Tax Identification Number, is used to identify a corporation in the same way that a social security number is used to identify a person.

F.A.Qs

What is the difference between LLC and C-Corp?

The C Corp’s structures are very complex compared to the LLC, which offers a flexible and easily changeable structure. Also, the LLC is saved from the disadvantage of double taxation that a C Corp has to bear, but the LLC has a privileged taxation system due to pass-through entities.

How does LLC be different from S-Corp?

The major difference that the businessman will notice among the LLC and S-Corp is the flexibility. In LLC, you can allocate income according to your rules and change them according to your will. Also, there is a different LLC interest class that can be considered a downside of S Corp.

Distinguish between LLC, Partnership & Sole Proprietorship?

In the limited liability partnership and sole proprietorships, the owners are responsible for their debts, but the LLC facilitates owners. The LLC members’ assets are saved, and they are not considered the reason behind the debts that a company has with the help of limited liability protection. Moreover, the member’s liability is only limited to the investment that they have made in the LLC, unlike the sole proprietorships and solo partnership firms.

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