How to Start an LLC in Hawaii
An LLC, or limited liability company, is a business entity that provides the personal limited liability protection of a corporation to its owners (referred to as "members"), while also offering the tax advantages and flexibility of a partnership or sole proprietorship.
By forming an LLC, owners can avoid many of the formalities and reporting obligations of a corporation, while safeguarding their personal assets in case the business is sued or becomes insolvent. Additionally, LLCs steer clear of the "double taxation" that corporations often face, where profits are taxed both at the corporate and individual levels.
However, while creating an LLC is simpler than establishing a corporation, it still necessitates adhering to the correct procedures and submitting the appropriate documents.
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1. Name Your Hawaii LLC
The initial step in starting a Hawaii LLC is to name your business. Choosing an original and fitting name for your LLC can help you stand out and effectively communicate your purpose to potential customers. However, it is crucial to adhere to the Hawaii DCCA's rules for naming LLCs to avoid rejection of your filing.
Hawaii LLC Naming Guidelines
When brainstorming names for your LLC, it's important to keep Hawaii's LLC naming guidelines in mind. For instance, your LLC's name must be unique and distinct from all other business names in Hawaii.
Additionally, your company name must include a "designator" such as "LLC," "L.L.C.," or "Limited Liability Company" to indicate that it is an LLC.
Some other guidelines include avoiding deceptive or fraudulent names, words that suggest government affiliation, and names that imply illegal activity. If your LLC name includes words that suggest a licensed profession or financial institution, additional paperwork and permissions may be necessary.
Hawaii entity search
To comply with Hawaii's naming guidelines, it is necessary to conduct a Hawaii entity search to verify that your desired LLC name is not already in use. The Hawaii business name search page can be used to perform this search. However, it is essential to confirm with the BREG office that your desired name is available before filing. The BREG can be contacted at (808) 586-2727 for more information.
2. Choose Your Registered Agent
In Hawaii, it is mandatory to designate a registered agent for your LLC. The registered agent is responsible for receiving official legal documents and notices, including service of process, on behalf of your LLC. This person or entity can either be an individual, such as yourself or an employee of your LLC, or a professional entity offering registered agent services.
To qualify as a registered agent, an entity or company must provide registered agent services and possess a physical address in Hawaii. Additionally, the registered agent must be available to accept documents during regular business hours and must be present on-site to receive them.
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3. File Hawaii Articles of Organization
To establish your business's legitimacy in Hawaii, you must file Form LLC-1 - Articles of Organization with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division.
Filing official government documents can be overwhelming, but we can help you with our business formation plans. Nevertheless, we will guide you through the process here.
Submitting the Hawaii Articles of Organization can be done online, via email, postal mail, or fax. If you choose to file online, you must use the Hawaii Business Express system, which is accessible via the Business Registration Division of the Hawaii Department of Commerce and Consumer Affairs website.
If you opt to file by postal mail, you must complete the paper Articles of Organization form and send it to the address below:
- Department of Commerce and Consumer Affairs
- Business Registration Division
- P. O. Box 40
- Honolulu, Hawaii 96810
Articles of Organization Requirements
The following information must be provided in the Articles of Organization in compliance with Hawaii's requirements.
Please keep in mind that this information becomes public once submitted:
- The complete LLC name (including the designator)
- The business address
- The name and address of your registered agent or registered agent service
- The name and address of each LLC organizer
- The duration of the LLC (if not perpetual)
- Whether your LLC will be manager- or member-managed. If member-managed, list the names and addresses of all the initial members. If manager-managed, list the name and address of the manager(s) and the number of initial members.
- Your signature
The form also includes boxes that you must check regarding liability. Most people select the first box, which indicates that the owners will not be held personally responsible for the company's debts, obligations, and liabilities. This is one of the main reasons to establish an LLC.
4. Write an LLC Operating Agreement
To ensure that your business runs smoothly, an operating agreement is a crucial contract between LLC members that outlines the internal functioning of the business. It covers essential topics such as each member's investment amount, profit and loss distribution, and contingency plans in case of adversities.
Operating agreements are not mandatory to file with the Hawaii Department of Commerce and Consumer Affairs since they are internal documents. However, without an operating agreement, your business will be regulated by Hawaii's standard LLC statutes.
5. Apply for an EIN
Obtain an Employer Identification Number (EIN) for your LLC
An EIN, also known as a Tax ID Number or Federal Tax Identification Number, is required by the IRS if you have multiple LLC members, hire employees, or meet other criteria. Additionally, most banks will require an EIN for opening a business bank account. You can obtain an EIN for your Hawaii LLC through the IRS website, by mail, or by fax. Alternatively, if you find this process daunting, we can handle it for you through our quick and hassle-free EIN service.
Register for Hawaii Taxes
All Hawaii businesses must obtain a Hawaii Tax ID Number and any required tax licenses. To do this, you need to complete Form BB-1, State of Hawaii Basic Business Application, and pay a one-time registration fee. Depending on the type of tax license you require, you may have to pay additional fees. You can register for the Hawaii Tax ID Number and other tax licenses via the Hawaii Department of Taxation website.
Other Hawaii Tax Registrations
In addition to the Hawaii Tax ID Number, you will need to register for the General Excise Tax (GET) which is levied on your gross business income. When you apply for the GET license, you will also be automatically registered for use tax, which is applicable to imports from unlicensed sellers.
6. File Annual Reports
Annual Report Filing Requirements for Hawaii LLCs
In Hawaii, all LLCs that conduct business are required to file an annual report with the Business Registration Division and pay a $15 filing fee. You can file your report online or print the Domestic Limited Liability Company Annual Report form (Form C5) and submit it by mail. The state will send you a reminder to file the annual report.
Your annual report is due during the calendar quarter of the anniversary month of your LLC's formation. For example, if your LLC was established on July 15, then you must file the annual report between July 1 and no later than September 30 each year. Please note that no annual report is required to be filed in the year of the LLC's formation.
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