A Hawaii entrepreneur may choose to set up a business as a limited liability company (LLC). This type of legal structure gives the owner benefits of the limited liability features that typically come with a corporation as well as the amazing tax perks and flexibility of operations a partnership offers.

Each state has different guidelines to form an LLC. Here are the guidelines to start a LLC in Hawaii.

Getting Started

Naming the LLC

The first and most important step in creating a LLC is to choose a name. In the state of Hawaii, the name of an LLC must contain the words Limited Liability Company or the abbreviation for those words which would be L.L.C. or LLC.

In addition, certain words that may result in confusion because they are already being used by Federal or State agencies, such as ‘FBI’, are strictly prohibited. Also prohibited are words such as ‘bank’, which is considered to be a restricted word. This requires the LLC to file additional paperwork for approval.

Once a name is chosen, a search must be performed to ensure the name is available and is not being used by another Hawaii company or agency. A search can be performed to see if a business name is available in Hawaii.  

Assuming a website will be designed for the business, it is a good idea to search now to see if the desired URL and domain name is available so that it can be secured.

Choosing a Registered Agent

A registered agent, sometimes referred to as a statutory agent, must be selected for the LLC. A registered agent is an owner or a third-party individual who is designated to accept tax and other legal documents on behalf of a business. Hawaii requires that the registered agent reside in the state or that it be a corporation who is authorized to conduct business in Hawaii.

Filing the Articles of Organization

It is necessary to register and file the Articles of Organization for a Hawaii LLC with the state of Hawaii to officially form your LLC. Articles of Organization must include the following:

Articles of Organization in Hawaii Require:

  • Business Name and Address
  • Name and Address of Registered Agent
  • Principal Office Address
  • Members (Owners)
  • Period of Duration

The Articles of Organization must be signed by all members and filed with the state of Hawaii. The fee is $50 and is non-refundable.

Create Operating Agreement

The state of Hawaii does not require an Operating Agreement to form an LLC.

Running Your Business

Getting Your EIN

What’s an EIN?

An EIN is an employee identification number, issued by the Internal Revenue service. Sometimes it is also called a Federal Tax Identification Number. It’s a unique number issued to each business.

You’ll need an EIN to

  1. Open a business bank account.
  2. File Federal and State Taxes
  3. Hire employees.

Before you get your EIN:

  1. Make sure your new business has been properly formed before applying.
  2. Be wary of paid sites. EINs are free direct from the IRS.

How do I get an EIN?

  1. Apply online: The easiest way is to apply online for an EIN. Note, the IRS website has office hours, and is only available Monday through Friday, 7am to 10pm. Yes, we also agree this is one of the most ridiculous things we’ve ever seen.
  2. Call: You can call 1-800-829-4933, between 7am to 7pm of your time zone, Monday to Friday.
  3. Snail Mail – You can download the form and mail it in.

Keep Business and Personal Accounts Separate

  1. Get a business bank account for your business. This will help you protect your personal assets from potential creditors and lawsuits, and will also make life A LOT easier come tax time.
  2. Get a business credit or debit card. This will help you keep your expenses separate and easier to track.

Accounting

No matter what business you run, accounting software and processes is a must for any small business. If you have an accountant, ask them which software they work with and recommend.

A good accounting system is necessary to:

  1. Track income and expenses, so you can easily see if you’re making money
  2. Makes filing income taxes so much easier.

Always try and find something that will:

  1. Sync with all of your bank and credit card accounts automatically – not just downloads, but auto sync.
  2. Automatch vendors, customers and other accounts.
  3. Let you accept credit cards and ach drafts with ease.

Employee Taxes

Businesses with employees in Hawaii must register with the IRS as well as the State and set up accounts for Unemployment Insurance Tax and Employee Withholding Tax.

Withholding Tax

A Hawaii business with employees is required to withhold and pay employee income taxes to the state of Hawaii. An LLC must register with the State then pay the Employee Withholding Tax on a regular periodic basis, typically quarterly.

Unemployment Tax

Hawaii LLC rules require a business to pay State Unemployment Insurance (UI) Taxes. The Hawaii Department of Labor and Industrial Relations manages the UI Taxes in Hawaii.

General Excise Tax (GET) and Use Tax

General Excise Tax is a tax on the gross business income of an LLC. When a Hawaii LLC applies for a GET license, it is automatically registered for use tax. Use tax is a tax on imports from unlicensed sellers. GET and use tax are reported on the same tax return. The cost to register for GET is a one-time fee of $20.

Permits

Any additional necessary permits required by the state of Hawaii can be found here.

Insurance

Worker’s Compensation Insurance

Worker’s Compensation Insurance is required for all Hawaii LLCs with employees and is managed by the Disability Compensation Division of the state of Hawaii.

State General Liability Insurance

A Hawaii LLC should obtain General Liability or Commercial Insurance. This protects the business assets and pays any costs for legal claims.

Keeping Your LLC Compliant

The state of Hawaii requires an LLC to file an Annual Report with the Department of Commerce and Consumer Affairs (DCCA) Business Registration Division. The Annual Report is due by the end of the calendar quarter in which an LLC was formed. The cost for this Annual Report is $15.

The state has the authority to charge a $100 late fee (per state law), but instead charge a $10 late fee for the first year and a $20 late fee if it’s 2 years late. If the Annual Report has still not been filed after 2 years, the state may administratively dissolve (shut down) the LLC.

How to File a Foreign LLC in Hawaii

A foreign LLC is required to register with the DCCA in Hawaii and file an Application for Certificate of Authority for Foreign Limited Partnership – Form FLP-1. The filing fee is $50 with an additional fee of $25 for expedited service.