If you’re looking for a reliable DIY guide for starting an LLC in Hawaii, look no further. Below you’ll find all the information you need.
That said, the process can be complex, with various filings, so if at any point you need help, you can hire a good LLC service – they’ll take care of the paperwork.
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Hawaii LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
Adhere to Hawaii’s business name laws by including a business type signifier like “limited liability company,” “L.L.C.,” or “LLC” while avoiding terms that imply government affiliation or mislead the public as to the business purpose. Additionally, your name should not include the terms “financial institution”, “bank”, “banker”, “banking”, “banc”, “savings bank”, “savings and loan”, “savings association”, “financial services loan company”, “credit union”, “trust company”, “intrapacific bank”, “international banking corporation”, or “trust” unless authorized by the state. The Hawaii Business Express website has a “Help” page containing a more comprehensive list of name requirements.
But you can carefully follow all of these rules and your name might still be unavailable if it’s already taken. Each new LLC name must be distinguishable from every other business name on record with the Department of Commerce and Consumer Affairs (DCCA). If your desired name is already in use, making the following changes will NOT be enough to distinguish it:
- Spelling out numbers vs. using numerals
- Changing word spellings
- Using a different business type signifier (LLC, Ltd, Inc, LP, etc.)
- Adding/removing articles (“a,” “an,” and “the”), certain prepositions, or their Hawaiian equivalents.
- Adding, removing, or changing punctuation
- Making words singular, plural, or possessive
- Adding or removing “Hawaii” or “HI”
Any of these changes will leave your name “substantially identical” and therefore unavailable. To successfully make your name unique, you’ll need to make significant changes to key words rather than small, syntactic ones.
Consider this: your friend Fanny wants to open a flower shop in Honolulu, Hawaii. The name she wants, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the DCCA’s records.
Determine if the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Department of Commerce and Consumer Affairs’ Business Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Hawaii for a total of 120 days.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold online through the Hawaii Business Express portal, or by mailing an Application for Reservation of Name form to:
State of Hawaii Department of Commerce and Consumer Affairs
Business Registration Division
P.O. Box 40
Honolulu, Hawaii 96810
Or, if you live in Honolulu, you can hand-deliver your form to 335 Merchant St.
Despite which method you choose, the filing fee is $10. The online system will automatically prompt you to pay with a credit card. Otherwise, you can pay via check made payable to “Department of Commerce and Consumer Affairs.”
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Hawaii, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. The Department of Commerce and Consumer Affairs website puts it this way: “In general, the duty of the registered agent is to receive service of process, notice or demand on behalf of the business the agent is hired to represent and to inform the business of such service.”
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Hawaii.
Maintaining an agent isn’t just a convenience, it’s required. But don’t take it from us, Hawaii’s Revised Statutes 428-107 states that “a limited liability company and a foreign limited liability company authorized to transact business in this State shall continuously maintain in this State a registered agent.”
You can comply with this law by simply designating a registered agent. But how? Fortunately, it’s an easy process, only one step long. All you need to do is list your registered agent’s name and address on your Articles of Organization and after it’s accepted, that information will be part of your LLC’s public record.
You have two options for who can serve as a registered agent: an individual or a company.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your registered agent, as long as they are a Hawaii resident, have a physical address in the state, and are at least 18 years old.
Attorneys, consultants, and other third parties are often great choices to ensure that nothing falls through the cracks, but family members, friends, and business partners are equally valid. You can even take on the role yourself, provided you don’t mind the additional responsibilities.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like IncFile or Northwest Registered Agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your Hawaii LLC on your own, you can use a registered agent service to cover your agent duties.
During the life of your LLC you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Department of Commerce and Consumer Affairs, giving it the authorization to commence business in the state.
When you’re ready to file your Articles of Organization, you have five options for submission: online, by mail, in-person, email, and fax. No matter which option you choose, the filing fee is $51 with an additional $25 fee if you want expedited service.
You can complete the entire process through the Hawaii Business Express filing portal. From the homepage, click “Get Started” in the box labeled “Start.” If you don’t already have an account, you will need to create one. After you’re logged in, follow the instructions to complete your filing.
First, download and complete a paper application. When finished, include your payment and mail both to:
State of Hawaii Department of Commerce and Consumer Affairs
Business Registration Division
P.O. Box 40
Honolulu, Hawaii 96810
Live near Honolulu? You also have the option of hand-delivering your form and payment to 335 Merchant St.
Or, you can fax your form and credit card information to (808) 586-2733.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
State law doesn’t mandate that your LLC maintain an operating agreement, but that doesn’t mean you should go without one. This document offers immense benefits to an LLC, including efficient procedures, legal protection of personal assets, and legitimacy in the eyes of banks, courts, government agencies, other businesses, and more. You should think twice before proceeding without one.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns.
Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Hawaii LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Hawaii’s income taxes function much like the federal ones do – owners report income and losses on their personal returns rather than a separate corporate one (unless you’ve elected to have your LLC taxed like a corporation).
However, every business operating in Hawaii is responsible for paying a General Excise Tax, which is based on gross business income. Your LLC will need to apply for a General Excise Tax License. If you formed your business through the Hawaii Business Express website, this was part of the process. But if you filed a hard copy Articles of Organization, you’ll also need to submit this form.
Plus, there are some circumstantial state taxes your LLC might owe if it meets certain conditions. If you sell merchandise, your LLC will owe Sales and Use Taxes, and if you hire employees, it will need to pay Withholding and Unemployment Insurance Taxes.
All Hawaii businesses are required to register with the Department of Commerce and Consumer Affairs and obtain a Tax Identification Number through the Department of Taxation. Any business that maintains employees must also register with the Department of Labor and Industrial Relations. You can register with all three departments through the Hawaii Business Express portal, or by submitting a Form BB-1 to one of the following addresses:
Department of Taxation
P.O. Box 1425
Honolulu, HI 96806-1425
Department of Taxation
830 Punchbowl St.
Honolulu, HI 96813
Department of Labor and Industrial Relations, Unemployment Insurance Division
830 Punchbowl St., Room 437
Honolulu, HI 96813
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
Take our friend Fanny, for example. She may need to obtain a Dealers in Farm Produce License from the Department of Agriculture before she opens her flower shop’s doors in Hawaii. Take a look at the DCCA’s professional and vocational licenses page to determine if your business requires any.
Certain cities and counties require their own specific licenses on top of any state ones, so you should also check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that Hawaii requires all of its businesses to submit one important recurring filing: the Annual Report.
Every year, your LLC will need to file an Annual Report to ensure that the state’s business records are current and accurate. This report is due by the end of your company’s approval quarter. For example, if you formed your LLC between Jan. 1 and Mar. 31, your due date would be Mar. 31.
Mark your due date on the calendar and set a reminder on your phone because missing an Annual Report will cause your LLC to fall into delinquency. And if that report remains unfiled for two years, the LLC will be administratively dissolved.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Hawaii LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation website. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.