How to Form an LLC in Hawaii

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Hawaii LLC Quick Facts

Hawaii LLC Costs

Initial LLC Filing Fee – $50

 

Recurring Fee – $15 Annual Report Fee

LLC Processing Time

It normally takes 1-2 weeks for the LLC paperwork to be approved in Hawaii.

Expedited processing is also available for an additional fee.

Don’t want to form an LLC by yourself?

Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular entity structure for many businesses starting in Hawaii.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Hawaii without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting for the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

To form a Limited Liability Company in Hawaii, file the Articles of Organization with the State of Hawaii, Business Registration Division.  The LLC filing fee for standard processing is $51. Approval for the LLC typically takes 1-2 weeks.  Expedited processing is available, which shortens the approval process to 2-3 business days and is an additional $25.

Guide to Forming an LLC in Hawaii

The steps for filing a domestic LLC online or by mail are largely the same.  The screenshots show filing online.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

To get started, register with the Hawaii DCCA Business Registration Division. Alternatively, you can download the Hawaii Articles of Organization (Form LLC-1) and file by mail.

After registering,

  1. Go to https://hbe.ehawaii.gov/BizEx/home.eb and select “Use QuickFile.”
  2. Enter the email address and password used to register with DCCA and log in.
  3. Next, click on the “Continue to Homepage” link. Then click “Use QuickFile.”
  4. Look for ‘Initial Business Filings’ and click the “LLC-1 Articles of Organization for Limited Liability Company” link.  You will be given a prompt to use the wizard or continue with the filing.  For this step-by-step guide, we will choose the filing.

Register Hawaii LLC

Step 1: Name the LLC

Enter the name you want for the LLC.  The name of the LLC also has to differ from other entity names in the state of Hawaii.  See how to do a business name search through the Department of Consumer Affairs Business Registration Division’s business name database to check on name availability.

The name of the LLC must include one of the following designators at the end of the business name:

  • Limited Liability Company
  • Limited Liability Co.
  • Ltd. Liability Company
  • L.L.C.
  • LLC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is a name you want to register but are not ready to file the LLC paperwork, a business entity name may be reserved for up to 120 days.  The state filing fee for the Reservation of Name is $10.

Before finalizing a name, learn more about LLC Name Guidelines in Hawaii.  You may also want to see if a domain name (also called a URL) is also available to have a matching website address.

Register a Name Hawaii LLC

Step 2: Mailing Address of Principal Office

In this section, enter the street address, city, state, zip code, and country of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  This does not have to be an address in Hawaii, but you may not use a PO Box for the registered office.

Hawaii LLC Principal Office

Step 3: Registered Agent

To have an LLC in Hawaii, a Registered Agent must be identified.  The Registered Agent is either a resident of Hawaii (select Individual under Agent Type) or a registered agent service (select Entity under Agent Type and enter their state of incorporation from the State drop-down menu).  The agent must have a physical street address in the state to receive service of process (act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc.) on behalf of the LLC.

You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Learn more about the requirements of a registered agent in Hawaii.

Hawaii LLC Registered Agent

Step 4: Organizer Information

The LLC Organizer is someone who is involved with the formation of the Articles of Organization.  The Organizer may or may not be a member, such as a mentor, attorney, or accountant, but the initial members could be listed as an organizer.

At least one organizer has to be listed.

Learn more about who can be an LLC Organizer.

Hawaii LLC Organizer Information

Step 5: Period of Duration

Most businesses intend to exist forever and would suggest “At-will.”  If you have a specific end date in mind (typically used for investment-related businesses), choose the close date.

Hawaii LLC Period of Duration

Step 6: Member-Managed of Manager-Managed

This section asks for the names and addresses of initial managers if the LLC is manager-managed or the names and addresses of the initial members if the LLC is manager-managed.

  • Member-Managed LLCs have members (owners) that are active in the day-to-day operations of the business.
  • Manager-Managed LLCs have managers hired by the members to run the LLC, similar to a CEO of a corporation.

Related: What is the Difference Between a Member-Managed LLC and Manager Managed LLC?

Most LLCs are member-managed.

If the LLC is Manager-Managed, select option A or option B if the LLC is Member-Managed.

If A was selected, list the total number of members of the LLC.

In section C, enter the name and address of each of the members and/or managers.

Hawaii LLC Member Managed Manager

Step 7: Liability

This section has options on if the members will be liable for the LLC’s debts and obligations.

Most people select “Shall not be liable for the debts, obligations, and liabilities of the company.”

While you can select this option, if the LLC takes out a bank loan, expect the bank to require a personal guarantee from the members that will require them to pay back a loan personally.

Hawaii LLC owner liabilities

Step 8: Signature

Have an individual authorized to sign contracts to sign.

Step 9: Review

Review that the information is correct.

Step 10: Pay and File

Pay and file the Articles of Organization.

In approximately 2-3 business days, if expedited or up to 2 weeks with standard processing, the LLC will be approved.

If mailing the LLC-1 form, send payment to:

State of Hawaii – Department of Commerce and Consumer Affairs (DCCA)
Business Registration Division
PO Box 40
Honolulu, HI 96810

If you have questions, contact the Hawaii Department of Commerce and Consumer Affairs at 808-586-2727 or breg@dcca.hawaii.gov

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Hawaii LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

In Hawaii, it is not required to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Hawaii operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • In some cases, a Hawaii Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state. A Certificate of Authority will be needed for a foreign LLC)

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed to start your business. Some common registrations include:

  • Business License – Some counties in Hawaii require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • General Excise Tax License – To sell products and certain services, registration with the Hawaii Department of Taxation will be necessary.

Related: What Business Licenses are Needed in Hawaii?

File Annual Reports

LLCs are required to file an annual report with the Hawaii Department of Commerce and Consumer Affairs.  The annual report updates ownership information and other details.

Related: How to File a Hawaii LLC Annual Report