Here we look at the necessary steps on how to start an LLC in Hawaii. A Hawaii LLC can be used to operate a business or to hold assets like real estate, vehicles, etc. Either way, a limited liability company is an excellent way to legally structure your business.
It provides the liability protection enjoyed by corporations but includes the flexibility and fewer formalities of simpler business structures like a sole proprietorship.
You can set up the LLC by filing the Articles of Organization with the Hawaii Business Registration Department. Here are the things to consider for a successful filing and tips to keep running your Hawaii LLC smoothly.
1. Choosing A Name For Your Hawaii LLC
You might already have a name for your business, but let’s take a while to see if it is suitable for a Hawaii LLC. The chosen name should be recognizably different as compared to other entities registered with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division.
Additional requirements also apply. For example, the name shouldn’t misrepresent the LLC or mislead the public with regards to the functioning of the LLC. This can include using words like “Corporation” or “bank” in the name. It shouldn’t be confusingly similar to the names of government departments or agencies either.
A quick way to check for name availability is to use the state’s webpage for Search for Businesses & Buy Documents. This will give you a fairly good idea of name availability. The Department of Commerce & Consumer Affairs has a helpful document on business naming rules.
Hawaii LLC Name Designators
Every LLC in Hawaii should end its name with a proper designator. Accepted designators are:
- Limited Liability Company
- LLC
- L.L.C.
- Ltd. Liability Company
- Ltd. Liability Co.
- Limited Liability Co.
LLC is the most commonly used designator, though you can use any of the allowed designators.
LLC Name Reservation (Optional)
Hawaii allows name reservations for LLCs for up to 120 days. This requires filing Form X-1. Online filing is available as well. The filing fee for name reservations is $10.
2. Appoint A Registered Agent For HI LLC
When forming an LLC in Hawaii, you must maintain a Registered Agent for service of process in the state. This agent is responsible for receiving legal documents like lawsuits and summons on behalf of your LLC.
The registered agent can be an individual or a business entity that is authorized to do business in the state. Having a physical street address in Hawaii is a must for registered agents. PO Box addresses or similar aren’t accepted.
3. Filing Articles Of Organization For Forming An LLC In Hawaii
Filing Hawaii Articles of Organization is the most important step in forming your LLC. Once the state approves the articles, the Hawaii LLC comes into existence. The articles are filed with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division.
You could file the documents online or via postal mail. The cost of forming an LLC (filing fee for Articles of Organization) through either method is $50.
Filing online requires the use of Form LLC-1. This form is also available on the Business Registration page of the Hawaii Department of Commerce and Consumer Affairs. The filing fee can be attached with a check or money order made payable to “Department of Commerce and Consumer Affairs”. The mailing address is:
State of Hawaii – DCCA,
Business Registration Division,
PO Box 40,
Honolulu, HI 96810
Processing and approval time for Articles of Organization filed via mail is usually 7-10 business days.
For faster processing and more convenient filing, it’s better to file your Hawaii LLC Articles of Organization online. To file online, you’ll have to use the Hawaii Business Express (BizEx) system. You’ll have to register for an eHawaii.gov account to use the online method.
Thankfully, the registration is free and simple, so there’s no problem going through with it. Plus, it makes it easy to manage various facets of your application and future filings.
When filing online, you can pay the required fee via credit cards. The processing time for applications filed online is 3-5 business days.
4. HI LLC Operating Agreement
Hawaii doesn’t legally require LLCs to have an operating agreement. But, as with practically all other states, this remains highly advisable. You should get an operating agreement for your business. It shows that the LLC is being managed properly and is indeed a separate entity from its member(s).
For a multi-member LLC, the Operating Agreement can outlay various setups, including the ownership of each member and their roles, responsibilities, and voting rights. Hiring processes, management principles, and the approach to taxation can also be a part of this agreement.
To be more comprehensive, you may include additional details on the operation of the HI LLC in the Operating Agreement. This is what makes the document useful for single-member LLCs as well.
It’s worth noting that the Operating Agreement is an internal document of the LLC. Each member should have a copy of the agreement. However, as it is an internal document, there is no need to file the operating agreement with any government agency or department.
5. Getting A Federal Tax ID (EIN)
Having an EIN (Employer Identification Number) is important for any LLC. Multi-member LLCs must have an EIN. This is a number issued by the IRS. Though it is meant for taxation, the EIN is useful in several aspects of running a business. This includes opening a separate bank account for the LLC and building credit with vendors.
The IRS doesn’t charge any filing fee for EIN. If you file online, you can get the EIN instantly. In case filing online isn’t possible, you’ll have to download and fill Form SS-4. This form can be filed via fax or postal mail. Fax is the faster option and results in processing being completed within a few business days.
Note, you should apply for the EIN only after the LLC has been approved.
6. Hawaii LLC Annual Reports
Filing Annual Reports is a necessity for all LLCs operating in Hawaii. Annual Reports are due during the calendar quarter of the anniversary of the LLC. As an example, if your LLC was formed on June 15, 2020, you’d have to file the annual report between June 1 and September 30, 2021 (and each subsequent year).
There is no need to file an annual report in the year the LLC was organized. So, if you start an LLC in Hawaii in 2021, the annual report won’t be due until 2022.
Annual Reports can be filed online, including through the use of BizEx. If you intend to file it via mail, you’ll have to use Form C5. The filing fee for either method is $15.
7. Taxation, Licenses, And Permits For Your Business
Once your Hawaii LLC is approved, you’ll have to comply with license, permit, and taxation requirements of local, state, and federal authorities. Local requirements will depend on the city/county of operation of your LLC. Therefore, it’s a good idea to contact the local government for these requirements.
State and federal taxes may also consider the industry of your business. Additionally, all LLCs in Hawaii must register with the Department of Taxation to get a HI Tax ID number and to register for General Excise Tax (GET).
Federal taxation depends on how you structure the LLC for taxation. By default, LLCs are pass-through entities, though there are possibilities for different tax structures. Filing with the IRS will change depending on how you structure your Hawaii LLC.