Forming a limited liability company in Hawaii is a great way to protect your personal assets and manage your business with flexibility. Hawaii’s business-friendly environment has no income taxes on unincorporated businesses like LLCs, no sales tax, and lots of initiatives to provide entrepreneurs with the resources they need. But before you can join the Aloha State’s lively small business community, you need to learn how to start an LLC in Hawaii.
How to form a Hawaii LLC in 6 steps
Hawaii LLC formation isn’t complicated, but there are some steps you might not think of. Follow this guide to make sure you don’t miss any requirements.
1. Choose your business name
Your LLC name must follow specific rules set by the Hawaii Department of Commerce and Consumer Affairs (DCCA). Here are the Hawaii LLC naming guidelines to keep in mind when choosing a name:
- Your business name must be distinguishable from any other registered business in Hawaii. You can check availability using the Hawaii Business Express name search tool on the Business Registration Division website.
- The business name must include “limited liability company,” “Limited Liability Law Company”, “LLC," “L.L.C.”, “LLLC”, or “L.L.L.C.”
- Words like “bank,” “credit union,” or “financial services loan company” can only be used by authorized financial institutions.
- Purely geographic names or those registered with a recognized historical registry cannot be used.
- Words like “postal service” or “post office” cannot be used.
- If your business deals with insurance, your name must include words like “insurance” or “assurance.”
- Profession-specific terms like “certified public accountant,” “escrow,” or “cooperative” may be restricted or require additional approval.
If you’re not ready to file your LLC yet, you can reserve your chosen business name through the Department of Consumer Affairs for 120 days for a $10 filing fee.
2. Appoint a registered agent
Your Hawaii LLC must have a registered agent who is responsible for receiving legal documents, such as lawsuits or state filings, during regular business hours. The registered agent can be:
- A Hawaii resident with a physical street address in the state
- A company authorized to transact business in the state of Hawaii
You can be your own registered agent or you can make one of your employees or LLC members your agent. Even if you live in the state, however, it can be helpful to use a registered agent service like the one LegalZoom provides. Using a service keeps your personal address off the public record and gives you peace of mind that you won’t miss important notices.
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3. File articles of organization
To officially form your Hawaii LLC, file the articles of organization with the DCCA’s Business Registration Division. You can file online through the Hawaii Business Express website or by mail. The filing fee is $50, and you can pay an extra $25 for expedited filing.
The articles of organization form will require the following information:
- Your LLC’s business name
- The mailing address of your principal office
- The name and physical street address of your registered agent
- The duration of the LLC
- This is usually “at will,” but if your LLC was formed for a specific purpose and will dissolve on a certain date, you can enter that date.
- Whether the LLC will be managed by its members or by appointed managers
- The names, addresses, and signatures of each LLC organizer
Most Hawaii LLCs choose to file the articles of organization through the Hawaii Business Express website, but you can also send them by mail to the Business Registration Division in Honolulu.
4. Create an operating agreement
Though you’re not required by law to have an operating agreement for your Hawaii LLC, it’s highly recommended. This is a legal document that outlines how your LLC will operate and helps prevent future conflicts. An operating agreement generally includes the following.
- Ownership structure: How much of the business each member owns.
- Management responsibilities: Whether the LLC is managed by its members or managers, and what their roles are.
- Profit and loss distribution: How profits and business debts will be divided among members.
- Voting rights and procedures: Guidelines for how decisions are made.
- Rules for adding or removing members: What happens when new members join or existing members leave.
- Dissolution procedures: Steps to take if the LLC is dissolved.
An operating agreement is especially useful for multi-member LLCs. For example, if there’s a disagreement over profit distribution, the operating agreement can resolve the issue by providing clear terms everyone agreed on.
For single-member LLCs, an operating agreement can clearly separate your business and personal finances for legal purposes. You can create this document yourself, but many business owners choose to use an online service like LegalZoom to create an operating agreement.
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5. Obtain an EIN and open a business bank account
You’ll need an employer identification number (EIN) from the Internal Revenue Service (IRS) if your LLC has multiple members or employees, or if you want to open a business bank account. This federal tax identification number also helps protect your personal assets by keeping them separate from your business. You can apply for an employer identification number through the Internal Revenue Service website or use LegalZoom’s EIN filing service.
Once you have your EIN, you’ll want to open a business bank account to ensure that your business income and expenses are handled separately from your personal finances. Like the EIN itself, having a separate bank account helps strengthen your personal liability protection. Opening a business credit card can also help you manage your expenses, plus provide perks like rewards.
6. Register for state taxes and business licenses
After forming your LLC, you’ll need to register to pay business taxes with the Hawaii Department of Taxation. While Hawaii taxes don’t include a sales tax, LLCs must pay the General Excise Tax (GET), which applies to nearly all business activities, including sales of goods and services. The GET tax rate varies by industry, but is 4% for most businesses.
In addition to the GET, certain businesses might have to pay other taxes. For example, if your LLC rents out accommodations for less than 180 days, you’ll need to register for the Transient Accommodations Tax (TAT). Like most other states, Hawaii also leverages excise taxes on certain products, like alcohol, tobacco and e-cigarettes, and fuel.
If you have employees, you’ll need to withhold Hawaii income taxes from your employees’ wages. You’ll also need to register to pay the unemployment tax and get workers’ compensation insurance. You can register for taxes by submitting a Hawaii basic business application through Hawaii Tax Online. Once you do, you’ll receive a Hawaii tax ID number that you’ll use to file taxes each year.
Depending on your business, you may also need state licenses or permits. Hawaii’s Professional and Vocational Licensing Division oversees licensing for 52 professions, including accountants, chiropractors, contractors, doctors, electricians, mechanics, nurses, real estate agents, and veterinarians.
The Hawaii Department of Health issues various permits, including for food establishments and tattoo shops. They also issue noise permits and environmental permits, which you might need if your business operations will affect air or water quality or involve waste disposal. You might also need business licenses or permits from your city or county. You can use the state’s Business Action Center as well as your local county clerk’s office to research which permits you need.
What to do after forming your Hawaii LLC
You’re well on your way to starting your LLC in Hawaii, but there are a few additional steps you need to take to stay compliant and protect your business.
- Register a domain name. Every modern business needs an online presence with a professional website. It’s a good idea to secure your domain name at the same time you perform your Hawaii business name search.
- Maintain compliance. Your LLC will need to file an annual report to keep your business in good standing. This report is due each year by the end of the anniversary quarter in which you formed your LLC, and the filing fee is $15.
- Obtain a certificate of good standing. A Hawaii certificate of good standing verifies that your LLC is legally registered and compliant with the state’s laws. You can obtain one for a $5 filing fee from the Hawaii Department of Commerce and Consumer Affairs if you need it for contracts, loans, or expanding your business.
- Get a trademark. Trademarking your business name and logo protects your brand from copycats. In Hawaii, you can file for a state trademark with the Department of Commerce and Consumer Affairs or apply for federal protection through the U.S. Patent and Trademark Office (USPTO).
- Consider a foreign LLC. If you plan to do business outside Hawaii, you may need to register as a foreign LLC in those states. This allows your Hawaii LLC to legally operate in multiple states while maintaining its primary registration.
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The cost of forming an LLC in Hawaii
The minimum cost to form an LLC in Hawaii is $50 for filing articles of organization. It’s an affordable state in which to start a business, which lowers the barrier of entry and allows you to focus your budget on additional services that can help streamline the Hawaii LLC registration process.
- Formation cost: $50 for filing articles of organization (required)
- Name reservation: $10 filing fee
- Hawaii certificate of good standing: $5 filing fee
- Professional registered agent: $100–$300 per year
- Operating agreement: $99 and up
- Licenses and permits: Varies by location and industry
The total cost of Hawaii LLC formation therefore ranges from $50 to about $465, plus the cost of any business licenses or permits. You’ll also need to pay $15 each year when you file your annual report.
Special considerations for Hawaii LLCs
In addition to the General Excise Tax discussed above, Hawaii LLCs need to comply with a few other state-specific rules and regulations.
- Initial report filing requirement: Hawaii requires LLCs to file an initial report with the Business Registration Division within 60 days of formation. This report provides the state with basic information about your LLC, such as its members and business address.
- Temporary Disability Insurance (TDI): Hawaii requires all employers to provide Temporary Disability Insurance (TDI) for employees. TDI covers workers who are unable to work due to non-work-related illness or injury.
- Environmental and tourism regulations: Hawaii’s unique environment means that businesses, particularly those in tourism, must comply with strict environmental regulations. For example, businesses near coastal areas may need additional permits to protect natural resources.
- Hawaii Small Business Development Centers (SBDC): The Hawaii SBDC offers resources to help small businesses grow. They provide consulting services, training programs, and guidance on topics like funding and marketing.
How to start your Hawaii LLC with LegalZoom
After reading this guide, you have a better idea of how to start an LLC in Hawaii, but it’s even easier with LegalZoom. We handle everything from filing your articles of organization to providing registered agent services, so you can not only form your LLC, but make sure it stays compliant. As a business owner, you have enough on your plate. Whether you’re looking to streamline the process or get expert help with the paperwork, LegalZoom is here to help you start your LLC with confidence.
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FAQs
How long does it take to form an LLC in Hawaii?
Forming a limited liability company in Hawaii typically takes 3 to 5 business days when filing online, but paper filings may take up to two weeks. On the other hand, if you pay for expedited filing, it will only take 1 day. Once the state approves your articles of organization, your LLC is officially recognized.
What are the benefits of forming an LLC in Hawaii?
Forming a limited liability company in Hawaii protects the personal assets of the business owner and offers flexibility in management and taxation. Hawaii’s supportive small business environment also provides resources to help you grow your company.
What are the annual filing requirements for Hawaii?
Each limited liability company in Hawaii must file an initial report within 60 days of formation and an annual report each year. The annual report filing fee is $15, and it’s due by the end of the LLC’s anniversary quarter. Filing these reports keeps your LLC in good standing with the state.
How do I correct filing errors in Hawaii?
If you make a mistake on your limited liability company’s articles of organization, you can file articles of correction with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division. This allows you to fix errors without needing to start over. It’s important to file corrections quickly to avoid any complications with your LLC’s registration.
Do LLCs pay taxes in Hawaii?
Yes, LLCs in Hawaii are subject to the General Excise Tax (GET) on their gross income. LLCs don’t pay state income tax as entities, but members must report their share of profits on their personal tax returns. If your LLC has employees, you’ll also need to pay employer taxes like withholding tax and Temporary Disability Insurance (TDI).
Rudri Bhatt Patel contributed to this article.
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