Form a General Partnership in Hawaii

To form a general partnership, all you need is to join at least one other person, engage in business, and make a profit. Unlike in most states, you must register as a general partnership in Hawaii. While creating a Hawaii general partnership is simple, this entity type isn’t right for every business. 

Here’s how to form a general partnership in Hawaii.

Step 1: Determine if you should start a general partnership

If you and your partner are starting a business, it might make sense to create a partnership. Before you do, let’s go over the good and the bad of forming a partnership in Hawaii.

Pros

General partnerships offer the following advantages:

• They’re simple to form and maintain
• Taxes pass through to the business owners (pass-through taxation)
• Business partners can bring additional skills and knowledge to the table
• Costs associated with starting and running the business are split between partners

If you’re just testing the waters with your business, a general partnership may be a good place to start. However, if you want a long-term business, there are better options that offer things like personal liability protection. 

Cons

Here are some drawbacks to starting a business partnership: 

• Partners are personally liable for all legal and financial business obligations
• Decisions must be made collectively
• Profits are split 
• Not an attractive business structure for investors

General partnerships typically dissolve when a partner leaves the business, either by choice or if one passes away. 

Speaking with a financial and legal professional about how to structure your business is beneficial. They can look at your goals and needs to help you make a decision. 

Step 2: Choose a business name

When selecting a business name, you want one that’s distinct and recognizable. You also need to be sure it meets any state business name requirements. When you register your Hawaii general partnership with the Department of Commerce and Consumer Affairs, you must provide a business name. Partnerships often use the partners’ last names as their “formal” business name.

In Hawaii, you can also reserve your partnership name while getting your registration paperwork together. 

Step 3: File a DBA Name (if needed)

Some businesses use a different name than their legal one for advertising purposes. In Hawaii, it’s called a trade name, but it’s also commonly knowns as a “doing business as” name or fictitious name. 

To register a trade name in Hawaii:

• Submit a registration form either online, by mail, or in-person
• Pay the filing fee

Everything must be submitted to the Department of Commerce and Consumer Affairs. 

Step 4: Draft and sign a Partnership Agreement

A partnership agreement is a legal document that governs the partnership’s operations. It typically covers the following business matters:

• Roles and responsibilities of the partners
• Profit and loss sharing
• Events that trigger dissolution
• Admittance of new partners 

If you don’t sign a partnership agreement, Hawaii’s Uniform Partnership Act provides default rules for resolving conflicts. What the law says may not be what you want, so seriously consider adopting a Hawaii general partnership agreement. 

Step 5: Obtain licenses, permits, clearances

General partnerships are subject to the same permitting and licensing requirements as any other type of business. Depending on the location of your business and the type of business activity, you may need a combination of licenses, certificates, permits, and clearances. Federal, state, and local agencies all have their own licensing requirements for businesses.

If you don’t know what licenses or permits your business needs, we can help! With our Business License Service, our partners at Avalara can provide a summary of the licenses required to operate your business legally. 

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a unique number that the IRS provides to businesses to pay their federal taxes. Your partnership also needs an EIN for different business matters like opening a bank account, getting financing, and hiring employees.

You can get an EIN for free through the IRS’s website or let us secure one for you with our Employer ID Number Service. 

Step 7: Get Hawaii state tax identification numbers

Although your Hawaii general partnership won’t pay federal income tax, it may owe some state taxes. To receive a state tax identification number, file tax returns, and make payments, register your partnership through the Department of Taxation’s Hawaii Tax Online portal.  

Forming a Business Partnership in Hawaii: Next Steps

Before conducting any business, consider doing a few more things:

• Open a business checking account
• Purchase insurance 
• Assess your finances 

It might be tempting to jump right in and start drumming up business, but take a few extra steps to protect yourself and your company. 

How We Can Help

Starting a business is an incredible undertaking and one that you don’t have to do alone. We offer plenty of products and services, expert support, and educational resources that are meant to help your business thrive. Our Worry-Free Compliance Service assists with state compliance and annual filings to help keep your business in good standing. 

It’s important to compare different kinds of business structures, like limited liability companies (LLCs) and corporations, before deciding on the entity type. We can help you set up your Hawaii LLC or Hawaii corporation with our formation services. 

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.