Top Three Hawaii LLC Formation Questions:
- Long does it take to form a Hawaii LLC? It takes 10 business days for the state to process your business formation paperwork regularly. You can also expedite your order for an additional $25 fee and get your finalized documents in the mail to you. Please note that the estimate of 3-5 business days begins once ALL required paperwork is in order and filed correctly.
- How much does it cost to create an LLC in Hawaii? The state charges a $50 fee to form an LLC. This does not include additional fees for a using an incorporation service or establishing a Registered Agent. A complete fee schedule for the state of Hawaii can be found here.
- Do I have to be a US citizen to start an LLC in Hawaii? The short answer is no. However, there may be restrictions depending on the type of entity you’re establishing. For example, you must have a social security number in order to apply for an EIN. It is recommended that you seek consultation with an attorney or the IRS, so that you know of any caveats before applying for your business formation.
You can access additional FAQs on the state of Hawaii website here.
Step One: Choosing a Name
What are naming requirements? Hawaii has a few basic rules for naming. The first is that your LLC (Limited Liability Company) requires some form of the “LLC” abbreviation in the name, which you can read more about here. The second rule is that your name must be unique compared to other named businesses.
Be aware of avoiding any words that may imply you’re part of a governmental agency, or restricted words like attorney or university. Otherwise, you may have to meet additional requirements. If you’re not sure if your preferred business name is in use, click this link to check availability.
What is a name reservation, and is it required? While it is not required, it is recommended that you reserve your name in advance of beginning the business formation process. Reserving your desired business name gives you 120 days to get your paperwork in order and filed.
During this 120-day period, no one else can form a business using the same name you have reserved. While the chances are small, you wouldn’t want to get to the point of filing and find out your name has already been taken. Once you’re ready to reserve a name, simply click here to learn more and submit a request state of Hawaii for approval.
How Do I Check to See if the Name is Available? Visit the state’s website here to check availability before filing to reserve your name. If it is not unique enough, you may need to tweak it or come up with a new name altogether.
Step Two: Designate a Registered Agent
What is a Registered Agent? As a business owner, you will be required to provide a physical address where mail can be accepted during regular business hours. If your business has a physical address, you can use it. However, it is recommended that you assign what is called a “Registered Agent” to receive mail on your behalf.
There are two distinct benefits to hiring a Registered Agent. First, it limits the way your personal information is shared, since you won’t be using your own address and phone number. As a result, this cuts down on the amount of junk mail you have to sift through, as your Registered Agent can manage your mail and provide you only with the pertinent documents.
Who can be my Hawaii LLC Registered Agent? The only requirements for your Registered Agent is that they have a physical address within the state of Hawaii where mail and legal notices can be served during regular business hours. A P.O. Box is only acceptable if a corporation (like an incorporation service) is serving as your Registered Agent.
You can hire a service to act as your Registered Agent, serve as your own, or even use an accountant or other business professional’s address – with their consent, of course. You can click here for more details on Registered Agents within the state of Hawaii.
Our Recommendation: At the end of the day, we recommend designating a Registered Agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record. Incfile and Northwest Registered Agent both offer a free Registered Agent service when you utilize their services to form an LLC. Both are fast and affordable. In fact, they’re the best available.
Step Three: File Formation Documents
What are the Articles of Organization? This is THE document that formally registers your LLC with the state of Hawaii. You can file here, but first review the instructions to make sure you have everything you need before getting started. You’ll want to ensure all of the following information is correct on the form:
- Name of LLC
- Name and address of Registered Agent
- Notation of management (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s governing person(s)
- Name and address of organizer
- Effective Date
Our Recommendation: Read and then reread what you’ve included on your certificate. Compare the information to what is required. Double check your information again and be sure nothing is missing or you could hold up the process of finalizing your incorporation.
Step Four: Get an Employer Identification Number (EIN)
What is an EIN? An EIN, short for Employer Identification Number, is the business equivalent of a social security number.
Am I Required to get an EIN? Yes. An EIN is required for filing taxes, opening a business bank account and hiring employees. However, it is free to apply for one through the IRS.
How do I get an EIN? Just visit the IRS website here to walk through the application process. The principal business owner or partner will need a valid social security number to apply for an EIN.
Step Five: Create an LLC Operating Agreement
What is an Operating Agreement? Usually when you establish a business within a state, you have to create a detailed outline that explains how you will run and manage your business. While this type of document is called different things in different states, in Hawaii it is called an Operating Agreement.
Do I Have to File it with the State? In Hawaii, this document is not specifically required, but it is still important to have a plan in place for how you will be successful, and how you will handle different aspects of the business. Even though it doesn’t need to be filed with the state, put it together and keep it for your records. It is important to have a written plan in place, not only for success, but also to help you plan ahead and manage potentially negative situations if they arise.
How to I Create an Operating Agreement? An attorney can help you outline your Operating Agreement or create one from a template. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members’ ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Next Steps: What Happens After Creating an LLC in Hawaii?
- Understand your ongoing requirements. Depending on what the nature of your business is, you may have different compliance requirements due to the state or federal government on an annual basis. We’ve listed some of the more general requirements below, but you may have more to meet than just these.
- Get any business licenses or permits. Again, this is highly dependent on the nature of your business. You can check here to see what licenses the state of Hawaii requires based on the category your business falls under. You can also review the federal government’s Small Business Administration guide here for any additional requirements you may need to meet.
- Understand annual reporting. Hawaii requires that an annual report is filed for each LLC within two months of your annual formation anniversary. You can register an account and file online here. This document essentially updates the state with any information that has changed regarding your business records. It also serves as a general update on the success of your year.
- Register for taxes. You can learn more about taxes in Hawaii here, and then fill out one of these forms to file online. If you are collecting taxes, that will have to be reported, but since Hawaii also charges a “General Excise” tax on most LLCs, you’ll have to manage that as well.
- Open a bank account. We highly recommend that you establish a business banking account so that your business and personal finances are maintained completely separate. This is important because it helps to protect your personal assets and also makes filing taxes much easier. Once you receive your EIN back from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
- Find an accountant. We do not suggest that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.
- Understand income reporting. Income reporting is just what it sounds like – reporting the income you made from your business. It is important to note that you must file this form whether you made or lost money over the course of the year. The state of Hawaii has two forms. This form is for LLCs managed by a single individual and this one is for LLCs managed by two or more partners.
Why Do We Recommend Using an LLC Formation Service?
As you can tell from above, there are so many logistics to consider when incorporating and managing a business. You have to plan, assess funding, think about how you’ll market your product or service, and manage ongoing legal requirements.
There is something you’re great at, and that’s why you’re establish a business. You have a product or service that provides a needed solution, and we believe that you should spend your time focusing on your business. Outsource the legal details to professionals so you can be more effective as a business owner.
While it is fairly easy to form an LLC on your own, the ongoing compliance can be time consuming. Just as we recommend hiring a knowledgeable accountant in your area, we also recommend hiring an LLC formation service to handle the logistics of forming your LLC as well as the ongoing compliance of it. They can help you make sure all of the t’s are crossed, and the i’s are dotted.
You’ll receive reminders of ongoing requirements like annual reporting so your LLC isn’t shut down because of an innocent oversight. Plus, an incorporation service can serve as your Registered Agent, providing a little additional help in sorting through junk mail and eliminating your personal information from being widely shared.
An LLC formation service basically provides that little extra something you need to be successful. It adds the polish behind the scenes that will give you the confidence to be the best you can be for your business and customers.