How to File an LLC in Hawaii

Welcome to Hawaii, the Aloha State. Hawaii is a tropical paradise to visit and live in and an exceptional place for entrepreneurs. Small business growth in Hawaii is above the national average.[1]

If you’re considering starting a Hawaii LLC but you’re not sure that it’s the type of business for you, we’ll take you through all the benefits and what sets an LLC apart from other business structures (such as sole proprietorships, partnerships, S Corps, and C Corps).

When you decide to proceed with your Hawaii LLC formation, we’ll take you through all the steps required for filing.

Key Takeaways:

• Hawaii is a beautiful and economically-diverse location, making it an excellent place for business. Additionally, the Hawaii Business Development and Support Division offers several small business incentive programs.

• A limited liability company (LLC) is a business entity that allows you the liability protection of a corporation while avoiding many of the formalities.

• Small business growth in Hawaii is above the national average.

What Is an LLC Formation?

A limited liability company (LLC) is a business entity that allows you the liability protection of a corporation while avoiding many of the formalities. An LLC is one of the most flexible business structures.[2]

In Hawaii, an LLC is formed by filing the Articles of Organization (Form LLC-1) and paying the requisite filing fee (also referred to as state fees) of $50.

The benefits of forming a Hawaii LLC include:

1. Personal asset and liability protection

2. Tax designation flexibility

3. Management flexibility

Let’s go over these in more detail.

1. Personal Asset and Liability Protection

Arguably the most crucial benefit of LLC formation is the limited liability it offers. This means you’re given legal separation between you as the owner and the company. If anyone ever sues your LLC, you’ve protected your personal assets, and only your business assets will take the hit.

This liability protection is crucial, as it protects your house, car, stocks, and properties from being impacted by negative legal decisions.

2. Tax Designation Flexibility

By default, an LLC is taxed much like a sole proprietorship, which the IRS calls a “disregarded entity.” Your business entity is disregarded for tax purposes, and you’ll only need to fill out your personal income tax return. You’ll report your business’s income on your personal tax return in what’s referred to as “pass-through taxation.”[3]

While most businesses take advantage of this pass-through taxation,[4] the beauty of an LLC is that you can also be taxed as an S Corp or C Corp if that best suits your business. You can even choose one tax designation one year and switch to another later.

3. Management Flexibility

Another level of flexibility an LLC allows you is the flexibility to choose who manages your business.

An LLC’s owners are referred to as “members.” If your LLC’s members manage your day-to-day business, you have a member-managed LLC. However, you can also elect outside individuals or entities to run your business. In that case, your LLC would be manager-managed.

Most smaller LLCs elect to be member-managed, while larger companies choose manager-management, but the decision is really up to you. 

Step-By-Step Guide to Starting Your Hawaii LLC

Are you ready to start filing your LLC in Hawaii but need help determining where to begin? Look no further than this step-by-step guide to LLC formation in Hawaii. Read carefully through all the steps below, as the filing process varies by state, so it’s vital to thoroughly understand Hawaii’s guidelines.

Remember, the following steps outline how to file a domestic LLC. If you’ve already registered your LLC in another state, you must register as a foreign LLC with a different process.

The filing fee for domestic LLC formation in Hawaii is $50.

Step 1: Choose a Business Name for Your LLC

The first essential step in starting your Hawaii LLC is to choose your company name. Likely, you’ve already put much thought into selecting the perfect name for your brand, but now’s a good time to ensure it complies with Hawaii’s requirements.

The Hawaii LLC naming requirements are:

• Your LLC name cannot be “substantially identical” to other business names in Hawaii.

• Your LLC name must contain a designator such as “Limited Liability Company” or abbreviations such as “LLC,” “L.L.C.,” “Ltd.,” or “Co.”

• Your LLC name cannot contain any misleading nomenclature regarding your business type.

• Your LLC name cannot have words that suggest it’s a government agency.

• Your LLC name cannot have words that indicate illegal activities.

Business Name Search

First, you should conduct a business name search to ensure that no one currently using your Hawaii LLC name is not being used by anyone else in the state.

You can do so by visiting the Hawaii Department of Commerce and Consumer Affairs (DCCA) website and searching your name.

Name Reservation

Let’s say you’ve come up with the perfect name for your Hawaii LLC and have ensured no one else is using a similar name, but you’re not yet ready to move to the next step. In this case, it’s a good idea to reserve your name until you’re ready to file.[5]

You can use a name reservation form to secure your business name for up to 120 days until you’re ready to file. The filing fee is $10.

You can fill out a name reservation application online through Hawaii Business Express. You’ll need to register an account to fill out the form. You can also access the document here, print it, and mail the completed copy to the Hawaii DCAA Business Registration Division.

Trademarking Your Name

If you’re worried about brand infringement and people using your LLC name even after you’ve formed your business, you should consider trademarking your name. A trademark can protect a brand by securing your exclusive legal right to use your name.

The state of Hawaii specifies a difference between trade names, trademarks, and service marks. Trade names refer to business names or entities, while trademarks and service marks refer to the specific goods or services you sell. You’d register a trademark if you sell goods or a service mark if you sell services.[6]

You can register for a trade name, trademark, or service mark through Hawaii Business Express. The filing fee is $50, plus an additional $20 for expedited processing.

Remember that registering your trademark in Hawaii only protects your brand within the state. You must register your mark with the United States Patent and Trademark Office (USPTO) for federal protection. However, this can be costlier, at up to $350 per the classification of goods/services you register.[7]

DBAs in Hawaii

In some states, if you regularly use a name in your day-to-day business that’s different from the one registered on your Articles of Organization (such as leaving off the “LLC” designator), you need to register an assumed name or doing business as (DBA) name.

You can register your DBA in Hawaii, but it’s not a requirement. To do so, you must register your DBA as a trade name through Hawaii Business Express. The filing fee is $50, plus an additional $20 for expedited processing.

Step 2: Fill Out Hawaii Articles of Organization

The next step is the actual application process: filing your Hawaii Articles of Organization (Form LLC-1). This is the primary document that acts as your official application for Hawaii LLC formation.

Here’s what you need to file Articles of Organization in Hawaii:

• Your LLC name

• Your business mailing address (cannot be a P.O. box)

• Name and address of your registered agent (covered in the next step)

• Names and addresses of each of your LLC’s organizers[8]

• Period or duration of LLC (specify either a specific end date or select “at-will”)

• Names and addresses of managers (if manager-managed) or members (if member-managed)

• Signature of organizer[9]

You can file your Articles of Organization online through the Hawaii DCAA Business Registration Division. You’ll need to register an account for Hawaii Business Express to file all business registration paperwork with the state of Hawaii. The filing fee for the Articles of Organization is $50.

You can also file your Articles of Organization by email, mail, or fax, but the quickest and easiest option is just going through Hawaii Business Express. Additionally, they’ll keep all formation documents in one place through their portal so you can access them anytime.

Most applications get processed in just a few business days. However, if you need your LLC processed even more quickly, you can pay an additional $25 for expedited processing. That will bring the processing time down to just one business day.

Optional services (and their subsequent state fees) include:

• $10 for a certified copy of your filing (plus $10 for expedited processing)

• $5 for Good Standing Certificate designating your LLC’s compliance (plus $10 for expedited processing)

Annual Reports

Once your LLC is registered, you’ll need to stay on top of annual reports to remain in good standing with the state of Hawaii. An annual report is a yearly document that you’ll submit to the Hawaii DCCA Business Registration Division that keeps all your LLC’s information up-to-date.

Your annual report is due every year within the quarter of your LLC’s formation anniversary. Staying on top of your filing is essential, or you risk your business falling into delinquency. The pricing is $12.50 for online filing and $15 for mail filing.

Step 3: Hire a Hawaii Registered Agent

One of the required items of your Articles of Organization is to list the name and address of your Hawaii registered agent. You’ll assign this person or entity as the point of contact between your business and the state.

Anyone can serve as a registered agent so long as they:

• Are 18 years or older

• Have a principal address within the state of Hawaii (not a P.O. box)

• Maintain regular business hours during which service of process can be delivered in person[10]

Most LLC owners hire a registered agent service to handle their registered agent needs. A good registered agent service will provide a professional, reliable service to process all your legal documents promptly.

Of course, hiring a registered agent service is an added expense you may not be so eager to pay, especially if you can elect yourself as your own registered agent. While this is certainly an option available to you, here’s why it might not be a great idea.

1. Privacy

Because all of the information listed on your formation documents, including your registered agent name and address, will be listed as public record, it’s not a good idea to list your home address, even if that’s where you do most of your business. 

Hiring a registered agent service is a better option if you want to protect your privacy and keep your address off the public record.

2. Discretion

Let’s say you have a public-facing business address that you don’t mind being on the public record, and you decide to use that for your Hawaii registered agent address. This may solve the privacy issue, but discretionary issues remain to consider.

If you list your customer-facing business address as your registered agent address, you risk being served legal documents and service of process in front of your customer base. Being sued is never a fun prospect, but getting sued in front of customers and clients can worsen an already negative situation.

3. Business Hours

One of the critical responsibilities of serving as a registered agent is maintaining regular business hours. This means that a registered agent must be physically present at their business address during regular business hours to receive service of process and other legal documents.

This requirement can be challenging to maintain for entrepreneurs running a small business. It essentially negates your freedom to leave the office for extended lunches, doctor’s appointments, or vacations, in case a process server shows up to serve you papers. 

4. More Mail to Process

When running a small business, it’s easy for mountains of mail to pile up, and separating critical correspondence from junk can be challenging. With the added responsibility of being your own registered agent and the additional mail that entails, the situation can become even more overwhelming.

Moreover, the consequences of some of your registered agent mail slipping through the cracks and not getting answered can be costly. Neglecting your registered agent duties and missing deadlines can lead to expensive fines, lawsuits, and even suspension or dissolution of your business.

5. One Registered Agent Per State

If your future plans for your LLC include extending outside of Hawaii and into business in the continental U.S., you’ll have to keep in mind that you need one registered agent per state in which you register your business.

Working as your own registered agent might work in the short term while your business is based in Hawaii, but hiring a registered agent service is the best way to go if you’ve got your eyes on expansion.

Swyft Filings Registered Agent Service

Let Swyft Filings come to the rescue. Starting at just $199 annually, our registered agent service will provide you with a designated Hawaii registered agent and the ability to expand to other states anytime.

Benefits of our registered agent service include:

1. Guaranteed privacy protection

2. Compliance assurance

3. Secure online dashboard to view your documents 24/7

4. Availability in all 50 states

With Swyft Filings, you can rest assured that a trained professional adequately attends to all your registered agent needs. Good small business owners delegate. Why shouldn’t you?

Step 4: Create an LLC Operating Agreement

The next step in developing your Hawaii LLC is to draft your written operating agreement. While the state of Hawaii does not require your LLC operating agreement to be on file, it’s still a good idea to create one anyway.

What is an operating agreement, and what does it do for your business? An LLC operating agreement is an internal document agreed upon by all business owners that outlines how you’ll run your day-to-day business.

While multi-member LLCs can benefit most obviously from a written operating agreement, in cases of future internal dispute, even single-member LLCs should have an operating agreement in their back pocket.

Here’s how an operating agreement can benefit even single-member LLCs:

1. It further separates you (and your personal assets) and your business.

2. It boosts your legitimacy in the eyes of state institutions and banks.

3. It allows you to choose how to operate your business rather than the state.

4. It will enable you to apply for specific business licenses, financing, and credit accounts.

An LLC operating agreement can vary significantly from business to business, but in general, here’s what to include in yours:

• Business name and type of business entity

• General description or purpose of your business

• Management structure (member-managed or manager-managed)

• Rights and responsibilities of members

• Ownership percentages

• Profit and loss division

• Voting percentages, rights, and procedures

• Initial tax designation (sole proprietorship, partnership, S Corp, or C Corp) and procedures for changing designations in the future

• Procedures for adding or removing members

• LLC dissolution procedures and steps to take for wrapping up your business[11]

An excellent operating agreement is a road map for conducting your future business, and all LLC owners must agree on its contents. 

Step 5: File for an Employer Identification Number and Business Licenses

Next, it’s time to get friendly with the Internal Revenue Service (IRS) and file for your business’s employer identification number.

An employer identification number (EIN), also referred to as a federal employer identification number (FEIN) or federal tax identification number (FTIN), is a 9-digit ID assigned to businesses by the IRS. It helps identify a company, just like a social security number identifies an individual.[12]

Your LLC must obtain an EIN if you plan on hiring employees or if your business meets specific other criteria,[13] but it’s a good idea to apply for one even if you’re a single-member LLC. This is because an EIN is also essential for:

• Providing a secure alternative to using your social security number

• Opening business bank accounts

• Applying for business credit cards

• Applying for specific business licenses and financing

• Filing as a partnership or corporation on your federal tax returns

• Filing certain business taxes and state taxes

Luckily, it’s super easy to apply for an EIN. You can do so online, and it’s completely free. Obtaining your LLC’s EIN only takes a few minutes, so start today.

Apply for Hawaii Tax Accounts

To keep your business compliant with state taxes, you’ll need to register your LLC’s tax account. The Hawaii Department of Taxation (DOTAX) requires all companies to register for a Hawaii Tax ID number and various required tax licenses.[14]

To start, you must complete the State of Hawaii Basic Business Application (Form BB-1). You can do so online through DOTAX for faster processing times, but we recommend using Hawaii Business Express so all your business documents are in one place.

Additionally, the state of Hawaii requires a general excise tax (GET) on the income tax return for all businesses. The one-time fee for registering for a GET license is $20.

Other business tax licenses your LLC may require include:

• Employee withholding tax (required if you have a multi-member LLC)

• Transient accommodations tax

• Car rental, car-sharing, and tour vehicle tax

• Liquid fuel distribution tax

• Liquor tax

• Cigarette and tobacco tax[15]

Let Us Handle Your LLC Paperwork

If all these steps seem like a lot to handle on top of running your small business, we get it. That’s why Swyft Filings helps entrepreneurs like you form an LLC in no time.

With our LLC formation service, we’ll take on all the responsibility of filing, so you can rest assured that your Hawaii LLC will be registered smoothly and correctly.

Swyft Filings’s LLC formation service features:

• Some of the fastest processing times in the industry

• Personalized customer care with our team ready 24/7 to help with any step of the process

• More than 3,500 five-star customer reviews

In just 10 minutes, you tell us about your business, and we’ll file all paperwork. Once the state approves your formation documents, we’ll mail you your completed LLC documents. Get started today!

FAQs:

How much does it cost to set up an LLC in Hawaii?

Fortunately, setting up a Hawaii LLC is relatively inexpensive compared to other states. The filing fee for your Articles of Organization is just $50, plus an optional $25 for expedited processing.

Additionally, here are some other expenses you may incur:

• $10 for the name reservation fee

• $50 for a trade name, trademark, or service mark registration in the state of Hawaii (plus $20 for expedited processing)

• $10 for a certified copy (plus $10 for expedited processing)

• $5 for Good Standing Certificate designating your LLC’s compliance (plus $10 for expedited processing)

• $15 for the annual report filing fee (plus $25 for expedited processing)

How is an LLC taxed in Hawaii?

The state of Hawaii does not charge a corporate or franchise tax rate for LLCs, but you will need to pay state and federal income taxes. You can review Hawaii’s income tax rate brackets here.

However, remember that you must pay the Hawaii corporate tax rate if you’re filing your LLC taxes as a corporation. You can review the corporate tax rate brackets here.

Additional taxes you may be subject to include:

• Sales tax

• Employee withholding tax

• General excise tax

• Use tax[14]

What are the benefits of a Hawaii LLC?

Hawaii is a beautiful and economically-diverse location, making it an excellent place for business. Additionally, the Hawaii Business Development and Support Division offers several small business incentive programs.

Additional benefits of Hawaii LLC formation include:

1. Personal asset and liability protection

2. Tax designation flexibility

3. Management flexibility

4. Minimal paperwork and reporting

How do you dissolve an LLC in Hawaii?

For your first steps in dissolving your LLC, look at your LLC operating agreement and follow the procedures outlined there.

Once you wrap up those items, you’ll need to terminate your business with the state of Hawaii officially. You’ll fill out the Articles of Termination (Form LLC-11) to do so. You can do so online on Hawaii Business Express or by printing and mailing the completed form.[16]

The filing fee for the Articles of Termination is $25, plus an optional $25 for expedited processing.

Bibliography:

1. U.S. Small Business Administration Office of Advocacy. “2022 Small Business Profile: Hawaii.” Accessed April 11, 2023.

2. DCCA Hawaii Business Registration. “What Is An LLC?” Accessed April 11, 2023.

3. Internal Revenue Service. “Limited Liability Company (LLC).” Accessed April 11, 2023.

4. Brookings. “9 Facts About Pass-Through Businesses.” Accessed April 11, 2023.

5. DCCA Hawaii Business Registration. “Name Reservations.” Accessed April 11, 2023.

6. DCCA Hawaii Business Registration. “Trade Name, Trademark, Service Mark.” Accessed April 11, 2023.

7. United States Patent and Trademark Office. “Trademark fee information.” Accessed April 11, 2023.

8. DCCA Hawaii Business Registration. “What Is an LLC Organizer?” Accessed April 11, 2023.

9. State of Hawaii Department of Commerce and Consumer Affairs Business Registration Division. “Articles of Organization for Limited Liability Company.” Accessed April 11, 2023.

10. State of Hawaii Department of Commerce and Consumer Affairs Business Registration Division. “Information for Domestic Limited Liability Company.” Accessed April 11, 2023.

11. Hawai’i State Legislature. “Effect of Operating Agreement; Nonwaivable Provisions.” Accessed April 11, 2023.

12. Internal Revenue Service. “Employer ID Numbers.” Accessed April 11, 2023.

13. Internal Revenue Service. “Do You Need an EIN?” Accessed April 11, 2023.

14. State of Hawaii, Department of Taxation. “Tax Facts 31-1: Licensing and Tax Information for New Businesses.” Accessed April 11, 2023.

15. State of Hawaii Department of Taxation. “State of Hawaii Basic Business Application.” Accessed April 11, 2023.

16. DCCA Hawaii Business Registration. “If My LLC Is No Longer in Business, How Do I End My Registration With the Department?” Accessed April 11, 2023.