Are you thinking about starting an LLC in Hawaii? In this article, we’ll discuss the top advantages of an LLC and how it will benefit your business in the short and long term. After that, I will walk you through the entire registration process if you decide it is the right business structure for you.
However as a quick note, if you are nervous about the filing process and would rather professionals handle it to make sure everything is filed properly, look into a service like IncFile (for $49) or LegalZoom (for $149). Both services use online questionnaires that take you less than 15 minutes to fill out and they take care of the rest.
If you’d like to handle the incorporation process yourself, keep reading for our step-by-step guide. Otherwise look into one of the incorporation services mentioned above. Do what you feel most comfortable with.
As a business owner, liability is a major risk that you have to confront as you run your Hawaii startup. However, you can protect yourself from personal, legal and financial liabilities if you form an LLC in Hawaii.
Once you incorporate, your business is considered a separate entity, an independent enterprise that has its own rights and deals with its own transactions. Therefore, it will be responsible for its own mistakes or problems.
In the event that your business gets sued or is put under credit investigation, you will not be accountable for answering any issues and your personal assets will be protected by state law as well. Your Hawaii small business on the otherhand will also be allowed to explain its side fairly and the state will respect its right to due process.
Small businesses at the early stages of development are not expected to be profitable, as a matter of fact, money losses are considered normal during this phase. Building a business takes time and during the initial stages, you have to save and minimize expenditure as much as possible to prepare for the hard times.
Forming an LLC can actually help you ease this financial blow. Many entrepreneurs opt to incorporate under LLC because they can save a lot on taxes. The default partnership taxation which is exclusive to LLC’s enables incurred losses to be carried by the owners of the business deducting it from the income of the startup, thus reducing tax burden.
Business credibility is not built overnight; you need to work hard for it and maintain consistency and sincerity towards your customers. If you start your Hawaii small business on the wrong foot by running it unincorporated, establishing credibility is more difficult, you may even find it hard to gain loyal customers.
To give you that added boost of credibility, the best way to start is to incorporate your business under LLC. Having an LLC right after your business name will improve your startup’s image. With the impression that you are legally registered before the state of Hawaii, consumers will somehow be able to trust and rely on your products and services.
LLC’s are known for their flexibility and ability to adapt to any kind of situation. For instance, you can write your operating agreement in whichever direction you want; it may depend on your business needs or your agreement with other co-founders.
You can set your own rules and manage your Hawaii startup according to your own choices. Basically, you are not mandated by state law to follow any management rules unlike corporations as long as your management methods are not offensive and will not bring harm to consumers.
The state of Hawaii, like the majority of states are lenient on LLC’s. Businesses running under the legal structure are not imposed with formalities and numerous requirements. Corporations are subject to stiff corporate formalities and unbending organizational structures.
If you’re looking for financing for your Hawaii small business, an LLC is an excellent entity of choice. Seed or angel capital investors prefer to invest in LLC’s because of the security that the business structure offers.
An LLC has a feature called partnership pass-through taxation that allows investors to deduct contributions enabling them to use the losses to offset the income of the business. This is especially true when the startup is still unprofitable.
In the event that a business fails, investors will still be able to obtain deductions even if they can’t gain back their investments.
To start forming your Hawaii LLC, you need to come up with the best name. There’s no rule when it comes to naming your business, however, you need to make sure that it doesn’t confuse the public. Make sure to attach the abbreviations, “LLC” or “L.L.C.” after your business name upon filing.
Further, your Hawaii business name should be unique; to check for duplicates you can use the business name search tool. If your chosen business name is available, you can reserve the name for $10, make sure to file an Application for Reservation of Name.
The state of Hawaii requires all businesses to hire and maintain the services of a registered agent as they run their business. Failure to do so would result in the revocation of your LLC status and you may even be penalized for not following this requirement.
When hiring a Hawaii Registered Agent, you should take note of three basic requirements: the professional should be a natural resident of Hawaii, he/she should have street address/office within the state and he/she must be available during business hours from Monday to Friday.
You may also want to consider track record and experience when hiring a registered agent or any other requirement that you’ve set yourself.
Registered agent services can cost you up to $160/year, but if you incorporate your LLC with IncFile – which is $100 less than other online incorporation services, you’ll be able to take advantage of a registered agent service for one full year.
An Employer Identification Number is essential for a number of reasons: it allows you to open a business bank account, hire employees and file for income tax returns. The EIN can be obtained from the IRS website for free.
You need this requirement so that the IRS can monitor your business activities and state taxes.
The Articles of Incorporation are one of the most important documents that you need to file so you can form your Hawaii LLC. Filing can be done online or through mail to the Department of Commerce and Consumers Affairs – Business Registration Division of Hawaii.
Before filling out the form, you need to prepare all your information, which includes: the name and address of the Hawaii LLC, name and address of the Hawaii Registered Agent, names and address of the LLC organizers and other statements to be included. The filing fee is $50.
An Operating Agreement is not a mandatory requirement when starting a business in Hawaii but having one will be good for your Hawaii small business. This document outlines the management, operating procedures and ownership of the business, which is why it’s essential.
As I mentioned previously, if you incorporate your business under LLC, you can basically create your Operating Agreement based on what you want. Check out this site to assist you in making a customizable Operating Agreement.
Like an Operating Agreement, a business plan is not required to start a business in Hawaii, however, writing one will give you numerous benefits.
A business plan verifies whether your business idea is viable or not in the first place. It determines whether it’s profitable or marketable; whether it can survive in the Hawaii business industry or not.
Lack of experience is not an excuse to not write a business plan for your Hawaii startup, below are quick links to help you deal with this problem.
To continue operating your business in Hawaii, you need to pay the required Hawaii LLC Taxes. This is a mandatory requirement in the state that should not be taken for granted.
Failure to pay taxes will result in the revocation of your license to operate; you can be charged for tax evasion and be penalized with large sums of money.
To avoid this, make sure that you understand Hawaii Tax Regulations and familiarize yourself with your responsibilities as a business owner. If you need help, you can seek assistance from concerned office in your county or you may consult a professional tax consultant.
Part of maintaining a Hawaii LLC is to stay compliant for the lifetime of your business. One of the compliance requirements that you need to file every year is the annual report.
The annual report is filed on the calendar quarter of the month of the anniversary when your Hawaii LLC was formed. The filing fee that you need to prepare is $15.
As you can see, starting an LLC in Hawaii is quite a lot of work, there are many requirements to fulfill and numerous steps involved. Before you make a final decision, you need to assess what your business needs first, the pros and cons of each legal entity, the degree of difficulty when it comes to applying for the business structure and among other considerations.
Although filing an LLC can be difficult, you can basically do it yourself as long as you study how to form an LLC in Hawaii. There are many useful guides and resources that can help you, all you need to do is read and understand them. If you feel like a Hawaii LLC is good for you and your business, then go for it!
Please keep in mind that this guide is not meant for legal purposes and is not legal advice. If you want specific answers for forming an LLC in Hawaii, consult with a professional.