How to Form an LLC in Hawaii

Selecting a unique LLC name

The first step new businesses should take is deciding what to name their business. Choosing a valid corporate name is essential to help your business stand out and avoid legal problems. In Hawaii, your LLC’s name should also incorporate either “Limited Liability Company,” “LLC,” or “LLC.” Abbreviations such as “Ltd.” for “Limited” and “Co.” for “Company” are acceptable. This name should also reflect your business’s mission while being unique from established firms.

You can confirm name availability using the Business Registration Division’s online database. 

You can reserve your LLC name by submitting an Application for Reservation of Name if desired. This reservation can protect your name from being taken by other corporations for up to 120 days. Reserving a name has a fee of $10 as of 2024.

Designate a registered agent

Every LLC in Hawaii needs a registered agent responsible for receiving and reporting legal documents. This agent can be a Hawaii resident or an entity authorized to conduct business in the state. They must possess a physical address in Hawaii.

Your registered agent can be anyone who fits the above qualifications, even yourself. Hiring a professional for this role is recommended for legal safety and reliability.

Submit Articles of Organization

Like all new business owners, you must file the Articles of Organization before establishing your LLC. This document will give the government basic information about your business and its operations. Your Articles of Organization should include the LLC’s name and address, the registered agent’s name and address, information about the LLC’s organizers, details about the LLC’s management structure, statements concerning the liability of the LLC’s members, and the organizer’s signature.

Filing the Articles of Organization in Hawaii costs $50.

Draft an operating agreement

While Hawaii doesn’t mandate an operating agreement for LLCs, creating it will help smooth operations. This document outlines the management procedures and member responsibilities to ensure all parties know how to make business decisions and their role.

Acquire an Employer Identification Number (EIN)

LLCs with multiple members need an IRS Employer Identification Number (EIN), regardless of having employees. Single-member LLCs require an EIN if they have employees or opt for corporation-based taxation. Business owners will also need an EIN if they plan to open a business bank account to separate their finances. 

You can acquire an EIN for free by filling out an online application on the IRS website.

Obtain business licenses and permits

Your LLC might need specific local or state business licenses based on its nature and location. For local licensing, consult with the city where your primary business is situated or the county for unincorporated areas. 

Some industries may require that businesses have additional licensing. For example, a company that grows and sells fish requires an Aquaculture Dealer license. Refer to Hawaii’s official business information site for broader state and industry licensing details.

Submit annual reports

Hawaii-based LLCs must annually report to the Business Registration Division and pay a $15 fee. You can submit this report online or by mailing Annual Report Form C5. 

The report’s due date falls within the calendar quarter of the LLC’s founding month. For instance, an LLC founded on July 15 must file between July 1 and September 30 in the following years. The initial year of the LLC’s formation is exempt from this requirement.

• Easier to operate: Hawaii LLCs have fewer mandatory reports and less paperwork than corporations.
• Limited liability protection: Hawaii LLC members and managers have limited liability, similar to shareholders, directors, and officers of corporations. Their assets are protected if the business faces legal problems or debts.
• Owner and employee benefits: Hawaii LLC members are given voting rights, different profit and loss shares, and distinct distribution rights depending on their position in the company. Corporations, partnerships, and trusts can become members of Hawaii LLC. Employees also often prefer working for an LLC over a sole proprietorship or partnership for legal safety and job stability.

• Flexible taxation options: Hawaii LLCs have more flexibility when choosing how to be taxed. You can decide to tax your business as a corporation. Alternatively, it can adopt the pass-through tax structure of proprietorships, partnerships, and S Corporations, providing additional tax benefits and helping the business save money.
• Unlimited members: There’s no cap on the number of members for Hawaii LLCs. No limit on the number of members can make it easier for the company to gain funding from more investors.
• Enhanced public perception: Incorporating a business as an LLC can make it look more professional to the general public. Because the company is government-recognized and trustworthy, LLCs can benefit from more accessible funding from investors.