How to Start a Hawaii S Corp

Naming your business

The first step in any incorporation process is determining a good name for your S corp. A good name should tell the public the purpose of your business while being unique from currently operational companies. Hawaii also has a few basic business regulations, including being distinct from existing businesses in the state and including an identifier like “corporation” in your company’s name.

You can reserve your business’s name for a small fee of $10 during the incorporation process. This reservation will be valid for up to 120 days.

Designate a registered agent

All S corps in Hawaii need a registered agent who receives crucial documents and notifies the owners. Registered agents can be nearly anyone, but they must have a physical residence in Hawaii. Note that a registered agent is not required to be your business employee or representative but must be available during standard business hours.

Submit Articles of Incorporation

The next step in creating your S corp is filing the Articles of Incorporation. These documents should contain your business’s name, address, registered agent data, and other essential information. As of 2024, the filing fee for the Articles of Incorporation is $50.

Create corporate bylaws

Once you file your Articles of Incorporation, it is time to create your S Corporation’s rules and governing body. Corporate bylaws are the rules that determine how your company will operate and define different individuals’ roles. Creating these bylaws helps your company operate more efficiently. These bylaws do not need to be filed with the state.

Hold first organizational meeting

Before implementing your new bylaws, the board of directors must approve them in the first organizational meeting. The board should also discuss other important business matters, such as appointing officers during this meeting.

Obtain your Employer Identification Number (EIN)

An EIN is necessary for many basic business actions, including opening a business bank account and paying employee payroll. You can apply for your business EIN with the IRS for free.

Apply for S corporation status with Form 2553

Form 2553 must be filed with the IRS if you want your company to become an S corporation. You will need your EIN and basic information about your business to apply. Be sure to file this form within two months and 15 days of forming your corporation or at the beginning of the tax year.

Obtain business licenses and permits

All S corps in Hawaii are required to apply for a General Excise Tax License for a fee of $20. Other licensing requirements may depend on industry or business actions. For example, a construction company in Hawaii must obtain a Contractor’s License before starting a project.

For more information on licensing requirements, visit the Hawaii Department of Taxation website.

Submit your annual reports

S corporations in Hawaii must file an annual report for a fee of $15. This report will update the government on your business’s information and any potential changes that have happened to it.

S corporation limitations and eligibility

While S corporations offer several advantages, the IRS has specific requirements and limitations for adopting this status.

• Shareholder limitations: S corporations are limited to a maximum of 100 shareholders. 
• Stock classes: The business can only possess one class of stock.
• Domestic establishment: The entity must be a domestic corporation or another eligible entity.
• Ineligible entities: Certain corporations, such as certain financial institutions and insurance companies, are ineligible for the S corp status.

• Limited liability protection: The owners of Hawaii S corporations benefit from limited liability protection. Because of these protections, they are not personally liable for the corporation’s legal judgments or debts.
• Tax benefits: S corporations are subject to pass-through taxation. This taxation method allows S corporations to avoid double taxation by passing profits to shareholders. The shareholders are then responsible for reporting all gains and losses on their tax returns. S corporations also have the benefit of being able to reduce self-employment taxes, providing the shareholders with additional profits.

• Ability to transfer stock: Hawaii S corporations have more access to capital by issuing and selling stock. Being able to transfer stock also makes transferring ownership easier.
• Professionalism: The general public perceives incorporated businesses as more trustworthy than sole proprietorships and partnerships. A more professional appearance makes it easier for S corps to access customers and funding from investors.