How to form an LLC in Hawaii in 7 easy steps
Forming an LLC in Hawaii is a simple part of launching your small business. The abbreviation LLC stands for Limited Liability Company. It’s a common legal business structure for small business owners to separate and protect personal assets from company assets. To set up your LLC in Hawaii, follow a few simple steps.
1) Check if your business name is available
Whether you’re upgrading a sole proprietorship or starting with a Hawaii LLC, your first step is to name the business. Before settling on a final name, you need to do a name search to make sure no other company is using it.
Search existing business names
Check with the Hawaii Department of Commerce and Consumer Affairs (DCCA) by searching the business name database at ehawaii.gov to determine whether the name is already taken. Then, make sure your business name follows Hawaii's naming guidelines:
- The business name must include the words "Limited Liability Company" or the abbreviation LLC or L.L.C. in the name
- Do not use phrases that resemble government agencies, such as State, Department, or Treasury
- Don’t use restricted words (bank, doctor, attorney, and university) unless your industry allows it
Using your given name vs. a fictitious name
Consider if your LLC will use your given name or a fictitious name. For example, if you’re starting a financial services company that relies on name recognition, you may want to use your legal name as your business name.
But for selling products like handmade leather goods, a fictitious name such as Love For Leather might be more suitable.
Hawaii LLC trade names
You also have the option to create a more generic name for your LLC and file a DBA (doing business as) for the name you want to use for your company. In Hawaii, a DBA is known as a trade name.
For example, suppose you choose Greene Enterprises LLC as your company name. But you want to use the brand name Quality Construction for your building and contracting business. You can register your LLC under Greene Enterprises and file an Application for Registration of Trade Name to legally do business under Quality Construction.
Filing a trade name isn’t required, but it’s an option if you want to expand your company now or in the future.
2) Claim your name
Choosing a name is no easy task—it can be one of the most stressful (but exciting!) parts of business formation. Once you settle on a decision, you’re ready to name your company officially.
In Hawaii, you must register your LLC with the Department of Commerce and Consumer Affairs Business Registration Division (BREG). BREG has an online portal to register online instantly. You can also claim your name by mail using the Application for Reservation of Name (Form X-1):
- Select "LLC" for the business entity type
- Enter your name and street address or P.O. box number
- Choose application status—domestic LLC (in-state) or foreign LLC (out-of-state)
- Enter the requested business name of your Hawaii LLC
- Fill in other necessary information, if applicable
You’ll submit the form to the Honolulu office, along with a $10 non-refundable filing fee. Once Hawaii Commerce and Consumer Affairs approves your name application, you have 120 days to apply for your Hawaii Articles of Organization.
3) Appoint a registered agent
Before applying for your LLC Articles of Organization, you need to choose a Hawaii registered agent (RA). You’ll list your company’s RA in its business filings as the point person for contact—they’ll accept tax and legal documents on behalf of the LLC.
You can act as your own RA, elect another member of your LLC, appoint a trusted friend, or use a registered agent service. Many LLCs opt for a registered agent service because it offers:
- Compliance: The service maintains and files annual reports with the state, helping you keep your company in good standing and avoid fees
- Privacy: The agent's name and address are publicly published on business forms and state business registration sites—rather than listing your address, the RA services' address would be recorded
- Discretion: If you have employees, the service receives sensitive legal documents, avoiding discussion among your staff
- Flexibility: The service can have staff available during business hours all year, so if you go on vacation or away from the office, the RA can handle the paperwork for you
- Online storage: The service can scan and maintain your documents online, which is easy for you to access
- National coverage: Using a service can be convenient if you expand outside the state or hire employees who are residents of another state—most services have offices in all 50 states
The cost of a registered agent service can average around $50 to $300 per year. However, many LLC owners believe the benefits are well worth the price.
4) File Hawaii Articles of Organization
You have finalized and claimed your small business LLC name and chosen a registered agent by this point. Now it's time to make it official by filing your Hawaii LLC Articles of Organization.
Choosing member-managed or manager-managed
When completing the form, you’ll need to choose whether your LLC is member-managed or manager-managed:
- Member-managed: The managers actively participate in the daily business operations
- Manager-managed: The managers do not actively participate in the day-to-day operations
Member-managed LLCs are the most common option—many LLCs are small enough that the business owners actively engage in running business operations (taking orders, fulfilling orders, managing cash flow, handling customer service).
However, suppose your LLC has passive investors who prefer to have a hands-off approach, or your company is large enough that it doesn’t make sense to have the business owners manage day-to-day tasks. In that case, opting for manager-managed is probably your best bet.
Filing the Articles of Organization
Use the Hawaii Business Express site to register your new business online. You can also register by mail, fax, or email using the Articles of Organization for Limited Liability Company (Form LLC-1). Conveniently, BREG has a handy guide that walks you through how to complete this. Whether you complete your Articles of Organization online or by mail using a printed form, you’ll need to provide:
- The name and mailing address of the company
- The name and address of the registered agent
- The names and addresses of all the LLC's organizers
- The status as manager-managed or member-managed
- The signature of the LLC organizer
The $50 filing fee is payable by check or credit card, and it’s non-refundable. However, if you’d like faster processing of your form, you can pay an additional fee of $25 for expedited service.
5) Write your LLC operating agreement
An operating agreement is a crucial piece of LLC formation when the company has more than one owner. It spells out:
- The percentage of the company each member owns
- Member voting rights and responsibilities
- How meetings should be held for members
- Profit distributions (how much each owner receives in profits)
- How to handle changes in leadership
- How to dissolve the LLC if the need arises
Some states require that you draft an operating agreement, but Hawaii doesn’t mandate it. Even so, you may want to create one. An operating agreement can save you substantial trouble down the road if a dispute over management or money arises.
Without one, you’re stuck following Hawaii’s default rules which may be inadequate when applied to your business.
An operating agreement is a legally binding document that defines many situations and functions of your business and its owners. You can find operating agreement templates online, but you’d be better off contacting an attorney for help drafting the document.
6) Pay your taxes
Businesses are responsible for taxes—there’s no doubt about that. While you probably won't have to pay taxes immediately, you can prepare now and be ready when the time comes.
Register with the IRS
The first step to getting ready for business taxes is to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). It’s also known as a federal tax identification number. Getting an EIN doesn’t cost anything, and you can usually get your number instantly.
Your EIN is a nine-digit number and serves a similar purpose as an individual’s Social Security Number. For example, the IRS uses it to track tax returns you file. Even if you are a single-member LLC and don’t have any employees, you’ll find an EIN is helpful for opening business bank accounts and applying for financing.
Manage business income taxes
Nearly every small business will face tax or personal liabilities at one point or another. But an LLC handles income taxes slightly different from what you’d expect—the company doesn’t file or pay federal income tax or state tax itself.
Instead, LLCs are “pass-through” entities. Your company’s revenue passes through the business to you, and you’re responsible for paying income taxes.
7) Wrap up other regulation and sales tax requirements
Congratulations! Your Hawaii LLC is just about ready. But depending on the industry your business is in, the State of Hawaii may have additional requirements, such as:
- Business licenses and permits: Hawaii typically requires your business to register for a seller’s permit if you sell a physical product—other licensing and permits may also be required
- Annual reports: Hawaii has a due date for LLCs to file annual reports
- Small business insurance: If your business has employees, you must have workers’ compensation insurance
- Sales tax: Hawaii doesn’t have a sales tax, but it does assess General Excise Tax (GET) that you can pay online through the Hawaii Department of Taxation
The state may have other requirements that you must follow. Make sure you understand the local, state, and federal regulations to keep your business compliant.
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Starting a small business is exciting! Don’t get bogged down by the intricacies of forming your Hawaii LLC—it isn’t super complicated or time-consuming. However, you do need to follow the process step-by-step to get the right forms and state fees where they need to go. At the end of the day, you’ll have the liability protection of an LLC.
Small business insurance from Huckleberry can be the missing piece to your LLC puzzle. It can extend your liability coverage to make sure you and your business have the proper protection in place. It takes about 60 seconds to get a quote, and you’ll soon discover that insurance is much more affordable than you think.