How to start a business in Hawaii in 8 steps
When it comes to quality of life, the state of Hawaii provides one of the best. The third wealthiest state in the United States, Hawaii’s capital of Honolulu consistently ranks as one of the top regions of livability in the world. It should be no surprise then that Hawaii is also a fantastic destination in which to start a business.
If you’re an entrepreneur living in Hawaii or are simply dreaming of starting a business in the Aloha State, here are 8 steps you can follow to help actualize your vision for creating your own enterprise in an area of the world where delicious mai tais flow like water and beautiful beaches are the norm.
1) Think about the type of business you want to start
Whether you already know what business you want to start or are just deciding that starting a business is for you, becoming a small business owner is a relatively intricate and time-consuming process. Before you dive into the throes of entrepreneurship, it’s essential to dedicate quality time to thinking about the type of business you want to start. This way, you’re embarking on an endeavor you genuinely love and not one you feel mediocre about, which could end up wasting your time.
As you consider different types of business ideas, think about ventures that will provide the kind of work that will leave you feeling inspired and fulfilled every day. Being internally motivated to show up for yourself will keep you grounded and focused on achieving the long-term goals of your company without fear of burning out. When you love what you do, the work will feel more like play.
Once you’ve solidified the type of business you want to start in your mind’s eye, you’ll then want to actualize the blueprint for your idea in the form of a business plan. A business plan will help you conceptualize how best to monetize your startup, providing a framework for you to follow as you set forth to accomplish your small business milestones.
2) Set up your legal structure
After you’ve chosen the type of business you wish to grow, you’ll then want to establish your startup’s business structure. A company’s business structure is a legal structure that designates how your business entity will pay its taxes. For small business owners operating in Hawaii, there are four main options when choosing the structure that best fits your business model:
- Sole Proprietorship: At its core, a sole proprietorship is essentially you, the business owner, conducting business using your Social Security Number as the means by which you’re taxed and report your income tax. Unless you’re opting to use a fictitious name—or trade name—to operate your business, there’s no fee to set up a sole proprietorship in the state of Hawaii, and you’re not required to fill out any paperwork and. Note, the one drawback of a sole proprietorship is the absence of legal protections that come with an officially incorporated designation.
- General Partnership: Think of a general partnership as one or more sole proprietors running a business together. General partnerships, like sole proprietorships, are unincorporated entities that offer no legal protections to their owners. They also operate as pass-through entities when it comes to taxation and reporting income.
- Corporation: Offering both legal protections and tax benefits, corporations are their own entities acting in their own best interests. Unlike sole proprietorships, the profit and loss of a corporation do not affect the personal assets of its business owners, which also helps protect those assets from being accessible in the event of a lawsuit. Corporations in Hawaii are usually filed as a C corporation or an S corporation, the main differences of which reside in how the business entities are taxed come tax season.
- Limited Liability Company (LLC): The Limited Liability Company is another entity that provides legal protections and tax benefits to its owners. However, the tax benefits with your LLC are very flexible. An LLC’s tax flexibility allows it to operate more like a sole proprietorship or traditional corporation depending on the needs of the specific business, so it’s a fantastic option for startups that might need to make structural changes down the road. If you anticipate structural change as part of your business model, forming a Hawaii LLC might be the best business structure for you to set up.
Think of your business entity selection as the stabilizing core of your company when invoicing clients, paying taxes, or handling any legal matters. Given that needs and requirements of a startup’s day-to-day operations vary from startup to startup, it’s essential to think through what legal and tax system will best fit the needs and requirements of your business and select the business entity structure that best meets those needs.
3) Name and register your business
Now that your business entity has been selected, it’s time to choose a name for your new business and register it with the State of Hawaii. Your business name should feel right to you. It should not rely on any other factors outside of what you, the business owner, think is memorable and best positions your company for success in its specific industry.
Before moving forward with a specific name, conduct a name search on the Hawaii Business Express website to verify your desired name is not yet taken. Provided your chosen moniker is available, you’ll need to register the name, and how you’ll do so will vary depending on your business structure.
If your business is a sole proprietorship or general partnership and you want to use a fictitious name—“Doing Business As” or DBA—you’ll need to fill out the Application for Registration of Trade Name, which is a form available on the Hawaii Business Express website. The form can be submitted online or by mail, along with a $50 filing fee. If your business is a corporation, you’ll need to fill out Articles of Incorporation and submit them to the Hawaii Department of Commerce and Consumer Affairs (DCCA), Business Registration Division (BREG) by mail or online, along with a filing fee of $50. If your business is an LLC, submit your Articles of Organization to the same BREG office, in addition to the $50 filing fee. Locking in a registered agent who can act as the point of contact for your business in Hawaii on all tax and legal matters is a recommended step during this process.
The last step is to ensure your business formation receives approval at the federal level with the Internal Revenue Service. You’ll need to apply for a Federal Employer Identification Number—or federal tax ID number—which will act as a Social Security Number for your business’s reported income and taxes come tax season. You can quickly fill out the application form for a Federal Employer Identification Number on the IRS website.
4) Apply for business licenses and permits
While there is no general business license in the State of Hawaii, all businesses operating must register for a Hawaii Tax Identification Number via the Hawaii Department of Taxation, which allows businesses to procure various tax licenses.
Suppose your business provides consulting services in the state of Hawaii like accounting or pest control. In that case, business owners must obtain a license—specific to their practice—from the Department of Commerce and Consumer Affairs Professional and Vocational Licensing Division, or PVL. Regardless of the licenses you think you’ll need, it’s a good idea to cross-reference with the Hawaii Business Express website to ensure you’re obtaining all of the proper licenses and permits specific to your business sector.
5) Choose a location
Choosing a location for your business in the state of Hawaii is more strategic than you might imagine. While some might put down a deposit on the first available space they see, you’ll want to take some time and research the different location-based requirements present across the state, which could impact your business’s bottom line.
Even though two of the most popular locations to start a business in Hawaii are Oahu and Maui, they may not be two of the best locations for your specific business. Depending on the industry you’re in, you may find a physical location unnecessary to accomplish the type of work in your field. If working from home appears to be the better play, it might make more sense to allocate resources to securing a prime living location and outfitting your home with a serviceable home office. With remote teams on the rise, a good investment might be to set up a functional office in your home so your company can accommodate different types of employees in the future.
6) Open a bank account and prepare for future taxes
Outside of sole proprietorships and general partnerships, the best thing you can do for your startup’s financial health is open a business bank account and a business credit card to establish a business line of credit. Keeping your income and expenses separate from your personal accounts will help you avoid any mix-ups and confusion on your tax returns and is a cleaner system to maintain should your business ever receive an audit.
To open a business bank account or credit card in Hawaii, you’ll need your Federal Employer Identification Number, a driver’s license, and—depending on which type of business entity you’ve selected for your company—either Articles of Organization or Articles of Incorporation.
After setting up your business bank accounts, you may want to consider hiring a business accountant or purchasing accounting software to handle your company’s financials, particularly if you plan on hiring employees or are easily overwhelmed by business taxes. A business accountant will make sure you’re registering for employee taxes and sales taxes, will help you set up payroll, and ensure that the way you’re running your business is in line with all federal taxes, state taxes, laws, and regulations.
7) Purchase business insurance
Even the most successful entrepreneurship journeys can be winding roads containing peaks and valleys, which is why most small business owners learn to expect the unexpected and purchase business insurance. Purchasing business insurance is a great way to protect your startup from legal claims and lawsuits or any other unplanned circumstance that could hurt your business’s overall health. In Hawaii, there are three main types of business insurance small business owners usually purchase:
- General Liability Insurance: A basic insurance policy that protects your business in the event of a lawsuit.
- Workers’ Compensation Insurance: Required in the state of Hawaii, this policy protects you and your employees should they suffer a work-related injury.
- Professional Liability Insurance: A basic policy tailored to those providing services that protect against malpractice claims, errors, and other types of unforeseen circumstances.
In the State of Hawaii, incorporated businesses with one or more employees must purchase a workers’ compensation policy. Contact the Small Business Administration (SBA) or the Small Business Development Center online or by phone to make sure your business also complies with any federal insurance requirements.
8) Create a marketing plan, hire employees, and more
Time to take a breather and recognize your accomplishment of successfully launching a new business in the state of Hawaii. Quite the milestone! With the majority of the initial financial and legal paperwork completed, you can now focus on creating the framework for growing your business and positioning it for success for years to come.
One of the most helpful ways to organize your thoughts around business development and growth is to create a marketing plan. By drafting a marketing plan, you’ll be able to determine how much time and money to allocate toward things like advertising, building a website, or hiring a social media manager. Rather than approaching the marketing and public relations side of your business ad hoc, take the time to create a marketing plan with the intent—in true startup fashion—to iterate as you go.
Just remember, as you continue about your day-to-day running your new business in the beautiful state of Hawaii, your friends at Huckleberry are standing by to assist you with all of your business insurance needs. In less time than it takes to dust off a surfboard, Huckleberry can fire off an insurance quote to you, allowing your time and energy to be focused on the present while Huckleberry has you covered for the future.