How To Start An Llc In Hawaii

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Hawaii is an excellent location to start a business if you want to put in some work and have a good lifestyle. The state may be known for its high costs, tough competition, and poor business support, but it is also one where if you’re going to work hard, it is going to help you. So in this article, we look at how to start an LLC in Hawaii.

Why Start a Business in Hawaii?

Hawaii is full of challenges. For one, you’ve got to make sure that you have the determination. There aren’t a lot of customers on any of the islands for more than three prosperous businesses and the main retail sector is saturated with large brands. At the same time, the state is one of the most expensive with residents struggling with one of the lowest incomes in the US.

However, there are also advantages. Get a good niche and work hard and any business can be a huge success in the State. You will also find success with most tourism, construction, or real estate business as these are in high demand.

A business in Hawaii is also a good way to have an excellent work-life balance. Life on the island is good for those who are successful, with lots of health benefits of living in the middle of the Pacific ocean.

Why Start an LLC in Hawaii

For those who are thinking of starting a business, there are significant benefits to starting an LLC in the state. For one, an LLC business requires a business registration, which allows you to protect your name against being used by another entity in the state, as long as the business name is not already in use.

The LLC business structure also protects your personal property from debt collectors who are there to seek payment from debts incurred by the company. So your house, car, and other personal property elements are completely safe from being seized.

You will also have flexible tax systems that allow you to get the best rates and keep more of your revenue.

There are also other benefits like being taken more seriously by suppliers and creditors. Therefore, you can often get better rates for supplies, credit terms, and financing.

Brands can also open business bank accounts that have their benefits. There are also some benefits of opening an LLC in Hawaii as the tax rates in the state are relatively low. For example, the annual fee for Hawaii is just $15, but in California, it is $800 and the US average is $90. To see a comparison, look at the table below.

State LLC Filing Fee LLC Annual/Biennial Fee Corporate Tax Rate Nominal GDP per capita
Hawaii $50 $15 (every year) 4.4-6.4% $62,474
California $70 $800 (every year) + $20 (every 2 years) 8.84% $85,546
Oregon $100 $100 (every year) 6.6-7.6% $62,867
Washington $200 $60 (every year) 0%* $86,265
US Average $130.38 $89.34 (every year) 5.60% $64,773.08

How to Start an LLC in Hawaii

How to Start an LLC in Hawaii

If you’re wondering how to start an LLC in Hawaii, then you need to consider the steps below to get going.

Step 1 – Get a Name for your Business

Before you can start an LLC in Hawaii then there are things that you need. For one, you need to have a name for your business. There are several requirements for the LLC name, these include:

  • The name should contain ‘Limited Liability Company’ or an abbreviation.
  • Any name should be unique, a Hawaii business name search can help with this.
  • You cannot have a name that can be confused with a government agency.
  • Certain words like Bank cannot be used.

In addition to these elements, you will need to have a registered agent within the state. The registered agent is an individual who can collect papers within the state. They must have a physical address in the state. In addition, they can be a business like ZenBusiness and Bizee, which can help you meet filing deadlines and other information.

The wisest option is to ensure that you have done all of this before you start the application. You can use a business name search to check that you don’t have a name that is already in use. You can also reserve your name for a set period to ensure no one takes the name while you’re preparing documents. It is also wise to get a domain name and social media accounts set up before applying for being an LLC.

You might also want to create a DBA name, this is a name that is different from your LLC name, but it can be shorter, not include the LLC elements and be more memorable for audiences. Many brands have an LLC and a DBA name.

Step 2 – File your Articles of Organization

The next step of the process is to file the Article of Organization with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division. The articles of organization contain lots of information about your business, who the agent is, the reason behind the business, and more.

You can file your documents through their website or you can do it by mail. You will also need to pay a fee for filing your articles of organization. These payments can be made by credit card.

There are options to make this process quicker. There are additional fees for the process to be sped up. But that doesn’t mean it isn’t worth it, especially if you would like to get your business going quicker.

How to Start an LLC in Hawaii

Step 3 – Create an Operating Agreement

While an operating agreement is not required by law, an operating agreement for an LLC is a fantastic idea that can prevent problems further down the line. The document outlines the general processes of your business, the organizational structure, and also the main policies. If there is a debate within the business, the operating agreement should help to resolve the issue with ease.

The operating agreement can take some time to create and you might want to take legal advice before you complete the document. However, it can save a lot of time and arguments once the business is operating.

Step 4 – Obtain an EIN

If you have more than one member or employee in your business, then you will need to obtain an EIN for your business. This is a free number that can be collected from the IRS. It can be requested on their website with ease. It takes a couple of weeks for the EIN to arrive.

The EIN can help with getting a bank account and is required for hiring any employees.

Step 5 – File Annual Report

Every LLC registered in the state, whether they are domestic or foreign will be required to submit an annual report. This is done on the anniversary of the LLC’s formation. If you are using an entity to act as a registered agent, they will contact you to remind you. You might also want to use the services of an accountant, who can complete the filing for you and also remind you of important dates.

How to Start an LLC in Hawaii

How Much Does it Cost to Start an LLC in Hawaii?

You cannot start an LLC in Hawaii for free. But there are going to be relatively low costs compared with some of the other states where you might consider starting an LLC on. You will need to pay to reserve your LLC name, this is $10. Registering the chosen name with the Hawaii Department of Commerce and Consumer Affairs will cost you an additional $50.

When you file your Articles of Organization, you will need to pay $50. And there is an annual filing fee of $15.

Therefore, the total cost of starting an LLC in the state is estimated to be around $125 with a recurring fee of $15 per year.

How Much are Taxes for LLCs in Hawaii?

The tax rate in Hawaii is a little more complicated than it is in other states. For example, those that have an income of up to $25,000 have a 4.4% tax rate. Those who have an income between $25,000 and $100,000 will be subject to a 5.4% minus $250. And then those who are earning more than $100,000 will be subject to a tax of 6.4% minus $1250.

There are also federal income taxes and self-employment taxes. These can be levied as pass-through taxation. Self-employment tax is calculated at 15.3% of your income.

When you compare these tax rates to other states, Hawaii isn’t the highest state by far. California has the highest tax rate, with a rate that is 13.3%. However, Alaska has a relatively low tax rate that is 5.06%.

How to Start an LLC in Hawaii

Final Word: How to Start an LLC in Hawaii

If you’re wondering how to start an LLC in Hawaii, then the steps above can help you manage the whole process. These steps are easy to follow and can help you get your business incorporated as an LLC business. You can make this process much easier with the use of a business like ZenBusiness or Bizee.

Hawaii is one of the better locations for taxation as they have a relatively low tax burden. However, Hawaii is not the best location for tax and there are other states that you might want to consider.
Hawaii is a very challenging location for businesses because it doesn’t have a significant audience to sell to, has high costs, and saturated markets. That doesn’t mean that you can’t make a successful business, just that it is going to be challenging.
The median income for a business owner on the islands is higher than on the US mainland, whereas the mean is lower. However, that just means that those who do well, are performing exceptionally well.
Yes. A website for your business is a must for the island. So many businesses that don’t have a website will fail and not succeed.
An LLC model doesn’t automatically make it the best. There are other business models that you might want to try. However, for most small businesses, it is the best option.