How to Start an LLC in Hawaii: Cost and Registration Steps

If you’ve ever been to Hawaii once, you know it’s a place like no other on Earth thanks to its unique tropical nature and mythical culture. Many visitors wish they could stay in this paradise forever, but is it really worth it? Is Hawaii a good spot to actually live and do business in?

In 2018, the Aloha State was reported to be the least business-friendly territory in the USA. Hawaii came last out of all 50 states in such categories as human capital, resource availability, and cost of living. It also has the second-highest tax burden in the country with almost 13%.

However, despite all these disadvantages, Hawaii remains one of the wealthiest states in the USA carried by its highly developed tourism and agriculture industries. Business opportunities may differ from island to island, but there are a few common spheres that you’re likely to cash in on:

• Hotels and apartment rentals;
• Tour guides and excursions;
• Bars, restaurants, cafes, etc.;
• Car and bike rentals;
• Health and self-care services (nail salons, barbershops, etc.);
• Tourist equipment rentals;
• Farming (requires land ownership);
• Souvenir shops;
• Gadget repair services.

So, if you’d like to join the party and start an LLC in HI, the best way to do it is to form a limited liability company. In this article, we’ll discuss all the pros and cons of this business structure and give you a complete guide on creating an LLC in Hawaii.

What is an LLC in Hawaii and Other States? – Quick Overview

Over the last two decades, no other business entity has had a bigger increase in popularity than limited liability companies. LLCs offer great versatility for business owners, making them the perfect choice for multiple situations.

LLC Cons

First, let's get the negative factors out of the way and check out 3 things about limited liability companies that we wish did not exist:

• Limited membership movement – Dismissing current LLC members or adding new ones is much more complicated than it should be. At the very least, you will have to file a special amendment form for the Articles of Organization (sort of a birth certificate for your LLC) and also make changes in the operating agreement. On top of that, some states will force you to disband the company and then re-register it with new members;
• Lack of third-party investment – The more owners an LLC has, the larger starting capital it can accumulate. However, getting money afterward can be a problem. LLCs cannot receive direct financing from outside parties, making it difficult to expand and upscale the business;
• Regular maintenance – Choosing LLC as your entity comes with some annual paperwork requirements. Typically, you need to file corporate reports at the end of each year, but some states also charge additional fees just for the fact that you're running a domestic limited liability company (luckily, that's not the case for Hawaii unless you elect to be taxed as a C-corp or S-corp).

LLC Pros

In our opinion, the items in the previous section are minor inconveniences compared to all the great things that limited liability companies bring to the table. Here are some of the main selling points for the LLC structure:

• Limited personal liability – This point is obvious, but it's exactly what makes LLCs so good. By separating their business from themselves, LLC owners receive valuable protection of their assets. This means that in case of a lawsuit, debt, or bankruptcy, their property (real estate, cars, bank accounts, etc.) will be safe;
• Different management models – An LLC can be managed by one, several, or all members of the company. This allows attracting unlimited sources of financing at the early stages of LLC formation, which will give the company a huge boost for development;
• Favorable taxation options – By default, single-member LLCs are taxed as sole proprietorships, while multi-member LLCs reap the benefits of pass-through taxation. In other words, owners receive the company’s income in full and then pay taxes individually according to their established roles. An LLC can also choose to be taxed as a corporation which can save it a good amount of money if the regular income is high enough;
• Customer trust – People love to see various abbreviations or suffixes that make a generic word combination sound credible. You’ll get a lot more attention and sales when you’ve got an “Ltd.” or “LLC” tag after your business name.  
• Easy registration – Setting up an LLC in Hawaii or any other state has its unique moments that we are going to discuss later, but the official part of filling out and submitting the documents typically takes less than 30 minutes. Other than that, a limited liability company is run under mutual agreement between all owners which doesn't even have to be in written form to have an effect. 

Speaking of registration, in the next segment, we’ll go over all the stages of the LLC formation and tackle every tricky question regarding this procedure. Want to know how to start an LLC in Hawaii? Let’s go!

How to Form an LLC in Hawaii: Step by Step

While starting an LLC in Hawaii, you need to designate an LLC organizer. The main responsibility of the organizer is to prepare the registration documents and file them with the Hawaii Secretary of State. It can be you, your friend, a member of your family, a member of the company, an attorney, a registered agent, an accountant, or a specialized LLC formation service.

Once you’ve chosen the organizer, it’s time to initiate the process of your LLC formation HawaII. Usually, it includes 6 steps:

1. Name your LLC;
2. Appoint a registered agent in Hawaii;
3. File the Articles of Organization;
4. Draft an operating agreement;
5. Get an EIN for your LLC registration Hawaii;
6. Open a bank account;

Step 1: Name your LLC

First things first, your company needs a name. However, you can’t just call it what you want and be done with it. Like all states, Hawaii has a unique set of regulations and restrictions regarding LLC names, corporation names, trademarks, and other marks. As seen in Title 16, Chapter 36 of the Hawaii Administrative Rules, a business name will not be registered if:

• It consists solely of a geographical name or an officially recognized landmark, for example, “Honolulu LLC” or “Eiffel Tower Ltd.”;
• It contains the words “bank,” “trust,” “savings and loan,” and their derivatives unless the company is authorized to operate as a financial institution;
• It contains the words “Post Office” or “Postal Office”;
• It contains the words “Olympic,” “Olympiad,” or “Citius Altius Fortius”;
• It sounds disrespecting or similar to an active company in the state’s business registry;
• It is in any way deceptive, misleading, or confusing;
• It contains profanity or inappropriate language.

The full list of corporate name requirements in Hawaii can be found here.

The name of your limited liability company must include an entity modifier, such as:

• Limited;
• Limited Liability Company;
• Ltd.;
• LLC;
• L.L.C.

If you fail to apply any of these tags to your corporate name, the company will be registered as “LLC” by default.

How To Check Name Availability?

So, you’ve got a cool-sounding name that checks all the regulation boxes, but there may still be a problem. What if there is another company with the same name somewhere in Hawaii?

Don’t worry, the Secretary of State can help you handle this. Here is a useful search tool that allows you to find every LLC, corporation, or partnership registered in the Aloha State and see if your desired name is up for grabs. You can even reserve it for 120 days to prevent the opponents from taking it by paying a $10 fee.

Hawaii Trade Name (DBA)

By Hawaiian laws, your LLC cannot use any other name for promotion except the one it’s registered under. In other words, the sign on your office will look something like “Jonh Doe’s Bicycle Rental Service LLC.” To solve this problem, your company can register a fictitious name, also known as DBA (doing business as).
A DBA gives you an opportunity to establish a unique and recognized brand and attract more customers. The trade name application can be submitted online or by sending this form by mail. The DBA registration fee is $50.

Step 2: Appoint a Registered Agent in Hawaii

What is the next step in our “How to get an LLC in Hawaii” guide is a registered agent. To legally do business in Hawaii, it’s mandatory to appoint a statutory agent, also known as a resident agent or agent for service of process. It’s a person or another legal entity that accepts mail and correspondence from federal and state agencies on behalf of your company.

You may ask, “But why can’t I receive my mail myself?” It’s a good question, and the short answer is yes, you absolutely can be your own registered agent. However, it’s not as simple as it looks. If you choose to represent your company as its agent for service of process, you will have to follow these rules:

• A registered agent must be at least 18 years of age;
• An agent must have a street address in the state of Hawaii (if you’re not a Hawaiian resident, that could be a big problem);
• An agent must be physically present at the specified location during standard working hours (Monday-Friday, 9 AM - 5 PM) to receive correspondence, meaning no lunch breaks, no sick leaves, no vacations, and so on. If you miss an important mail (for example, a lawsuit) and miss a court date, the future of your company will be in jeopardy;
• Your name and address become publicly available on the Hawaii Department of Commerce and Consumer Affairs website (say goodbye to privacy and hello to tons of junk mail).

The good news is there are plenty of local and national registered agent companies that can make your life much easier. The fees range from $50 to $250 per year for a standalone service, and in our experience, it’s totally worth it as you’ll kill two birds with one stone. Not only do you get an experienced and reliable assistant who will never miss a single document, but it also gives you time and freedom for more important parts of your business life.

Pro tip: most LLC providers offer free resident agent service for 6 or 12 months when you buy one of their formation plans, allowing you to get more products for the price of the standard service of process.

Step 3: File the Articles of Organization

Preparing the Articles of Organization is probably the most vital stage of business formation. This document provides the state of Hawaii with basic details about your LLC, which will be used in the official business registry.

Note: in other states, the LLC registration form may be also called the Certificate of Organization or the Articles of Formation. These should not be confused with the Articles of Incorporation, which is a similar form used for creating S-corps and C-corps.

The Hawaiian version of the Articles (form LLC-1) consists of 7 sections:

1. The name of the LLC;
2. The mailing address of the principal office;
3. The name and address of the registered agent;
4. The name and address of LLC organizers;
5. The period of duration;
6. The type of management;
7. Liability options.

We’ve already discussed Sections 1 and 3, so let’s take a closer look at the other points, starting with #2.

Principal Office Address

Here you need to specify the address of the initial principal office for mailing purposes. Unlike registered agents, you can enter any street on any Hawaiian island or even outside of the state completely. The only limitation is that you cannot use a post office box.

LLC Organizer Contact

In this section, the organizer of your LLC must enter their full name and address. The state needs this information to provide feedback about the formation process and send approved or rejected documents back to your company.

Note: LLCs are not required to have more than one Organizer, but there’s an option to add multiple names if needed.

The Period of Duration

Section 5 clarifies how long your company is planning to be active. You can select one of two options:

• At-will – for LLCs with no expiration date;
• Specified term – for LLCs that will be shut down at a certain date (exact day, month, and year are required).

Note: if you're unsure what to choose, go with the "At-will" option. You will be able to discontinue the LLC at any time in the future.

The Type of Management

There are two ways you can manage a limited liability company: by members or by managers.

In member-managed LLCs, all business decisions are made by the owners. The amount of leverage for each member is specified in the operating agreement (see Step 4) and cannot be regulated from the outside. Member management is a great choice for businesses with fewer than 10 people where every owner is engaged in the company's activities.

Large companies with multiple owners prefer to appoint one or several managers that will be responsible for running the business. Usually, this role is given to the most experienced members or professional third-party executives. The manager-managed model is especially suitable for LLCs with several investment sources or corporate ambitions.

Pro tip: since most LLCs are relatively small domestic businesses, member management is by far the most common choice here.

After you decide on the management structure, all you have to do is to enter the names and addresses of either initial members or managers in the corresponding fields of Section 6.

Liability Options

Section 7 allows you to choose among three liability models for LLC owners:

• Not liable for any debts and obligations of the LLC;
• Liable for all debts and obligations of the LLC;
• Liable for specified debts and obligations of the LLC (list them below).

By default, your company should select the first option (not liable) unless agreed otherwise.

Signature

The Articles of Organization must be signed and certified by at least one of the Organizers.

Note: the Secretary of State accepts all LLC-1 forms, including scanned, photocopied, or faxed templates, on the condition that writing or typing is clear and done in black ink only. 

How to File the Articles of Organization

The Articles of Organization for Hawaiian LLCs can be submitted in 5 different ways:

• Online – Head on to the Hawaii Business Registration page and select "Register a new business". Before you proceed, you need to log in or create a new account. If you follow the instructions, the registration process takes less than 20 minutes. Registering online allows you to use a credit card to pay the filing fee (standard – $50, expedited – $75) plus a State Archive fee ($1). Accepted cards: MasterCard, Visa, American Express, JCB, Diners Club, Discover;
• Email – Send your documents to [email protected]. Provide credit card information via a transaction form or in the letter (card number, type, name of cardholder, expiration date, CVV, charge amount, phone number, email address);
• Fax – The Articles of Organization can be faxed to (808) 586-2733. The payment must be made via credit card (see Email section above);
• Regular mail – All forms can be submitted in a paper envelope to PO Box 40, Honolulu, Hawaii 96810. The letter must contain a payment check for the Department of Commerce and Consumer Affairs;
• In-person – If you're a resident of Honolulu, you can bring the printed and completed form to the Secretary of State's office, which is located in the King Kalakaua Building at 335 Merchant Street, Room 201. This is the only registration method that allows cash payments and physical retrieval of the approved or rejected papers. The service window is open every day from 7:45 AM to 4:30 PM except on weekends and state holidays.

Pro tip: online and in-person applications generally have faster processing times. 
If you have any questions about business registration in Hawaii, you can call (808) 586-2727 or send an email to [email protected]

Step 4: Draft an Operating Agreement

What is an operating agreement? It's an unofficial deal between all members of the company that lists some regulations and conditions about LLC management and business operations.

Operating agreements are not mandatory in most states, but every LLC that's taking itself at least half seriously should have one. Get together with the other members and create detailed action plans for as many scenarios as possible so in the future, you could quickly and efficiently deal with every LLC-related issue.

Here is a potential layout of an operating agreement for a multi-member LLC:

1. Basic details;
2. Membership duties;
3. Financial obligations and taxes;
4. Capital arrangements;
5. Change of membership;
6. LLC dissolution;
7. General rules.

Basic Info

An operating agreement usually starts by basically copying the Articles of Organization. Here you provide some essential information about your LLC:

• The name of the company;
• The date of formation;
• The name and address of the registered agent;
• The purpose of business;
• The duration of the LLC.

Overall, this section acts as an introduction and does not go into much detail yet.

Membership Duties

Here is where things start getting interesting. In this section, you assign roles and responsibilities for each member of the company and also describe the management model. We recommend including the following items:

• Liability options – specify if the LLC members are liable for any debts, expenses, or obligations;
• Management type – choose if the company is member-managed or manager-managed;
• Interest rates – specify how percentage interests are calculated;
• Voting rights – describe who has the right to vote and how much leverage each specific member has;
• Membership meetings – describe how often and under what conditions the members of the LLC should meet;
• Side affairs – specify if the LLC members can engage in any business activities outside of the company.

Financial Obligations and Taxes

Next, the members of the LLC should agree on the ways the company pays taxes and stores money. It’s important to pay attention to such details as:

• Tax classification – declares if the company is taxed as an LLC or a corporation;
• Accounting – specifies the accounting period and tax year;
• Tax returns and reports – regulates forms and procedures for annual taxation;
• Bank accounts – specifies the number of corporate bank accounts and their supervisors.

Capital Arrangements

This section regulates the financial side of the business, mainly investments, profits, debts, and general money distribution. Some of the items that you can add here are as follows:

• Capital contributions – specifies the amount of money or property each member is going to invest in the company (total amount and percentage interest);
• Capital accounts – describes the setup and bookkeeping for each member’s capital  accounts;
• Capital management – regulates the right to withdraw or distribute the capital by each member;
• Profit and loss allocation – specifies how the company’s income, losses, credits, gain, and deductions are split between the members;
• Liquidation splits – regulates the allocations to each member after the company is dissolved.

Change of Membership

This part focuses on the procedure of removing members from the company, adding new ones, or transferring the rights to another person. Make sure you include all possible moves to avoid confusion.

LLC Dissolution

Every LLC must have a list of conditions that can initiate its dissolution. The possible options may include:

• The death, illness, or retirement of one or more members;
• An officially signed mutual agreement of all members;
• A criminal case against an LLC;
• Bankruptcy;
• The end of the Period of Duration specified in the Articles of Organization.

General Rules

Finally, the company should handle some organizational aspects of the business. This includes:

• The appointment of officers for franchise tax purposes;
• Setting up records and archives;
• Agreed methods of dispute settlement;
• Compensation conditions;
• The conditions under which the operating agreement can be amended.

Once the agreement is signed by all the members, it becomes effective from the date specified in the documents.

Note: an operating agreement does not have to exist in written form. Some companies operate on mutual trust and prefer so-called verbal contracts.

Do I need an Operating Agreement for a single-member LLC?

Even if your company includes no one but you, it’s still a smart idea to create an operating agreement that covers all the bases of your business structure. This will help you:

• Protect your assets by regulating the exact amount of money and property you invest in the company;
• Protect the business in case something happens to you by describing the procedure of transferring the rights to another person, according to the state laws;
• Receive financing via bank loans that are sometimes impossible without providing a legit operating agreement.

To sum it up, the more detailed and thought-out an operating agreement is, the more time and resources you will save as a business owner.

Step 5: Get an EIN for your Hawaii LLC Registration

To receive taxes and track income, the Internal Revenue Service assigns each company a unique Tax Identification Number, also known as Employer Identification Number (EIN). To find out if your LLC is required to get an EIN, you need to ask yourself 2 questions:

1. Does your company have any employees?
2. Is your company a partnership, a corporation, or an LLC that identifies as a corporation?

If you got at least one Yes, it means you should apply for an EIN immediately. Luckily, this is a very easy procedure that takes about 15 minutes. 

All you need is to go to the IRS website, submit an online application and receive your tax ID immediately. You can also download and fill out Form SS-4 and send it by fax (processing time – 1 week) or by mail (processing time – up to 5 weeks).

All three application methods are free of charge.

Note: single-member LLCs that are taxed as sole proprietorships and don't have employees are not required to obtain an EIN, and they can use their social security number instead.

Step 6: Open a Bank Account

The next step in our “How to create an LLC in Hawaii” guide is opening a bank account. As you already know, one of the biggest advantages of an LLC is the ability to protect the owner's assets by separating them from the company entirely. For this purpose, it is crucial for each owner to create their personal bank accounts along with a dedicated corporate account.

A business account serves as the storage for incoming payments, and it's also used as a salary deposit for all employees. On the other hand, owners' accounts are used for personal savings and individual tax payments due to the pass-through nature of the LLC taxation.

Opening a business bank account in Hawaii is fairly simple and typically requires a banking resolution and a small starting deposit of $100. Additionally, you may need a copy of the operating agreement and a Certificate of Good Standing.

First Things to Do after Creating an LLC in Hawaii

Congratulations, your Hawaii LLC is officially registered! But before you start business activities, there are still a few matters that need to be addressed:

• Fulfill Hawaii's LLC publication requirement;
• Obtain necessary business licenses and permits;
• Get business insurance.

LLC Publication Requirement

Back in the day, all LLCs had to announce their creation by publishing a notice in two local newspapers. However, in 2022, only three states keep this practice alive: Arizona, New York, and Nebraska. So, you can ignore this step and proceed to the next one.

Business Licenses and Permits

Depending on the nature of their business and its location, most companies in Hawaii need to obtain some kind of license or permit for legal operation. 

For example, in Hawaii county, it's necessary to get a business license if you sell firearms, scrap, or second-hand products.

The county of Maui requires a liquor-selling license as well as permission for land zoning and estate building.

All companies in Hawaii that sell any type of products or provide any services must file for a General Excise Tax License with the Department of Taxation (filing fee – $20).

The list of requirements is unique for every city and type of business, so it's recommended to do careful research to find out what exactly your LLC should apply for.

Business Insurance

No one wants to lose money due to unexpected circumstances, so insurance is a logical choice for any business that seeks extra protection. The most popular types of insurance for limited liability companies are:

• General Liability Insurance – protects the company if a customer injures themselves or damages their property in your store or office;
• Product Liability Insurance – covers the expenses from damage caused by your company's products;
• Professional Liability Insurance – protects your LLC from mistakes caused by your services;
• Business Income Coverage – covers potential income lost due to property damage (flood, fire, theft, etc.);
• Workers' Compensation Insurance – covers the expenses of your employees caused by their injury or illness due to an inadequate working environment;
• Hazard Insurance – protects your company's property (including rentals) and equipment.

How to Keep Your Company Compliant

To maintain good standing with the state of Hawaii, an LLC must file regular reports within specified periods. This includes annual tax filings and corporate statements.

For more information on Hawaii taxation and licensing, check this guide.

As for the annual corporate reports, they provide the state with updates on your LLC's structure excluding the financial details. The due date of the statement is based on the date your LLC was registered:

• For LLCs registered between January 1 and March 31, the report must be filed by March 31;
• For LLCs registered between April 1 and June 30, the report must be filed by June 30;
• For LLCs registered between July 1 and September 30, the report must be filed by September 30;
• For LLCs registered between October 1 and December 31, the report must be filed by December 31.

The filing fee for annual reports is $15 for standard review and $40 for expedited processing. If you have any questions regarding corporate statements, check the FAQ page here.

LLC Hawaii Cost: How Much is an LLC in HI

Forming an LLC in Hawaii costs $51. This price consists of the filing fee for the Articles of Organization with the Secretary of State ($50) and a State Archive fee ($1).

Additional expenses may include:

• Expedited processing of the Articles of Organization – $25;
• Business name reservation – $10;
• Certificate of Compliance – $5;
• Registered agent service – from $49/year.

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