What is an LLC?
A limited liability company (LLC) is a type of business where business owners are legally separated from the business itself. They are not personally held responsible for debts, losses, or lawsuits of the business.
LLCs are private business entities with the common goal of generating revenue. While LLCs are private, there is information on LLCs that is made public unless an anonymous LLC was established.
An LLC is like having the best of both worlds because it mixes features of a one-man business, a partnership, and a corporation together.
Another reason LLCs are great choices for entrepreneurs is that they do not get as taxed as corporations.
Furthermore, an LLC provides a more comfortable space for business expansion.
Hawaii has boundless opportunities for businesses to grow but we must note that Hawaii has also been ranked as one of the worst American states to start a business in, particularly because of business costs.
This is more reason why choosing an LLC as a business structure is a great choice for upcoming entrepreneurs.
Having cleared this up, these are the steps to creating an LLC:
Let’s Establish your LLC in Hawaii!
Establishing an LLC in Hawaii is much less scary than it sounds. All you need to do is file Articles of Organization (Form LLC-1) which costs $50 and pay the appropriate filing fees.
Our team pulled together this step-by-step guide on how to form an LLC in Hawaii. Once you read our guide you will be one step closer to getting your business up and running in sunny Hawaii.
Now let’s jump in!
#1. Choose an appropriate business name for the LLC
The very first step to take in creating an LLC is to give your business a fitting name. Not just any ordinary name, but an appropriate name.
Naming an LLC doesn’t seem like much, however, there are rules and many things to consider before choosing a name.
This is especially true if you’re morphing from a sole proprietorship with little or no visibility to an LLC because the rules are different.
First and foremost, you have to check if the name you’ve chosen is available for use in Hawaii. You can do this by visiting the Hawaii State website.
Hawaiian state authorities have a number of rules that guide the naming of an LLC.
They include the following:
- The phrase ‘Limited Liability Company or any of its abbreviations (LLC OR L.L.C.) must be added to the end of your business name.
- Your business name must not contain terms that will make people mistake your business for a state parastatal or agency. For example, Treasury, State, Federal, Government, etc.
- There are some special terms that can’t be used in a business name unless legal permission is acquired or certain professionals like doctors, lecturers, or lawyers are employed in your LLC. These include terms like Bank, University, Associates, etc.
- If there’s another business with the same business name you want to use, listed on the Hawaii State website, it is not available for use. Make sure you check that!
Secondly, you must check if the name is available for use internationally.
This means it doesn’t make any logical sense to give your company the same name as a big, pre-existing company like Coca-Cola, Kentucky Fried Chicken, Unilever, or Home Depot, primarily because these are household names that have most likely been trademarked.
Such big brands will always overshadow your business visibility and confuse your customers.
Additionally, checking if the business name is available internationally also pertains to checking if the name is available as a web domain. You can check if your business name is available internationally on sites like:
Most LLCs have and need a company website, but even if you don’t plan on having one soon or you can’t afford to own one yet, you can buy the domain pending the time.
It’s always better safe than sorry. Plus, buying the domain and paying a small annual fee is cheaper than buying it from someone else years after. It would definitely be more expensive by that time.
#2 Get a Registered Hawaiian Agent for your LLC
After choosing a business name, you have to get a registered agent for your LLC.
A registered agent is a person or a business entity that is responsible for receiving important legal documents such as tax notices, payment reminders, etc. on behalf of your LLC.
Your registered agent must live in Hawaii, have a street address, and must be available during business hours; which is usually between 9 am- 5 pm.
You can nominate yourself, A trusted friend or family member, or an individual or business entity that specializes in being a registered agent for businesses, to be your business’ registered agent.
When considering who should be your registered agent, think about availability. Also, consider if you can afford to pay a separate individual or business to do the work for you.
Other important factors are time, stress, and the privacy of your address.
#3 File Articles of Organization for your LLC in Hawaii
The Hawaii Business Registration Division oversees the Articles of Organization. It is the document that basically creates the LLC in Hawaii. It is extremely important.
This particular step includes payment of a one-time filing fee and it can be filed online, done by mail, fax, or in person.
The filing fee as stipulated by the state costs $50 and it is nonrefundable. It also comes with an extra one-dollar State Archive Fee that might or might not be refunded.
It should be noted that this price stays the same whether the Article of Organization was filed online, or through fax or mail.
Below is are the details required for filing:
The official mailing address the form should be addressed to is:
Department of Commerce and Consumer Affairs Business Registration Division 335 Merchant St. P.O. Box 40 Honolulu, HI 96810
Office Address: 335 Merchant St. Room 201 Honolulu, HI 96813
Fax: (808) 586-2733
Email: [email protected]
These are the instructions to be followed when filing the Articles of Organization.
- Click on this link: eHawaii.gov Account Services.
- Enter your email address and click “Continue”.
- Set up your profile and select the “Create Account” button.
- You’ll find a confirmation message on the next page.
- Visit this website: eHawaii.gov: Welcome to Hawai‘i Business Express (HBE)
- Click on the “Use QuickFile” button on the right. Note that you are not to select anything from the drop-down menu options. Log in on the next page.
- Click the “LLC-1 Articles of Organization for Limited Liability Company” link.
- A popup message about “multiple agencies” and using the “Wizard” will appear on your screen. Click “Continue” to use QuickFile.
A. LLC name
Enter your LLC name exactly as it is. Make sure what you write aligns with your preferred capitalization, unique punctuation marks, terms, as well as the abbreviation of ‘Limited Liability Company’ you have chosen to use.
B. The mailing address of the initial principal office.
Input your LLC’s principal office address. PO Boxes are not permitted. Make sure the address you use is accessible because this is where all documents from the authorities will be sent to.
C. Registered Agent
If your LLC’s Registered Agent is an individual:
- Enter their full legal name.
- Select “Individual” when you see the ‘Agent Type’ option.
- Do not click on the State and Country dropdowns
- Enter the registered agent’s street address in Hawaii
If your Registered Agent is a business entity:
- Enter the business name
- Select “Entity” in the ‘Agent Type’ option
- Select the state where the business was incorporated.
- Enter your Registered Agent’s street address in Hawaii
Individual or Entity:
If an individual is the LLC Organizer, select “Individual”
- If a business entity is the LLC Organizer, select “Entity”. You should note that your LLC can’t be its own LLC Organizer.
- Enter the address of the LLC Organizer.
It should be noted that an LLC only needs one Organizer. However, if you want to add more, click the “Add Another Organizer” option.
E. Period of Duration
- In this section, you will be required to tell the State of Hawaii how long you intend to run your LLC.
- If you don’t know exactly, how long or you want to keep your options open, select “At-will”.
- If you prefer for your LLC to be automatically closed on a particular date, enter the 2nd option and select that date.
Most people choose “At-will” because that option allows the business to be open forever unless of course, you are trying to close your LLC at a specific date. In that case, enter a date.
F. Manager-Managed or Member-Managed
In this section, you will choose whether your LLC will be Manager or Member-managed. It is important to have full concentration and be careful while filling this section because it can be tricky.
- Select option A if your Hawaii LLC will be Manager-Managed. Next, enter the number of LLC Members (owners).
- If your Hawaii LLC will be Member-Managed, choose Option B. This is the commonest way most LLCs are Managed.
Manager(s) or Member(s) info:
- If you chose Manager-Managed, enter the name and address of the first Manager. Click on “Add Another Manager/Member” on the right if you have more LLC Managers to add.
Note: You won’t list any Member (owner) if your LLC is Manager-Managed.
- If you chose Member-Managed, enter the name and address of the first Member (owner). Click on “Add Another Manager/Member” on the right to add other LLC Members, if they are more than one.
Generally speaking, most LLCs in Hawaii are Managed by their owners.
Choose whether or not the LLC Members will be liable for the debts and obligations of the Hawaii LLC.
Since most people choose LLCs in order to escape being personally liable for losses and debts, most LLCs choose the first option, which states: “Shall not be liable for the debts, obligations, and liabilities of the company”.
Signature (Organizer’s signature)
If you are the organizer of your own LLC, select “Individual” and enter your name twice.
Click on “Review and Purchase” at the bottom.
Review and Confirmation
Carefully go through the entire document and check if the information you provided is correct.
You can click on the small “go back” link at the top of the page if you need to make corrections on any page.
When you’re satisfied with your answers, click on the “I certify” box at the bottom and click the “Confirm” button.
Confirmation of Forms/Fees
You will see the total Hawaii LLC filing fee on this page.
Email reminders: There will be a box selected to receive email reminders for your Hawaii LLC Annual Report. Do not unselect it.
Click “Checkout” to proceed.
Select “Credit Card” and enter your billing information. Click “Continue” to complete your payment.
And that’s a wrap! Your Articles of Organization have officially been filed.
You will see a message of confirmation and a receipt on the next page. You can save/print this page. All you do after this point is wait for the state to get back to you.
Online filing takes approximately between 3 to 5 days to get approved. Filing by mail can take between 7 to 10 days.
#4 Create your Hawaiian Operating Agreement document.
An operating agreement is not a mandatory document; however, most LLCs are better off having one from the very start. It saves time, protects the business, and can prevent legal issues in the long run.
An operating agreement is a document that states the ownership status of the LLC and its operating procedures. It is a great idea to add the following information into your operating agreement:
- Owners of the LLC
- Distribution of profit and losses
- Explanation on how to add LLC members
- Voting process
- Management of company assets
Above is just a generic explanation of what should be in an operating agreement. Make sure that you add the essential details to your business.
An operating agreement is the main reference point to an LLC, take your time when you draw it up.
The operating agreement is an internal document and therefore doesn’t need submission, but as mentioned above is very important.
Having an opening agreement helps to stipulate how taxes in the LLC will be paid, how profits and losses are shared and settled etc.
#5 Get your EIN from the Hawaiian Internal Revenue Service.
The Employer Identification Number is a means of identification given to LLCs by the Internal Revenue Service.
It is like the Social Security number of the business.
Getting the EIN helps the LLC achieve many things such as:
- Allowing the company to open a separate bank account in its business name
- Securing a business phone number
- Apply for licenses, permits, credit, loans, grants
- Handle employee payroll
- Other business-related reasons
The EIN is the same as the Federal Tax Identification Number, Federal Employer Identification Number, and Employer ID Number.
It is highly advisable to wait for the Hawaiian state authorities to approve the LLC and get the other steps involved in creating the LLC settled before applying for the EIN.
Application for the EIN is free and can be done online, by mail, or by fax.
Just like the registered agent, you can nominate an EIN responsible party.
An EIN Responsible Party is an individual that is in charge of filing for your business EIN and such person will be the one responsible for communication and correspondence with the Internal Revenue Service.
This means that they will receive emails and communicate with the Internal Revenue Service. They will also provide information or documents to the Internal Revenue Service, upon request.
An EIN Responsible Party can be the business owner, a friend or family member, or another individual.
Based on new regulations by the Hawaiian state authorities, a business entity is not allowed to be an EIN Responsible Party.
Here are the different ways to apply for an EIN and we’ll be starting with the simplest.
The EIN online application
If you have a Social Security Number or an Individual Taxpayer Identification Number, the easiest and fastest means to getting your EIN is to apply online.
The online application has 5 categories.
-Click on this link: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Select the “Apply Online Now” button in the middle of the page.
- Read the information on the screen and click “Begin Application”.
- Select “Limited Liability Company” in the legal structure field and click “Continue”.
- The next page explains what an LLC is. Select ‘Continue’ at the end of the page.
- In the ‘Tell us more about the members of the LLC’ category, enter the total number of members in your LLC.
- Select the state where your LLC was formed, in this case Hawaii, and click on “Continue”
- If you selected 2 as the total number of members in your LLC and you’re creating your LLC in a community property state, the IRS will ask you how you’d like to be taxed and whether you want to be a Qualified Joint Venture LLC.
A qualified joint venture is basically an LLC created in a community property state and the only owners are a couple, who will then file a joint tax return.
This page will then show two options: Single-member LLC and Multi-member LLC.
A single-member LLC will be taxed as a sole-proprietorship while a multi-member LLC will be taxed as a Partnership which is not a Qualified Joint Venture.
- Click on the option that suits your LLC.
- The next page will require that you confirm your chosen option and explain what your choice means.
- The next page asks why you’re requesting for an EIN. Click on the option that suits you best. However, most people choose ‘Started a new business” and then click on ‘Continue’
- The first question on this page asks for the EIN Responsible Party. It provides two options: Individual or Business Entity. Select the options that suits your LLC and click on ‘Continue’
Please note that the EIN Responsible Party must have a Social Security Number or an Individual Taxpayer Identification Number.
- Insert information about the Responsible Party of the LLC:
The Responsible Party’s full name and SSN or ITIN.
Select “I am one of the owners, members, or the managing member of this LLC “. Then click “Continue” to proceed.
- Enter your LLC’s physical address and your U.S. phone number.
Please note that a P.O. Box address is not allowed. You must use an accessible, physical address.
- If you see a ‘Verify your physical address’ page, it means the IRS is trying to make your address match the “standardized address format” from the United States Postal Service.
- Click “Accept Database Version” and then click “Continue”.
- Enter the full name of your LLC.
- You will see a ‘Trade Name/Doing Business As’ page next.
This field can be left blank, unless your LLC has previously filed a ‘doing business as’ name.
- Enter the county your LLC is located in. Remember it is county not country.
- Enter the state in which your LLC was created in.
- Enter the state or territory where your Articles of Organization will be filed.
- Enter the date (month and year) your LLC was started. If you’ve forgotten the exact date, you can find it in your approved Articles of Organization.
- The next set of questions require Yes or No answers and you can carefully select which answer best describes your LLC. Then click on ‘Continue’
- The next page requires that you select your LLC’s primary business purpose from the list of options.
If your business does not fall into any of the categories provided, select “Other” and then specify your LLC’s business purpose on the next page. Click “Continue” after this.
5. EIN Confirmation
On this page you will be asked how you’d like to receive your EIN Confirmation Letter.
- Select “Receive letter online”. This is the fastest way to receive your EIN confirmation letter.
- Go through your entire application again and click “Submit” to finalize your application.
If you don’t have an SSN or ITIN
If you don’t have an SSN or ITIN, you can still get an EIN for your Hawaii LLC. The only catch is that you wouldn’t be able to apply online.
- You will need to mail or fax the Form SS-4 to the IRS and the form must be filled carefully.
- Download the form here: https://www.irs.gov/pub/irs-pdf/fss4.pdf and fill it carefully.
- Enter the legal name of the business entity or individual applying for the EIN.
- Enter the trade name of the business if different from the legal name. The trade name is the “doing business as” (DBA) name.
- Enter your mailing address. If you’re outside the US, you must enter the city, province or state, postal code, and the name of the country you’re located in.
- Enter your physical address.
- Enter the county and state where the LLC is located.
- Enter the legal name and SSN, ITIN, or EIN of the LLC’s EIN Responsible Party.
- Fill in the required information about your LLC.
- Check the option that best describes your LLC.
- State your reason for applying. It should be noted that most LLCs choose ‘Started a new business’. However, you should choose the most accurate option.
- Enter the exact date your LLC was started or acquired.
- Enter the last month of your accounting year or tax year.
- Insert the highest number of employees expected in the LLC within the next 12 months.
- Indicate if you’d like to file Form 944? If you expect your employment tax liability to be $1,000 or less in a full calendar year, you’re eligible to file Form 944 annually (once each year) instead of filing Form 941 quarterly (every 3 months). This is a cheaper option for your LLC.
- If your LLC has employees, enter the date it started paying wages or annuities.
- Check the box that best describes the principal activity of the LLC.
- Describe the applicant’s principal line of business in more details
- Indicate if the LLC was issued an EIN previously.
- Enter your full name and title. Specify you are the LLC member or owner
- Add your signature, date of application and phone number.
- You can mail your completed and signed SS-4 form to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, Ohio 45999
- If you want to fax your Form SS-4 to the IRS, fax SS-4 to:
EIN Confirmation Letter (CP 575)
The EIN confirmation letter delivery time depends on the mode of application.
If you applied online, your confirmation letter will be available for download at the end of the application. A duplicate copy will be sent through mail in about 4 to 5 weeks.
If you sent a Form SS-4 by fax, you’ll get your confirmation Letter within 4 to 7 business days.
If you sent Form SS-4 by mail, this will take between 4 and 8 weeks.
How to Cancel an EIN Application?
This is very simple. All you need to do is send a cancellation letter to the IRS.