Forming a corporation in Hawaii involves filing formation documents and following a few other steps required by state law.
The following step-by-step guide will show you how to go about starting a corporation in the state of Hawaii.
1. Select a name for your corporation
The first step in the process of forming your Hawaii corporation is deciding on a business name. The business name must be unique and also comply with Hawaii corporation naming guidelines.
General corporate name guidelines
Ensure that you adhere to the naming guidelines below:
- If you plan on using the following terms, you’ll need state approval or certification: public accountants, certified public accountant, PA, CPA, escrow, cooperative, and escrow depository
- If you plan on forming a domestic insurance corporation, then you must have the word “insurance” in your business name.
- You’ll need approval for the following terms from the state Commissioner of Financial Institutions: financial institution, banking, banc, bank, savings bank, savings, savings Association, Savings and Loan, credit union, services loan company, intra-Pacific bank, trust company, international banking Corporation, and trust
- Your business name should not include words that imply that your corporation is a government agency
- Your business name cannot imply that it is formed for purposes aside from what the Articles of Incorporation permit
- Your Hawaii corporation name should also be significantly different from any other existing businesses in the state of Hawaii
- The Hawaii corporation name must include the word company, corporation, limited, Inc. or an abbreviation of any of these terms
The Hawaii state statutes provide further guidance on corporation naming requirements.
Trademark
In order to trademark your Hawaii Corporation name, prepare and submit an application to the USPTO website or the United States Patent and Trademark Office.
Registering a trademark in the state of Hawaii is not a legal requirement; however, it’s advisable to have your own trademark as it serves as a symbol of quality, reputation, and the nature of goods or services. So, trademarking your business name goes a long way in creating brand value.
Entity name
An entity name is simply your corporation’s legal name. This is the name that the state uses to identify your business, and it’s also the name that must be included in all formation and legal documentation.
DBA (Doing-business-as) name
A DBA name or doing business as, a name is useful if you plan on conducting business under any other name aside from your legal entity name. In some states, DBAs are required; however, in the state of Hawaii, there is no requirement that a business registers a DBA in order to use a different name in commerce.
However, despite the fact that it’s not mandatory in the state, a DBAs is useful in many instances, such as keeping others from using your business name, reducing the chances of bad disputes, and detering trademark applications that are too similar to your Hawaii corporation name.
In order to register a DBA in Hawaii, you need to make an application to the Department Of Commerce and Consumer Affairs: Business Registration Division.
2. Nominate a registered agent
Every Hawaii corporation needs a registered agent. This individual is a legally designated point of contact for your business with the state.
The individual that you nominate as your corporation’s registered agent will be responsible for receiving important legal notices such as service of process and official government correspondence on your corporation’s behalf.
The registered agent must meet the following requirements:
- The agent must be a resident of the state of Hawaii
- They must maintain availability during normal business hours
- They must have a physical street address in Hawaii
- They must be available at the stress to sign documents as and when needed
It’s important to remember that when nominating an individual, you must ensure that they will be available during normal office hours, as any absence will increase your risk of missing the delivery of important legal documentation.
If you don’t nominate a registered agent for your Hawaii corporation, you may face negative consequences. For instance, your business could be penalized with fines and lawsuits, lose good standing with the state, and ultimately be dissolved.
3. Appoint initial directors at the organizational meeting
All corporations in Hawaii must engage in an organizational meeting where the initial directors are selected. This must be done prior to filing the Articles of Incorporation.
Some of the other tasks that must be conducted during the organizational meeting or the board’s first meeting include creating and approving bylaws, determining the corporation’s share structure, nominating an incorporator, and executing an incorporator’s statement.
During the board’s first organizational meeting, you must appoint at least one corporate director to oversee the company’s operations. The director will serve until the first shareholder meeting, where a successor is nominated.
The corporate director is tasked with adopting, amending, and repealing operational bylaws as well as electing, supervising, and removing corporate officers.
4. File Articles of Incorporation
Setting up a corporation in Hawaii requires that you file the Articles of Incorporation, also known as Certificate of Incorporation with the Hawaii Secretary of State. This document legally and officially creates your corporation in the state. The Articles of Incorporation must include the basics of your corporation, such as:
- The incorporator’s name and physical address
- The corporate registered agent’s name and street address
- The number of authorized shares the corporation is going to issue
- The name and physical address of the corporation
The Hawaii Department of Commerce and Consumer Affairs does issue an Articles of incorporation form; however, the Form may only be used to start a corporation with one share class. In the case of multiple share class structures, you’ll need to compose your own Articles of Incorporation.
Once you’ve compiled the relevant information, feel free to submit the Articles of Incorporation online to the Hawaii Department of Commerce and Consumer Affairs. Alternatively, download the Articles of Incorporation Form and mail it to the following address:
Department of Commerce and Consumer Affairs
Business Registration Division
P.O. Box 40
Honolulu, HI 96810
5. Create and approve bylaws
Bylaws or corporate bylaws are the guidelines, procedures, and principles used to oversee the operations of your corporation. The corporate bylaws should therefore include some pertinent information regarding the corporation such as:
- The names of the officers of the corporation
- Terms of service
- Responsibilities of the Board of Directors
- The procedure for removing or adding new directors or shareholders
- When a board or annual meetings will be held
- The policy is for authorizing shares
Bylaws are essential corporate records used in reducing owner and shareholder disputes and, therefore, should be stored in a safe place for reference as and when needed.
6. Select a share structure
When it comes to selecting your share structure, you should know that a share of stock is basically a portion of proprietorship or ownership of a company. Therefore, the percentage of ownership of the company is represented by each share of stock.
So if your corporation decides to issue stock or one share of stock to the stock owner, then that individual or shareholder owns a hundred percent of the business. Additionally, shares may be organized into classes, titled a share class, and each class holds a different set of benefits.
A corporation may have multiple classes, with each class permitted to hold any number of shares.
The Articles of Incorporation Form provided by the Hawaii Department of Commerce and Consumer Affairs allows corporations to and may be used to start a company with one share class. However, if multiple share classes are needed, then you need to compose your own articles.
It’s recommended that you begin with a high quantity of approved shares. In this way, you’ll have the fluidity to provide shares as required without having to fork out legal costs to grow the amount of preliminary authorized shares.
7. Obtain an EIN
An EIN, also known as an Employer Identification Number or a Federal Employer Identification Number or Tax ID, is assigned by the IRS to all business entities. This unique nine-digit code is used as a form of identification by the IRS and is essentially a Social Security number for your company.
An EIN is essential for business owners who plan on hiring employees, opening up a corporate bank account, filing tax returns, and registering for business licenses and permits.
There is no cost involved in getting your Employer Identification Number, and you can register with the IRS online. Alternatively, you are free to download IRS Form SS-4, and mail it to the following address:
Internal Revenue Service
EIN Operation
Cincinnati, OH 45999
8. File Hawaii state taxes
The following corporate taxes are payable by corporations be it small businesses or large businesses in the state of Hawaii:
- Corporate income tax: All Hawaii corporations need to pay corporate income tax. This tax is determined at marginal rates between 4.4% and 6.4%.
- General excise tax: Hawaii does not have a sales tax; however, they do have a general excise tax. This tax is assessed on all business activities, and the tax rate is 0.15% for insurance commission and 0.5% for manufacturing, wholesaling, wholesale service, production, and the use of tax on imports for the resale.
9. Hawaii business licenses and permits
Depending on the business structure or type of business you’re running as well as its location, you may require various licenses and permits before starting a business. Some of the most common types of licenses and permits required in the state of Hawaii include:
- General excise tax license: The general excise tax license is also known as the seller’s permit. It is required if you are engaging in business in the state of Hawaii or intend to sell goods or services in the state. In order to obtain a general excise tax license, visit the Hawaii tax website.
- Professional license: Depending on the type of corporation or if your business is a professional corporation that plans on offering certain types of services such as barbershops, salons, accountants, and other professional services, then you must obtain a professional license.
10. Annual report requirements in Hawaii
All Hawaii corporations, be it C corporations or S corporations must submit an annual report every year to the Hawaii Department of Commerce and Consumer Affairs, Business Registration Division. The annual reports are due and should be submitted during the quarter of the company’s anniversary date.
11. Costs of starting a corporation in Hawaii
The filing fees below apply to all Hawaii C corps:
- Name reservation: $10
- DBA name: $50
- Articles of Incorporation: $50
- Annual report: $12.50 online and $15 via mail
- Hawaii Certificate of Good Standing: $7.50
Next steps after forming a corporation
Consider the following steps after forming your a C corporation in Hawaii:
Get a business credit card
Since your new business is a separate legal entity, you’ll need to separate your personal finances and expenses from the corporation. Opening up a corporate bank account also gives you personal asset protection and makes accounting and tax filings simpler. However, you should also consider getting a business credit card to help you separate and categorize business expenses for end-of-year tax purposes. Additionally, getting a business credit card helps build your business credit score, which will be useful if you require a business loan in the future.
Hire a business accountant
Hiring a business accountant ensures that you’ll avoid fines and penalties and don’t overpay on taxes. Additionally, a business accountant will make payroll and bookkeeping much easier, allowing you to have more time to focus on growing your business. Lastly, managing your business funding is more effective when you have a business accountant at your service.
FAQs
An LLC or limited liability company is a business structure where owners pay business taxes on their own individual income tax returns. A sole proprietorship is a business entity where an individual operates a business individually and does not have any business partners of any kind.
In order to form a corporation in Hawaii, you’ll need to file Articles of Incorporation, create corporate bylaws, nominate a Board of Directors, and obtain an EIN from the IRS, in addition to a few other steps.
While other business entities pay taxes, it doesn’t involve a second form of payment. C corporations are business entities that experience double taxation, which refers to income taxes paid twice on the same income source.
The key difference between a nonprofit corporation and an LLC is what they do with the money they generate. LLC’s distribute profits from the business operations, products, and services, while nonprofits use the revenue to cover operating expenses, employees’ salaries, and further the nonprofit’s mission.
Liability protection or liability insurance is designed to cover businesses so that they are protected from the risk of personal liability caused by lawsuits and claims made against them.
