Articles of Organization

Getting your LLC started in Hawaii means you have to file articles of organization with the Hawaii Department of Commerce and Consumer Affairs. Your LLC is considered "organized" once an original and a copy are delivered to the DCCA with the $50 filing fee (and they verify that your articles meet the standards).

If the LLC has not yet been formed, the articles have to be signed by an organizer. If the LLC has already been formed, a manager or a member must execute the articles. The state will issue one certified copy of the articles of organization and return the other to the organizer or members.

Your LLC's articles of organization have to include the LLC's name and the street address of its registered office, as well as the name of its registered agent at that office. It must also list the organizers' names and addresses. The articles must say whether the LLC will be managed by members or managers, as well as whether the LLC's members are to be liable for the company's debts and obligations.

The articles must clarify whether the LLC will be perpetual, or only exist for a certain period of time. If no time limit is listed, the LLC will be considered as perpetual.

The articles are allowed to contain other items already mentioned in the operating agreement or other things not required by law, so long as they don't conflict with statutes.

Registered Agent and Office

An LLC in Hawaii is required to have designated a registered agent to receive official state legal and administrative communications. This can be someone (a "natural person") who lives in Hawaii or a business entity that is registered in the state. The registered agent's business office must be identical to the LLC's registered office.

Operating Agreement

After its articles of organization, an LLC's most significant document is the operating agreement. An LLC's operating agreement can be revised, amended, or repealed as set forth in the agreement itself or in the applicable state law. Having an operating agreement isn't required as such by the state, but it's a critical internal document that officially explains how the LLC will operate-such things as who the members are, the value of each member's investment, how profits are distributed, and how much relative say-so each member has when issues are voted on. The operating agreement usually includes things that are already set forth in state law.

In Hawaii, if an LLC has more than one member, the operating agreement has to be agreed to in writing by all the initial members. And, unless the operating agreement or the articles of organization state differently, members and managers have equal voting rights, and members and managers approve actions by majority votes but take action by unanimous written consent.

If anything in the operating agreement conflicts with the articles of organization, the operating agreement has priority on issues about managers and members, and the articles of organization are the controlling factor on other issues.

Membership in the LLC

To become a member of an LLC, an individual normally needs to make some kind of contribution-cash, property, services, or the like-or take on an obligation to do so. Unless otherwise specified in the articles of organization or operating agreement, new memberships require all members' unanimous consent.

A member can resign from an LLC, but only in accordance with the articles of organization or operating agreement, which also usually specify a minimum period of time a member can be a member before being allowed to resign. LLCs can pursue remedies for damages suffered by the LLC resulting from a member's resignation.

Unless the articles of organization or operating agreement state otherwise, managers are elected for an indefinite term by a majority vote of the members; a majority vote of the members is also required to remove a manager.

Ongoing Requirements

Hawaii LLCs must file a report each year (the deadline depending on the company's original date of organization), along with a $15 fee, which must include:

• The LLC's name and the state (or country) where it was organized.
• The mailing address of the LLC's principal office and registered agent.
• The street address in Hawaii of the LLC's registered office.
• If the LLC is manager-managed, the names and addresses of the managers.
• If the LLC is member-managed, the names and addresses of the members.

The state of Hawaii requires that LLCs must keep their business records available for inspection at their home office. It's also always a good idea for your LLC to keep minutes of the meetings of the owners or members.

Dissolution

An LLC in Hawaii is dissolved when any one of the following events occurs:

• An event or events are laid out in the articles of organization or operating agreement as requiring dissolution.
• An agreement to dissolve by the number or percentage of members specified in the operating agreement.
• An event that makes it illegal for the LLC to continue operating, unless the illegality is corrected within 90 days.
• Judicial decree is issued that orders dissolution.
• A member or dissociated member applies on the basis that the economic purpose of the company is likely to be unreasonably frustrated, or that a manager or another member has acted illegally or improperly.

Taxes

An LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through" entity for tax purposes-the members or owners report business losses or profits on their individual tax returns.

The LLC tax rate for Hawaii varies, depending on the LLC's Hawaii taxable net income.

Unless you choose for your LLC to be taxed as a corporation, the IRS treats single-member LLCs as sole proprietorships for tax purposes, meaning that the LLC itself does not pay taxes and does not have to file a tax return. However, the IRS treats multiple-owner LLCs as partnerships for tax purposes, unless your LLC is to be taxed as a corporation.

Articles of Incorporation

Hawaiian law requires that articles of incorporation be filed with the Hawaii DCCA. The fee to file your corporation's articles is $100, plus another $50 if you want expedited one-day filing. Certified copies of your articles of incorporation are $20 each.

Hawaii allows corporations to be formed for any lawful business activity; in fact, the business purpose of the new corporation does not even have to be listed in the articles.

At least one person (usually an initial director or officer) must sign the articles as incorporator. The incorporator's primary duty is to deliver the articles of incorporation to the Hawaii DCCA.

Hawaiian state law doesn't use the concept of par value, so you don't have to state a par value for your shares in the articles of incorporation. The filing fee is a flat amount and is not based on your authorized shares, so you can authorize as many shares as you desire. Many incorporators authorize common shares with equal voting, dividend, and liquidation rights, and no special restrictions. If you want to authorize one or more special classes of shares, state the name of each class or series, the number of shares in each, and the rights and restrictions associated with each class or series. A Hawaii corporation is exempt from registration under Hawaii's Uniform Securities Act if the number of subscribers is 25 or less.

It's also allowable to integrate other optional provisions into the articles of incorporation for those corporations wishing to formalize additional criteria, such as special qualifications of shareholders, limits on the duration of the corporation's existence, any limits on the liability of a director in specific circumstances, and the like.

Registered Agent and Office

The articles of incorporation should also include the name and address of your corporation's initial registered agent-the person you designate to receive official correspondence (legal or administrative) on behalf of your corporation. The registered agent must be either an individual who lives in Hawaii and whose business office is the same as the registered office, or a corporation with a business office that is the same as the registered office.

Bylaws

All corporations are required to keep a copy of their bylaws at their main executive office, but they are not required to file those bylaws with the state. At the new corporation's initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws are a critically important document describing the corporation's basic managerial and legal operating principles regarding such issues as:

• Shareholders' and directors' meetings
• The authority, number, and tenure of directors in the board of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Officers of the new corporation can either be listed in the bylaws or elected by the board in compliance with those bylaws.

Directors and Officers

The corporation's business is managed by its board of directors. The board must consist of one or more members as specified by the bylaws or by action of the shareholders. Directors are generally elected at each annual shareholder meeting to hold office until the next annual meeting.

Corporate officers can either be listed in the bylaws or elected by the board in compliance with the corporation's bylaws. A corporation must have a chairman of the board or a president (or both), a secretary, a chief financial officer, and whatever other officers with titles and duties as listed in the bylaws or determined by the board.

The president, or, if there is no president, the chairman of the board, is the general manager and chief executive officer of the Hawaii corporation, unless otherwise provided in the articles or bylaws. Any number of offices may be held by the same person unless the articles or bylaws require otherwise.

Required Reports

Your corporation must file an annual report with the DCCA every year between January 1 and April 1, or on another date that the director may specify. The first report must be filed within this period in the year immediately after the calendar year in which the company was incorporated. This report must include:

• The corporation's name and where (state or country) it was incorporated.
• The company's principal office mailing address, its registered office address in Hawaii, and the name of its registered agent at its registered office in Hawaii.
• The names and business addresses of its directors and officers.
• A brief description of the nature of its business.
• If it's a domestic corporation, the total number of authorized shares, itemized by class and series, and the total number of issued and outstanding shares, itemized by class and series within each class.

Additionally, the board must send an annual report to all shareholders by a filing date based on the date of incorporation.

Taxes

The corporate tax rate for Hawaii varies based on taxable net income.