Forming an LLC in Hawaii | How to Form an LLC in Hawaii

Your LLC’s Name

Your new Hawaii LLC’s name must not be the same or deceptively similar to any other business entity (corporation, LLC, partnership, etc.) name on file (registered or reserved) at the state Department of Commerce and Consumer Affairs.

Additionally, the LLC’s name must end with in the words “Limited Company” or “Limited Liability Company,” or the abbreviations “L.C.” or “L.L.C.” You can also abbreviate “Limited” as “Ltd.” and “Company” as “Co.” All of the letters in the LLC’s name must be from the English alphabet.

One exception: you can apply to use a name that is not readily distinguishable from another business’ name if the current owner or user gives written permission, or if a court order says you can.

You can reserve an available name with the DCCA for up to 120 days, but it will cost you a $10 fee.

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.

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