How to Form a Professional Corporation in Hawaii


Steve Goldstein
Steve Goldstein
Business Formation Expert
Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Form a Professional Corporation in Hawaii

Are you considering starting a professional corporation in Hawaii? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Hawaii can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Hawaii, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Hawaii!

What is a Professional Corporation in Hawaii?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Hawaii. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Hawaii.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Hawaii if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Hawaii

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Hawaii, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Hawaii

After you have decided on the idea to form a professional corporation in Hawaii, deciding the name for your corporation is significant. There is a complete guide on Hawaii LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Hawaii, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with Hawaii Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Hawaii Resident Agent

The next step in forming a professional corporation is hiring the Hawaii Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Hawaii. Forming a professional corporation for your service will be easier if you have Resident Agent in Hawaii.

Alternatively, you can serve as your own Hawaii Resident Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Hawaii.

Step 4: File the Articles of Incorporation in Hawaii

After you hire a Hawaii Resident Agent to form a professional corporation, the next step is to file the Hawaii Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Hawaii may be done with four ways, online, by mail, fax, and email. The Articles of Incorporation fee may vary from different states. However, in Hawaii, it costs $50 for filing online, by mail, fax, or by email. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. Email it to [email protected].. For offline filing, Send the form by mail to Office of the Secretary of State, 450 N 4th Street, P.O. Box 83720, Boise, ID 83720-0080 or Fax it to (808) 586-2733..

Step 5: Write an Operating Agreement in Hawaii

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Hawaii operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Hawaii

The next step is to appoint the initial board of directors in your PC in Hawaii. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Hawaii SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Hawaii

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Hawaii can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Hawaii might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Hawaii

Before your professional corporation operates in Hawaii, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Hawaii, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Hawaii

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Hawaii classification of taxes for the taxes an LLC in Hawaii has to pay.

Important Information

Maintaining Professional and Business License in Hawaii

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Hawaii

In Hawaii, you will be required to submit a report each year. The owners’ and Resident Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Hawaii, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Hawaii

A professional corporation takes a lot of time to process and pursue. However, with the help of the Hawaii Resident Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Hawaii.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

Can I form a Professional Corporation in Hawaii?
Yes, you can form a Professional Corporation in Hawaii. In order to do so, you must first file Articles of Incorporation with the Business Registration Division of the Department of Commerce and Consumer Affairs.
What is the process of forming a Professional Corporation in Hawaii?
The process of forming a Professional Corporation in Hawaii includes filing Articles of Incorporation with the Business Registration Division of the Department of Commerce and Consumer Affairs, selecting a corporate name, obtaining an Employer Identification Number, creating corporate bylaws, obtaining necessary licenses and permits, and opening a bank account in the corporate name.
What documents do I need to form a Professional Corporation in Hawaii?
The documents you will need to form a Professional Corporation in Hawaii include Articles of Incorporation, corporate bylaws, Employer Identification Number, licenses and permits, and a bank account in the corporate name.
Are there any restrictions on the name of a Professional Corporation in Hawaii?
Yes, there are restrictions on the name of a Professional Corporation in Hawaii. The corporate name must include one of the following words or abbreviations
Is there a filing fee to form a Professional Corporation in Hawaii?
Yes, there is a filing fee to form a Professional Corporation in Hawaii. The fee is currently $50.
Are there any requirements for directors of a Professional Corporation in Hawaii?
Yes, there are requirements for directors of a Professional Corporation in Hawaii. All directors must be licensed to practice the profession for which the corporation is formed.
Are there any other requirements for a Professional Corporation in Hawaii?
Yes, there are other requirements for a Professional Corporation in Hawaii. All shareholders must be licensed to practice the profession for which the corporation is formed and all shareholders must be US citizens or permanent residents.
Are there any ongoing maintenance requirements for a Professional Corporation in Hawaii?
Yes, there are ongoing maintenance requirements for a Professional Corporation in Hawaii. These include filing an annual report with the Department of Commerce and Consumer Affairs, holding annual meetings, and keeping accurate corporate records.
What are the advantages of forming a Professional Corporation in Hawaii?
The advantages of forming a Professional Corporation in Hawaii include limited personal liability for shareholders, the ability to deduct corporate losses from personal income taxes, and the ability to attract investors.
What are the disadvantages of forming a Professional Corporation in Hawaii?
The disadvantages of forming a Professional Corporation in Hawaii include the cost of formation, the requirement to hold annual meetings and keep accurate corporate records, and the requirement to obtain licenses and permits.
What is a professional corporation in Hawaii?
A professional corporation in Hawaii is a business entity that allows individuals licensed in a professional occupation to incorporate as a corporation.
How do I form a professional corporation in Hawaii?
To form a professional corporation in Hawaii, you must register the corporation with the Hawaii Department of Commerce and Consumer Affairs. The process includes selecting a business name, filing articles of incorporation, obtaining required permits, registering with the Department of Taxation, and obtaining a business license.
What documents are required to form a professional corporation in Hawaii?
To form a professional corporation in Hawaii, you must file articles of incorporation with the Hawaii Department of Commerce and Consumer Affairs. Additionally, you must obtain a business license and register with the Department of Taxation.
What is the filing fee for forming a professional corporation in Hawaii?
The filing fee for forming a professional corporation in Hawaii is $50.
Are there any special requirements for forming a professional corporation in Hawaii?
Yes, there are special requirements for forming a professional corporation in Hawaii. The business must be registered with the Hawaii Department of Commerce and Consumer Affairs, obtain a business license, and register with the Department of Taxation.
Who can form a professional corporation in Hawaii?
Any individual licensed in a professional occupation may form a professional corporation in Hawaii.
What professional occupations can form a professional corporation in Hawaii?
In Hawaii, professional corporations can be formed by individuals licensed in professions such as law, medicine, accounting, engineering, architecture, and other professional occupations.
Is a professional corporation in Hawaii required to have a board of directors?
Yes, a professional corporation in Hawaii is required to have a board of directors.
Does a professional corporation in Hawaii have to have shareholders?
Yes, a professional corporation in Hawaii must have shareholders.
What is the difference between a professional corporation in Hawaii and a regular corporation in Hawaii?
The main difference between a professional corporation in Hawaii and a regular corporation in Hawaii is that professional corporations must be formed by individuals licensed in a professional occupation. Regular corporations in Hawaii can be formed by any individual, regardless of occupation.
What are the tax implications of forming a professional corporation in Hawaii?
Professional corporations in Hawaii are subject to the same tax laws as regular corporations, including income, payroll, and corporate taxes.
What are the benefits of forming a professional corporation in Hawaii?
Forming a professional corporation in Hawaii can provide limited liability protection, tax benefits, and a formalized business structure.
What are the risks of forming a professional corporation in Hawaii?
The risks of forming a professional corporation in Hawaii include liability for debts and obligations of the corporation and potential conflicts of interest between shareholders.
Is a professional corporation in Hawaii required to have annual meetings?
Yes, a professional corporation in Hawaii is required to have annual meetings of shareholders and directors.
Is a professional corporation in Hawaii required to keep corporate records?
Yes, a professional corporation in Hawaii is required to keep corporate records including minutes of any meetings and copies of all documents filed with the Hawaii Department of Commerce and Consumer Affairs.
Are there any restrictions on the business activities of a professional corporation in Hawaii?
Yes, professional corporations in Hawaii are limited to activities related to the licensed profession.
Is a professional corporation in Hawaii required to have an attorney?
No, a professional corporation in Hawaii is not required to have an attorney. However, it is recommended to consult with a qualified attorney when forming a professional corporation.
Is a professional corporation in Hawaii required to register with the Securities and Exchange Commission?
No, a professional corporation in Hawaii is not required to register with the Securities and Exchange Commission.
Can a professional corporation in Hawaii issue stock?
Yes, a professional corporation in Hawaii can issue stock.
Can a professional corporation in Hawaii issue bonds?
Yes, a professional corporation in Hawaii can issue bonds.
Is a professional corporation in Hawaii required to have a corporate seal?
Yes, a professional corporation in Hawaii is required to have a corporate seal.
Is a professional corporation in Hawaii required to file annual reports?
Yes, a professional corporation in Hawaii is required to file annual reports with the Hawaii Department of Commerce and Consumer Affairs.
Can a professional corporation in Hawaii be dissolved?
Yes, a professional corporation in Hawaii can be dissolved by filing a Certificate of Dissolution with the Hawaii Department of Commerce and Consumer Affairs.

Also Read

Why Hawaii Professional Corporation is So Important

First and foremost, a professional corporation provides a legal barrier between the professional and their personal assets. This means that in the event of a lawsuit or financial troubles, the personal assets of the individual professionals are shielded from any liability incurred by the corporation. This protection is essential for professionals in high-risk industries where lawsuits or claims can be common.

Additionally, setting up a professional corporation can also provide tax advantages for professionals in Hawaii. By structuring your practice as a corporation, you may be able to take advantage of tax deductions and benefits that are not available to sole proprietors or other business structures. This can result in significant savings for professionals over time, allowing them to reinvest in their business or save for the future.

Furthermore, a professional corporation may also lend credibility and professionalism to a practice. By establishing a formal entity, professionals signal to clients and partners that they are serious and committed to their work. This can help attract new clients and business opportunities, ultimately leading to growth and success for the practice.

Another key benefit of a Hawaii Professional Corporation is the ability to easily transfer ownership or shares of the business. This can be crucial for professionals who may eventually want to bring on partners, sell their practice, or pass it down to future generations. With a professional corporation, the process of transferring ownership is much simpler and more straightforward than with other business structures.

Additionally, a professional corporation allows for more flexibility and scalability in the business. As the practice grows, professionals can easily add shareholders, change the structure of the corporation, or take on new avenues of business without disrupting the existing operations. This flexibility can be essential for professionals looking to expand and diversify their practice.

In conclusion, establishing a Hawaii Professional Corporation can be a vital step for professionals looking to protect themselves, save money on taxes, and grow their practice. The benefits of setting up a professional corporation are numerous and can have a lasting impact on the success and longevity of a professional business in Hawaii. With the legal protections, tax advantages, credibility, and flexibility that a professional corporation provides, it is clear why so many professionals choose this business structure for their practice.

Conclusion

In forming a professional corporation in Hawaii, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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