How to Start a Hawaii Corporation

When you plan to start a business in Hawaii, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in Hawaii or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating Hawaii corporation. Starting a corporation involves a legal process, that is, the process of incorporation.

In this article, I will share a step-by-step guide to start a corporation in Hawaii. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in Hawaii more than other business structures since it has many advantages over other forms.

What is a Corporation in Hawaii

In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.

Common Types of Corporations

Before you start with the process of forming a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation: C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations. Read how to start a nonprofit corp in Hawaii to learn about nonprofit corporations.

If you have a small business, it is recommended that you form an LLC instead of a corporation in Hawaii. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in Hawaii.
– LLCBuddy Editorial Team

How to Start a Corporation in Hawaii

To start a corporation in Hawaii, you must follow the below steps that, include forming a corporation name, appointing a board of directors, filing for Articles of Incorporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks, creating a shareholders agreement, requesting for an EIN, and getting a license and permit. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choose a Corporation Name in Hawaii

Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.

If you are forming an LLC, there is a complete guide on Hawaii LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your corporation in Hawaii-

Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

Step 2: Board of Directors Initial Appointment

To form a corporation in Hawaii, you must appoint an initial board of directors before making them permanent once the corporation is formed. In Hawaii, you may appoint at least Three board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in Hawaii is a big step in forming a corporation.

Step 3: Filing the Articles of Incorporation in Hawaii

After you appoint the initial board of directors in your Hawaii corporation, the next step is to write and file a Articles of Incorporation. In writing, the Hawaii Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Hawaii Resident Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written.

Filing a 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.

Online Filing: 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].
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 4: Draft Corporate Bylaws

Now you are done filing a Articles of Incorporation in Hawaii, 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 5: 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 6: Issuing Stock in a Corporation

After starting your Hawaii corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in Hawaii is managed by its shareholders, who contribute to the business in exchange for ownership shares.

Step 7: Draft and Finalize a Shareholders Agreement

Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your Hawaii corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.

Step 8: Request an EIN in Hawaii

After everything is in place, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your Hawaii 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 EIN online 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 Form SS-4 contains all of the required information.
Apply by Mail- The EIN application For m 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 corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 9: Get Licenses and Permits for your Corporation in Hawaii

Before your corporation operates in Hawaii, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in Hawaii to know more.

You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.

Important Information

Paying your Taxes in Hawaii

Even if you have established your corporation in Hawaii, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Hawaii has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Hawaii are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Hawaii

A filing and annual fee must be paid to form a corporation in Hawaii. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in Hawaii, it costs $50 for filing online, by mail, fax, or by email. The corporation in Hawaii also has to file an annual report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly. If, in the future, you make any changes to your corporation, you must file the Hawaii Amendment. It costs $25.00 to file an amendment in Hawaii.

Advantages of Starting a Corporation in Hawaii

Limited Liability: The biggest advantage of setting up a Hawaii corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets.

Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.

Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.

FAQs

What are the requirements to start a corporation in Hawaii?

In order to start a corporation in Hawaii, you must first register with the Hawaii Business Registration Division. You must provide a name for your company, a valid business address, and a registered agent. You will also need to file Articles of Incorporation and pay the filing fee.

Is it more expensive to start a corporation in Hawaii?

The cost of starting a corporation in Hawaii is the same as in any other state. There is a filing fee which must be paid when filing the Articles of Incorporation.

Are there any tax benefits to starting a corporation in Hawaii?

Yes, there are certain tax benefits for corporations that are registered in Hawaii. These benefits may include reduced taxes on corporate income, reduced taxes on capital gains, and other tax incentives.

What type of corporate structure is available in Hawaii?

In Hawaii, you can choose from the following corporate structures

What type of businesses are eligible to form a corporation in Hawaii?

Any type of business is eligible to form a corporation in Hawaii, as long as it complies with the laws and regulations of the state.

How long does it take to form a corporation in Hawaii?

It typically takes between 3-5 business days to form a corporation in Hawaii, depending on the complexity of the business and the number of documents that need to be filed.

What are the ongoing obligations of a corporation in Hawaii?

Once a corporation is formed in Hawaii, ongoing obligations include filing annual reports, paying taxes, and keeping corporate records up to date.

What are the laws and regulations specific to corporations in Hawaii?

Corporations in Hawaii must comply with state and federal laws and regulations, including those pertaining to taxes, corporate governance, and securities.

What is the process for dissolving a corporation in Hawaii?

In order to dissolve a corporation in Hawaii, you must file Articles of Dissolution with the Hawaii Business Registration Division. You must also pay any outstanding debts and taxes, and provide notice to creditors.

How does a corporation in Hawaii handle its financial reporting?

A corporation in Hawaii must comply with federal and state laws and regulations when it comes to financial reporting. This includes filing annual reports and other documents, as well as keeping accurate records of all financial transactions.

How do I start a corporation in Hawaii?

To form a corporation in Hawaii, you must submit articles of incorporation to the Department of Commerce and Consumer Affairs, along with the applicable filing fees. You will also need to obtain a business license from the Department of Taxation and register your business with the state.

What are the benefits of forming a corporation in Hawaii?

Forming a corporation in Hawaii provides limited liability protection for the owners, so their personal assets are shielded from business debts and liabilities. Additionally, the tax structure may be beneficial, as Hawaii has no personal income tax and only taxes corporate income on a graduated scale.

Are there any restrictions on who can form a corporation in Hawaii?

No, anyone can form a corporation in Hawaii as long as they meet the filing requirements.

Are there any annual filing requirements for corporations in Hawaii?

Yes, all corporations in Hawaii must file an annual report with the state by April 30th. The report must include the company’s current contact information, the number of shares authorized, and the name and address of the current registered agent.

What are the corporate tax rates in Hawaii?

The corporate tax rates in Hawaii range from 4.4% to 6.4%, depending on the amount of taxable income.

Are there any special taxes for corporations in Hawaii?

Yes, corporations in Hawaii are subject to the general excise tax, which is imposed on all business activities. The tax rate is 4% of gross receipts.

What is the minimum paid-in capital required to form a corporation in Hawaii?

There is no minimum paid-in capital required to form a corporation in Hawaii.

Are there any restrictions on the types of business activities that corporations in Hawaii can engage in?

No, corporations in Hawaii can engage in any type of business activity, as long as it is legal.

Do I need to have a physical office in Hawaii to form a corporation?

No, you do not need to have a physical office in Hawaii to form a corporation. You may use a registered agent who will receive legal documents and notices on behalf of the corporation.

What is the filing fee for articles of incorporation in Hawaii?

The filing fee for articles of incorporation in Hawaii is $50.

Are there any annual fees for corporations in Hawaii?

Yes, corporations in Hawaii must pay an annual franchise tax, which is based on the number of shares authorized. The minimum fee is $50.

What are the advantages of forming a corporation versus an LLC in Hawaii?

Corporations offer limited liability protection for the owners, while LLCs offer pass-through taxation. Corporations may be better for businesses that require large amounts of capital and/or are publicly traded, while LLCs may be better for businesses that are closely held and require minimal capital.

Are there any restrictions on the number of shareholders a corporation in Hawaii can have?

No, there are no restrictions on the number of shareholders a corporation in Hawaii can have.

How do I obtain a business license in Hawaii?

To obtain a business license in Hawaii, you must file an application with the Department of Taxation and pay the applicable fees.

Do I need to register my business with the state of Hawaii?

Yes, all businesses in Hawaii must register with the state.

Are there any restrictions on the types of names that corporations in Hawaii can use?

Yes, corporations in Hawaii cannot use a name that is already in use or too similar to another business entity’s name.

Do I need to appoint a board of directors for my corporation in Hawaii?

Yes, all corporations in Hawaii must appoint a board of directors.

Are there any other documents I need to file to form a corporation in Hawaii?

Yes, you must also file the company’s bylaws and any other documents required by the state.

What is a registered agent and do I need one for my corporation in Hawaii?

A registered agent is an individual or business entity that is responsible for receiving legal documents and notices on behalf of the corporation. In Hawaii, all corporations must have a registered agent.

What is the process for amending the articles of incorporation in Hawaii?

To amend the articles of incorporation in Hawaii, you must submit an Amendment to the Department of Commerce and Consumer Affairs, along with the applicable filing fees.

Why Hawaii Corporation is So Important

One of the key reasons why Hawaii Corporation is important is the fact that it provides job opportunities for thousands of residents. Large corporations, such as those in the tourism, agribusiness, and tech sectors, employ a significant portion of the state’s workforce. These corporations not only provide stable employment for individuals but also offer opportunities for career advancement and skills development.

Moreover, Hawaii Corporation is a significant contributor to the state’s revenue through taxes and other forms of financial contributions. The taxes paid by corporations help fund essential public services, such as education, healthcare, and infrastructure development. Additionally, corporations in Hawaii often engage in philanthropic activities, supporting local charities and community initiatives that benefit residents across the state.

In addition to job creation and revenue generation, Hawaii Corporation also drives innovation and economic diversification. Many corporations in the state are at the forefront of cutting-edge research and development, particularly in industries such as renewable energy, agriculture, and technology. Through investing in innovation, corporations help drive forward the state’s economy, create new markets, and boost competitiveness on a national and global scale.

Furthermore, Hawaii Corporation plays a crucial role in promoting economic resilience and stability. By diversifying the state’s economic base and attracting businesses from various sectors, corporations help mitigate the impacts of economic downturns or external shocks. This resilience is essential for Hawaii’s long-term prosperity and allows the state to weather economic storms more effectively.

Moreover, by supporting small businesses and entrepreneurs, Hawaii Corporation fosters a culture of entrepreneurship, creativity, and innovation. Large corporations often collaborate with startups and local businesses, providing mentorship, funding, and resources to help them grow and succeed. This partnership between large corporations and small enterprises creates a vibrant and dynamic business ecosystem that benefits the entire state.

Overall, Hawaii Corporation is a cornerstone of the state’s economy, playing a pivotal role in job creation, revenue generation, innovation, economic diversification, and community development. The contributions made by corporations in Hawaii have a far-reaching impact, benefiting residents, businesses, and the state as a whole. In an era of rapid technological advancement and economic uncertainty, the role of corporations in Hawaii is more important than ever before. It is essential to recognize and support the vital role that corporations play in driving forward Hawaii’s economy and shaping its future.

Conclusion

When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in Hawaii. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in Hawaii, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.