How to Start an S-Corp in Hawaii


Steve Bennett
Steve Bennett
Business Formation Expert
Steve 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.

All Posts by Steve →
Business Formation Expert  |   Fact Checked by Editorial Staff
Last updated: 
LLCBuddy™ offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
At LLCBuddy, we don't just offer information; we provide a curated experience backed by extensive research and expertise. Led by Steve, a seasoned expert in the LLC formation sector, our platform is built on years of hands-on experience and a deep understanding of the nuances involved in establishing and running an LLC. We've navigated the intricacies of the industry, sifted through the complexities, and packaged our knowledge into a comprehensive, user-friendly guide. Our commitment is to empower you with reliable, up-to-date, and actionable insights, ensuring you make informed decisions. With LLCBuddy, you're not just getting a tutorial; you're gaining a trustworthy partner for your entrepreneurial journey.
Start an S-corporation in Hawaii

Hawaii, popularly known as The Aloha State, offers a bunch of benefits for business owners, especially the state capital Honolulu has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in Hawaii, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in Hawaii. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In Hawaii, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in Hawaii. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in Hawaii.

What is an S-Corp in Hawaii?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in Hawaii. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.

–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in Hawaii

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in Hawaii.

How to Start an S-Corporation in Hawaii?

To create S-Corp in Hawaii, you must follow the below guidelines that include forming a business name, hiring a Resident Agent, filing your Articles of Organization, creating an operating agreement in Hawaii, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in Hawaii

After you have decided on the idea to start an S-Corp in Hawaii, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up 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 S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Hawaii.
  • Limit of restricted words that need a license in Hawaii, for example, doctors, attorneys, etc.
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the Hawaii Resident Agent

The next step in starting an S-corp in Hawaii is hiring a 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 (such as subpoenas), all notices of lawsuits, and other official government correspondence in Hawaii. Forming an LLC and an S-corp will be easier if you have Resident Agent in Hawaii.

Step 3: File Your Hawaii Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). Hawaii Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In Hawaii, the filing fee is $5.

In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in Hawaii

After you have filed your Articles of Organization in Hawaii, the next step is to create an LLC operating agreement in Hawaii. The Hawaii LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for 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 general partnership. 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- You can apply for EIN online, the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • 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.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in Hawaii

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Hawaii, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

Advantages of Starting an S-Corporation in Hawaii

Filing an S-Corp in Hawaii has numerous benefits and advantages.

  • Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
  • Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in Hawaii apply for an S-Corp LLC.
  • Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What are the requirements to form an S-Corp in Hawaii?
To form an S-Corp in Hawaii, you must submit articles of incorporation to the Department of Commerce and Consumer Affairs, issue stock, and hold an organizational meeting. You will also need to designate a registered agent located in Hawaii, obtain a federal employer identification number, and file an annual report with the state.
What are the benefits of forming an S-Corp in Hawaii?
Forming an S-Corp in Hawaii can provide several benefits, including protection from personal liability, tax-deductible business expenses, and asset protection. Additionally, Hawaii offers business-friendly policies, allowing owners to enjoy the benefits of operating their business in a desirable location.
What are the taxes for an S-Corp in Hawaii?
An S-Corp in Hawaii is subject to the state’s general excise tax and will also need to pay taxes on its income. Hawaii also levies a franchise tax on S-Corps at the rate of 0.25% of the company’s net income.
How much does it cost to form an S-Corp in Hawaii?
The cost to form an S-Corp in Hawaii is determined by the filing fees associated with the articles of incorporation and other required documents. Generally, these fees range from $50 to $100. In addition, you may need to hire a professional to assist with the formation process, which could incur additional costs.
Are there any requirements for directors of an S-Corp in Hawaii?
Yes, directors of an S-Corp in Hawaii must be 18 years or older, must be a resident of the state, and must not have been convicted of a felony or certain other offenses. Additionally, directors must be able to demonstrate a commitment to the success of the company.
Is there an annual fee to maintain an S-Corp in Hawaii?
Yes, the Department of Commerce and Consumer Affairs charges an annual fee to maintain an S-Corp in Hawaii. This fee is currently $50 and must be paid by the 15th day of the fourth month after the close of the company’s fiscal year.
What is an S-Corp in Hawaii?
An S-Corp in Hawaii is a type of corporation where the owners, or shareholders, do not pay taxes on the business income. Instead, the business’s profits are passed directly to the shareholders, who are then responsible for paying taxes on their individual tax returns.
What are the tax benefits of starting an S-Corp in Hawaii?
An S-Corp in Hawaii offers several notable tax benefits, such as the ability to deduct a portion of your salary as business expenses, and the ability to avoid double taxation of business profits. Additionally, Hawaiian S-Corps are eligible for certain tax credits, such as the Hawaii High Technology Investment Tax Credit.
What are the requirements to start an S-Corp in Hawaii?
To form an S-Corp in Hawaii, you must register your business with the Hawaii Department of Commerce and Consumer Affairs and obtain a Tax ID number. Additionally, you must file a Certificate of Authority with the Department of Commerce and Consumer Affairs, and you must file all necessary tax documents with the Hawaii Department of Taxation.
What are the different types of S-Corp in Hawaii?
There are two types of S-Corps in Hawaii
Is it difficult to form an S-Corp in Hawaii?
No, it is not difficult to form an S-Corp in Hawaii. Once you have registered your business, obtained a Tax ID number, and filed all necessary documents, you can set up an S-Corp with relative ease.
What paperwork needs to be completed to set up an S-Corp in Hawaii?
To set up an S-Corp in Hawaii, you must register your business with the Hawaii Department of Commerce and Consumer Affairs, obtain a Tax ID number, file a Certificate of Authority with the Department of Commerce and Consumer Affairs, and file all necessary tax documents with the Hawaii Department of Taxation.
How much does it cost to start an S-Corp in Hawaii?
The cost of starting an S-Corp in Hawaii depends on several factors, such as the type of business, the size of the business, and the number of shareholders. Generally speaking, the cost of setting up an S-Corp in Hawaii is around $500.
Is there an annual fee for operating an S-Corp in Hawaii?
Yes, there is an annual fee for operating an S-Corp in Hawaii. The fee is based on the total number of shareholders and can range from $50 to $900 per year.
Is an S-Corp in Hawaii a separate legal entity?
Yes, an S-Corp in Hawaii is a separate legal entity from its shareholders. This means that the business is liable for any debts or obligations it incurs, and shareholders are not personally liable for any debts or obligations incurred by the business.
What type of business activities can an S-Corp in Hawaii engage in?
An S-Corp in Hawaii can engage in any type of lawful business activities, so long as the activities are not illegal or prohibited by state or federal law.
Does an S-Corp in Hawaii need to have a board of directors?
Yes, an S-Corp in Hawaii must have a board of directors. The board of directors is responsible for making decisions on behalf of the company, such as making decisions about investments and hiring and firing employees.
Does an S-Corp in Hawaii need to file annual reports?
Yes, an S-Corp in Hawaii is required to file annual reports with the Hawaii Department of Commerce and Consumer Affairs. The annual report must include information such as the company’s business activity, its financial statements, and any changes to the board of directors.
Does an S-Corp in Hawaii need to have an operating agreement?
Yes, an S-Corp in Hawaii must have an operating agreement. The operating agreement outlines the rights and responsibilities of the shareholders, the board of directors, and the company itself.
Does an S-Corp in Hawaii need to have a registered agent?
Yes, an S-Corp in Hawaii must have a registered agent. The registered agent is responsible for accepting legal documents on behalf of the company, such as lawsuits or notices from the IRS.
Does an S-Corp in Hawaii need to have a business license?
Yes, an S-Corp in Hawaii must have a business license. The business license is typically obtained from the county or city where the business is located.
Does an S-Corp in Hawaii need to have insurance?
Yes, an S-Corp in Hawaii must have insurance. The type of insurance required and the amount of coverage needed depend on the type of business and the location of the business.
Does an S-Corp in Hawaii need to have an Employer Identification Number (EIN)?
Yes, an S-Corp in Hawaii must have an Employer Identification Number (EIN). The EIN is used to file taxes, open a bank account, and hire employees.
Does an S-Corp in Hawaii need to have a business bank account?
Yes, an S-Corp in Hawaii must have a business bank account. A business bank account is used to pay business expenses, such as taxes, payroll, and overhead costs.
Does an S-Corp in Hawaii need to have a business plan?
Yes, an S-Corp in Hawaii should have a business plan. A business plan outlines the company’s goals, strategies, and projected financial statements.
Does an S-Corp in Hawaii need to have shareholders?
Yes, an S-Corp in Hawaii must have shareholders. The shareholders own the company and are responsible for making decisions on behalf of the company.
Does an S-Corp in Hawaii need to have an accountant?
Yes, an S-Corp in Hawaii should have an accountant. An accountant can help the company file taxes, keep track of finances, and advise on financial decisions.
Does an S-Corp in Hawaii need to have a lawyer?
Yes, an S-Corp in Hawaii should have a lawyer. A lawyer can provide legal advice and help the company navigate any legal issues that may arise.
Does an S-Corp in Hawaii need to comply with federal and state laws?
Yes, an S-Corp in Hawaii must comply with both federal and state laws. This includes laws related to taxes, labor and employment, and environmental regulations.
Can an S-Corp in Hawaii be dissolved?
Yes, an S-Corp in Hawaii can be dissolved. The process of dissolving an S-Corp in Hawaii involves filing the appropriate documents with the Department of Commerce and Consumer Affairs.
What are the penalties for not complying with the requirements for an S-Corp in Hawaii?
Failing to comply with the requirements for an S-Corp in Hawaii can result in the revocation of the company’s Certificate of Authority, fines, and other penalties.

Also Read

Why Hawaii S Corporation is So Important

One of the key reasons why Hawaii S Corporation status is so important is the tax advantages it provides. By electing this status, businesses can avoid double taxation on their income. Instead of paying corporate taxes on profits and then personal taxes on dividends, S Corporations can pass their profits directly to their shareholders, who are then taxed at their individual tax rates. This can result in significant tax savings for business owners, allowing them to reinvest more of their earnings back into the company.

In addition to the tax benefits, S Corporation status also offers limited liability protection to shareholders. This means that the personal assets of shareholders are shielded from the debts and liabilities of the business. In the event that the company runs into financial trouble or faces a lawsuit, shareholders are not personally liable for the company’s obligations. This added layer of protection can provide peace of mind to business owners, allowing them to focus on growing their business without fear of losing their personal assets.

Furthermore, Hawaii S Corporation status can make it easier for businesses to attract capital from investors. Because S Corporations are pass-through entities, investors can receive their share of the company’s profits without being subject to double taxation. This can make investing in S Corporations more appealing to investors, as they can potentially earn higher returns on their investment compared to investing in traditional C Corporations.

Another important advantage of S Corporation status is the flexibility it offers in terms of ownership structure. While traditional C Corporations are limited to a maximum of 100 shareholders, S Corporations can have an unlimited number of shareholders. This can make it easier for small businesses to bring in new investors, grow their business, and ultimately achieve their goals.

Overall, Hawaii S Corporation status is a valuable tool for small businesses looking to take their company to the next level. By providing tax advantages, limited liability protection, and easier access to capital, S Corporation status can help entrepreneurs grow their business, attract investors, and achieve long-term success. For these reasons, it is clear why Hawaii S Corporation status is so important for small businesses in the state.

Conclusion

In conclusion, starting an S-corp in Hawaii is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in Hawaii.

Leave a Comment