If you plan to start a business in Hawaii, there are a number of steps you need to follow. In this guide, we'll tell you how to start a business in Hawaii and give you the tips that you need to succeed.
Hawaii is often seen as one of the least small business-friendly states, but the economy is based on small businesses. It has 126,600 small businesses, which is 99.3% of all businesses. These small businesses employ more than half of the workforce, and account for 86.5% of all exports.
Hawaii supports small businesses in a number of ways. It has a number of award-winning accelerators and government-run programs to help businesses obtain loans, grants, and other investment resources.
It is cheaper to do business in Hawaii. Mainly due to Hawaii's tax climate, it is cheaper to do business in Hawaii than in other Asia Pacific locations.
Hawaii has the Aloha spirit. It is worth noting, when deciding to start a business in Hawaii, that the island ranks the highest of all states in quality of life.
How to Start a Business in Hawaii:
1. Form a business entity.
You need to determine the legal structure of your business, whether you want it to be a sole proprietorship, partnership, Limited Liability Company (LLC), or corporation. For most small businesses, an LLC is a great option. They are easy to set up and manage and they have tax benefits. It can cost as little as $50 to set up an LLC in Hawaii.
Forming an LLC in Hawaii:
- Choose a name.
- File Articles of Organisation.
- Designate a Registered Agent.
- Put together an Operating Agreement.
- Get an Employee Identification Number.
- Obtain local and state business licenses.
- Register with Hawaii Department of Taxation.
2. Register with the Business Registration Division.
If you are going to start a business in Hawaii you must register with the Department of Commerce and Consumer Affairs, Business Registration Division. The fee for filing is $50.00. Then you need to pay a State Archive fee of $1.00.
You can register your business online. The best way is to sign up for a free account at Hawaii Business Express (HBE), and follow the step-by-step guidance provided. It should take no more than two weeks, but for an additional fee of $25.00, you can expedite the process.
3. Get an Employer Identification Number (EIN).
Every business needs to have an Employer Identification Number (EIN). An EIN is the number that the IRS uses to identify your business when it comes to the taxes that you deduct from employee wages.
Registering for an EIN is very easy. All you need to do is go here. You can complete the application online, and save your EIN confirmation notice once you receive a number from the IRS.
4. Open a bank account.
Once you have your EIN, open a business bank account. A merchant services account is necessary if you need to accept credit and debit card transactions. But your account can be a checking account, savings account, or credit card account.
A business account is for accepting payment and accessing loans. It also helps to keep your business and personal finances separate.
Visit a local bank and ask a business representative for advice. They will walk you through the process, and get you set up. You can also authorize other employees or company representatives to have access to the account.
Best Banks for Small Businesses in Hawaii:
- First Hawaiian Bank.
- Bank of Hawaii.
- American Savings Bank Hawaii.
- Central Pacific Bank.
- Finance Factors Hawaii.
5. Register with the Hawaii Department of Taxation.
By law, any business in Hawaii must register to charge and remit sales tax by obtaining a vendor's license. In other words, you need to be registered with the Department of Taxation in order to sell your goods or services and charge sales tax.
Register through Hawaii Business Express (HBE). Just go to hbe.ehawaii.gov and click "Wizard" or "QuickFile" to create an account. Once you have set up your account, you can input your tax information, update the details of your business, and more.
6. Hire employees and report them to the state.
When you hire a new employee in Hawaii, you have 20 days to report them to the Child Support Enforcement Agency (CSEA). Before they start working for you, have them fill in an IRS W-4 form for tax withholding processing. Print out the forms and deliver them to the Child Support Enforcement Agency. There is no online option at this time.
If you are re-hiring a past employee and sixty days have passed since their last day of employment with you, you must report them as a new hire. There is a penalty of $25.00 for late filing, and if you and the employee are found to have deliberately chosen not to supply the report, there is a $500.00 fine.
New Hire Information to be Reported in Hawaii:
- Employee’s name.
- Employee’s address.
- Employee’s social security number.
- The date services for remuneration were first performed by the employee.
- Employer’s name.
- Employer’s address.
- Employer’s Federal Employer Identification Number.
7. Obtain applicable state licenses and permits.
To legally operate your business in Hawaii, you will need the general business license from the state, which is an excise tax license. You might also need professional and occupational licenses, as well as local business licenses. Your business, products, and services will determine which licenses and permits you will need.
There are 47 regulated professions and vocations in Hawaii, such as accountants, elevator mechanics, nursing, and plumbers. You will need to apply to the regulatory boards of these professions to receive a license. And then, most cities and counties have their own requirements for business such as zoning, building improvements, signage, liquor licenses, and so on.
Registration for these licenses can be done in person or online at the Hawaii Business Express website. Go to hbe.ehawaii.gov. It may take between 15 and 20 business days to process an application.
Information to Complete the General Excise Tax License Application in Hawaii:
- Business name.
- Business address.
- Phone number.
- Type of business (LLC, Corporation, Partnership, or Sole Proprietor).
- Federal tax ID (FEIN) or social security number (for sole proprietors).
- Accounting period.
- List of owners, partners, shareholders, etc. (name, address and phone number).
- Driver’s license number.
- Number of expected employees.
8. Purchase insurance.
To protect yourself, your employees, and your business assets, you'll need insurance. The most common types of business insurance you should consider are:
In Hawaii, businesses with one or more employees are required by law to pay the Unemployment Insurance Tax, and cover employees through Workers' Compensation Insurance, Temporary Disability, and Healthcare.
How to Start a Small Business in Hawaii FAQs:
How much does it cost to start a business in Hawaii?
At a minimum it costs $50 to start a business in Hawaii, plus a $1 State Archive fee.
Where can I apply for a Hawaii business license?
You can apply for whatever licenses and permits that you need to do business in Hawaii by going to hbe.ehawaii.gov.
How much is a business license in Hawaii?
The State of Hawaii Basic Business Application, BB-1 Packet, carries a $20.00 license fee.
Are there any specific rules for an LLC in Hawaii?
The State of Hawaii requires a report from you every year. The filing fee for this annual report is $15.00, and there is a grace period of two months each year.
How do I start a sole proprietorship in Hawaii?
- Decide on a business name.
- File a trade name (optional).
- Get licenses, permits.
- Get zoning clearance.
- Obtain an EIN.
- Open a business bank account.
- Get insurance.
- Pay taxes.
How do I register a business name in Hawaii?
You can register with the Department of Commerce and Consumer Affairs, Business Registration Division, online here.
How do I start a small business in Hawaii?
- Decide what type of business you want to open.
- Write a business plan.
- Form your business entity.
- Register with the Hawaii Department of Taxation.
- Get an Employer Identification Number.
- Open a bank account.
- Source funding.
- Find a location.
- Hire employees.
- Market your business.
- Get state licenses and permits.
- Purchase insurance.
Do I need to insure my employees in Hawaii?
By law, all businesses in Hawaii must pay Unemployment Insurance Tax, and cover employees through Workers' Compensation Insurance, Temporary Disability, and Healthcare.
How much is General Excise Tax in Hawaii?
The rate across the state of Hawaii is 4% while on Oahu the rate is 4.5%. Some retailers on neighboring islands charge up to 4.712%, which is perfectly legal as long as the business is open about charging the customer this inflated general excise tax.