In this Article, we will give you a snapshot of the legal compliance requirement and associated fees required to register Limited Liability Company (LLC) in Hawaii and most importantly, maintain the status of an LLC, especially as a small business e-commerce start up.
In the United States, LLCs are registered on the state level, therefore you can register an LLC in any of the 50 States in the United States, including Washington DC.
You can check out the best states in the US to register your LLC as a small business e-commerce start-up, if you want to pay less State fees, less State imposed taxes and do less periodic paperwork in order to maintain your LLC.
In this Article, our focus is on Hawaii LLC. What cost should you expect to pay when you register an Hawaii LLC? What periodic filings requirements are imposed on Hawaii LLCs? What State taxes are levied on e-commerce small business start ups in Hawaii and what are the tax rates? What business permits are required to be obtained by e-commerce businesses in Hawaii, what’s the cost of these permits and are there any renewal requirements?
This Article presents you a snapshot, so you know what fees and legal compliance requirements to expect if you want to register an LLC for your e-commerce small business start up in Hawaii, operate with the required licenses and maintain your LLC status.
Business registration and compliance on Hawaii
- LLC Registration cost; the state fee for registering an LLC in Hawaii is $51. You can register your LLC with Bizee for a service charge of $0 + the State fee.
- LLC registration Publishing requirement; No, LLCs in Hawaii are not required to publish their registration in a local newspaper.
- Has the Option to register as an Anonymous LLC; No, LLCs in Hawaii do not have the option to register as an anonymous LLC. Meaning that the business details of the LLC Owners are published on the Hawaii public records. The LLC can still maintain some privacy by using a virtual office address and not the Owners real addresses.
- DBA requirement; DBA is optional if your LLC is operating under a different name than your LLC registered name. In Hawaii DBA is referred to as a “Trade name”. Cost of registration is $50, the length of approval is 5 years. You can register for a DBA in Hawaii online or outsource the registration of your Hawaii DBA (if needed) to Bizee.
- Annual returns filing requirement; yes, Hawaii LLCs have annual report filing requirements. The cost $12.50 for online filling; $15 paper filling
You can file the Hawaii annual returns yourself, you’ll need to visit the Hawaii Business Express – Annual Reports page or you can outsource the filling of your annual returns to Bizee for a $99 service charge.
Annual Franchise tax filing and compliance in Hawaii
- State Franchise tax requirement; No, LLCs are not required to pay Franchise tax in Hawaii.
Annual State income tax filing and compliance in Hawaii
- State income tax requirement; Hawaii has a graduated individual income tax system, with rates ranging from 1.40 percent to 11.00 percent. Additionally, the state has a corporate income tax rate ranging from 4.40 to 6.40 percent.
- Who files State income tax; LLCs by default are passed through entities meaning that tax obligation passes through to the individuals who own the LLC. Therefore an LLC with a default tax status pays the individual state income tax. Interestingly, if the individuals behind the LLC are not resident in the state and do not have state source income (a dependent agent in the state), then they are not required to pay “individual State income tax”.
If the LLC owners are resident in the State or have State source income (a dependent agent in the state), then the LLC Owners are required to pay “individual State income tax”.
If the LLC has elected to be taxed as a corporation (C-corp), then the LLC is required to pay “Corporate State income tax”.
- How to file state income tax; You can file your Hawaii State income tax by yourself. You will need to visit the State website. Alternatively, we recommend using the Service of a Certified Public Accountant (CPA), through H&R Block to file your state income tax.
Periodic Sales tax filing and compliance in Hawaii
- Sales tax requirement; Hawaii has a 4.00 percent state sales tax rate, with a maximum local sales tax rate of 0.50 percent. The average combined state and local sales tax rate in Hawaii is 4.44 percent.
- Sales tax nexus; Sales tax nexus is the state-defined threshold between a Seller and a state, which when reached makes it obligatory for the Seller to register for a Seller permit in the state, charge sales tax to customers in the state and remit the sales tax to the State Government.
Generally, there is the “physical sales tax nexus” and “economic sales tax nexus”.
Physical sales tax nexus is reached when the Seller had physical presence in the state (i.e have an office address, a warehouse etc).
In most States, “economic sales tax nexus” is reached when a Seller makes up to 200 transactions or $100,000 in sales in a State.
It’s important to note that, when you register your LLC in the State of Hawaii (which generally requires that you have a registered business address in Hawaii), you automatically meet the physical sales tax nexus and will be required to obtain a Sales tax permit in Hawaii, charge applicable sales tax rates to customers in Hawaii and remit sales tax to the Hawaii State Government.
- Sales tax permit; It costs $20 to register for a Hawaii Hawaii general excise tax (GET) license.
There is no requirement to renew a Sales tax permit in Hawaii.
- Reseller/Resale Certificate; Businesses who purchase products from their suppliers for the purpose of reselling those products to their customers can make sales tax free purchases from their suppliers if they have a resale certificate.
This means that Resale businesses can get cheaper product prices from their suppliers (that is product prices without sales tax included) which can help these Businesses have a higher profit margin and/or maintain competitive selling prices to their Customers.
Generally, suppliers will charge the sales tax rate applicable in the State where the product is to be delivered unless the business presents to the supplier a Resale Certificate (also called a Reseller Certificate).
The Resale certificate must be valid and acceptable in the state where the product is to be delivered.
Businesses can present any of the below listed Resale certificates to suppliers if they want to make sales tax free purchases for product delivery to an Hawaii address.
- Resale Certificate General Form 1
- Resale Certificate General Form 2
- Resale Certificate Special Form
- MTC Uniform Sales & Use Tax Resale Certificate (The MTC form serves as a uniform resale certificate for various states, streamlining the process by replacing the need for multiple state-specific resale forms when dealing with your supplier.)
Note; Hawaii does not accept out-of-State Seller ID.
This means that Resale Businesses seeking sales-tax-free purchases in Hawaii must have an Hawaii Seller ID ( i.e Register for an Hawaii Sale Tax Permit and have an Hawaii Sales Tax permit ID). If they choose to use the MTC uniform resale certificate and wish to indicate Hawaii as the resale state, they must furnish their Hawaii Seller ID on the MTC form.
In Hawaii, A blanket Resale certificate (This means that the resale certificate is kept on file by the Supplier to cover multiple purchase transactions between a specific Supplier and Reseller) does not expire unless it is revoked in writing.
Conclusion
This Article shows you a snapshot of the legal fillings and compliance requirements for LLCs that are registered in Hawaii, specifically for LLCs that want to carry on the business of selling and especially for small e-commerce start up LLCs that are registered in Hawaii.
If you are wondering what might be the best State in the United States to register your small business (especially if you are a reseller or an e-commerce business), we have written this Article, where we go over our most recommended states for registering a business in the United States, if you want to pay less LLC filling and legal compliance fees, if you want less state imposed taxes and if you want to do less periodic legal paperwork required to maintain your LLC status.
