Hawaii Corporation Advantages and Disadvantages - Hawaii’s overall rank, 24th best, would be much higher if the state could reform its individual income tax without causing
damage elsewhere in what is otherwise a good tax system. The top rate of 8.25% starts in at $40,000 of taxable income.
Only Maine and Oregon have a higher rate at such a low level of income.
Hawaii Corporation - Articles of Incorporation must be drafted and submitted to the Hawaii Secretary of
State, Corporations Division. Once articles of incorporation have been successfully filed, your Hawaii Corporation has
been formed and this begins its existence as a corporate entity.
Should I form an Hawaii Corporation?
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation
can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders.
The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.
Advantages and Disadvantages: Hawaii Corporation
Advantages of a Corporation
Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.
Disadvantages of a Corporation
The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation
Hawaii’s Corporate Income Tax System
Hawaii’s corporate tax structure consists of three brackets with an upper bracket rate of 6.4% kicking in at $100,000 of corporate income. Among states levying corporate income taxes, Hawaii’s top rate ranks 15th lowest nationally. In 2001, corporate tax collections reached $49 per capita (ranked 42nd nationally).
