Hawaii LLC
Advantages and Disadvantages



Hawaii LLC Advantages and Disadvantages

An Hawaii LLC offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership or a Subchapter S Corporation, are generally prime candidates for a business juststarting. The state of Hawaii gives public support to an Hawaii LLC.

Hawaii's License Requirements

Hawaii requires most businesses to obtain a license and pay a fee if operating in the state. Please check with the state to make sure your business is complying with the license requirements for your particular profession.

Should I form a Hawaii LLC?

A Hawaii LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Hawaii to your LLC. Your Hawaii LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Hawaii LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.


Advantages and Disadvantages of a Hawaii LLC

Advantages of Limited Liability Company

  • Limited Liability: Owners of a LLC have the limited liability protection of a corporation.


  • Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.


  • No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.


  • Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.

Disadvantages of Limited Liability Company

  • Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.


  • Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.


  • Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.


By Hawaii and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Hawaii LLC members, the name and address of your Hawaii registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Hawaii LLC formation documents assembled for application to the state of Hawaii.


Hawaii's 2011 Business Tax Climate Ranks 22nd

Hawaii ranks 22nd in the Tax State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

Hawaii's State and Local Tax Burden Below National Average

Hawaii's 2009 state and local tax burden of 9.6% of income is below the national average of 9.8%. Hawaii's tax burden has decreased overall from 10.0% (24th nationally) in 1977 to 9.6% (22nd nationally) in 2009. Taxpayers in the Aloha state pay $4,399 per capita in state and local taxes.


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