In Hawaii, the most common structure for real estate enterprises is an LLC. This is due to the ease with which a limited liability corporation (LLC) may be formed and operated.
If your real estate firm is sued, an LLC may safeguard your personal assets (vehicle, home, money). LLCs also provide credibility and tax-saving possibilities.
It Is Simple to Form a Real Estate LLC in Hawaii
In Hawaii, you may form a real estate LLC by filing the Articles of Organization with the Department of Commerce and Consumer Affairs. In Hawaii, forming a real estate LLC costs $51.
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Step 1: Give Your Real Estate LLC a Name
The first step in organizing a real estate LLC is to choose a firm name. You must offer your company a distinct name that complies with Hawaii naming regulations.
When you submit your Articles of Organization, you will formally register your name.
Choose a name that complies with Hawaii’s naming guidelines:
The word “limited liability corporation” or one of its acronyms must be in your name (LLC or L.L.C.)
Your LLC’s name cannot include terms that imply it is associated with a government entity (FBI, Treasury, State Department, etc.)
Determine if the name is available in Hawaii. Make sure the company name you choose isn’t currently in use by doing an online LLC name search.
Examine if your company’s name is accessible as a web domain. You may choose to purchase the URL in order to prevent others from using it.
Step 2: Select a Registered Agent for your LLC.
A registered agent must be included when you submit your Articles of Organization.
The role of a registered agent is to receive legal papers such as service of process and tax notifications on behalf of your LLC.
A person or a registered agent service might serve as the registered agent for your real estate LLC. Although you may serve as your own registered agent, many company owners choose to employ a registered agent service.
Consider the following while selecting a registered agent:
Availability: You must be available during regular business hours (Monday through Friday, 9 a.m.-5 p.m.) at the address you indicate.
Public Records: If you conduct your company from home, your personal address must be made public.
Privacy: A lawsuit might be served on you in front of your family or employees.
Step 3: File the Articles of Organization for your LLC.
Form LLC-1 – Articles of Organization must be filed with the Hawaii Department of Commerce and Consumer Affairs to register your Hawaii LLC. This may be accomplished online, via mail, fax, email, or in person.
Step 4: Draft an Operating Agreement for a Real Estate LLC.
An LLC operating agreement is a legal document that defines your real estate LLC’s ownership and member responsibilities.
An operating agreement may benefit even single-member LLCs.
Your operating agreement should include the following provisions:
Responsibilities of each member
How will new members be admitted?
How may current members transfer or cancel their membership?
How will earnings and dividends be distributed?
When and how will capital calls be made?
Manager liability for errors made in good faith
Tax and reporting deadlines
Members have first right of refusal and interest transfer if the property is sold.
Provisions may be added to your real estate LLC operating agreement as long as they do not contradict with Hawaii law.
Step 5: Obtain an EIN
The US Internal Revenue Service (IRS) uses an Employer Identification Number (EIN) to identify and tax firms. It’s essentially a business’s Social Security number.
methods for obtaining a free EIN
Following the Formation of a Real Estate LLC
Following the formation of your real estate LLC, you must perform the following:
Establish a Business Bank Account. Personal and corporate money are legally separated via a business bank account. This separation is essential to keep your LLC’s corporate veil intact (i.e., your limited liability protection).
Transfer Existing Property(s) to Your New LLC. If you currently possess property that you want to transfer to your new LLC, you must register a deed reflecting this change. This may be done with or without the assistance of a title firm. To begin started, we suggest contacting a title business or your county clerk.
You should update your lease. If you are transferring existing rental property to a new LLC, your residential lease agreement must be updated to reflect the new ownership.
Fill up and submit your Hawaii LLC annual report. Each year, file with the Hawaii Business Express online. The date of registration determines the due date. You must submit your paperwork before the end of the calendar quarter in which the LLC was created.