In Hawaii, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status with the IRS when you file for your EIN.
An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.
Considerations Before Forming a S Corp
You must examine the following things before founding a S corporation:
S corporations are restricted to one class of stock and 100 stockholders, among other things. For more information, see our What Is a S Corporation? guide.
As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.
You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.
There are two major methods to form a S corporation:
We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.
Forming an LLC and Choosing S Corp Status in Hawaii
Step 1: Give Your LLC a Name
Step 2: Select a Registered Agent.
Step 3: Submit the Articles of Incorporation.
Create an Operating Agreement in Step 4
Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.
The first and most significant step in forming an LLC in Hawaii is deciding on a name.
Make certain that the name you chose conforms with Hawaii’s naming rules and is readily searched by prospective customers.
1. Follow the Hawaii LLC naming guidelines:
The word “limited liability corporation” or one of its acronyms must be in your name (LLC or L.L.C.). “Limited” and “company” may be shortened as “Ltd.” and “Co.”
Your company or trademark name cannot be the same as or significantly similar to any other existing business or brand registered in the state.
Your LLC’s name cannot include terms that may be confused with a government organization (FBI, Treasury, State Department, etc.).
Without the approval of the state commissioner of financial institutions, the following terms may not be used: financial institution, bank, banker, banking, banc, savings bank, savings and loan, savings association, financial services loan company, credit union, trust company, intrapacific bank, international banking corporation, and trust.
Domestic insurance businesses must have the term “insurance” in their name, and reciprocal insurers must have one of the following words in their name: reciprocal, interinsurer, interinsurance, exchange, underwriters, or underwriting.
The following terminology must also be approved or authorized by the state: certified public accountant, public accountant, CPA, PA, cooperative, escrow, and escrow depository.
Your name must be legal and not be intended to mislead or confuse the general public.
2. Does the name exist in Hawaii? To determine whether your selected LLC name is available, utilize the company name search on the Hawaii Business Express website.
3. Is the URL accessible?
We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.
Your Hawaii LLC must have a registered agent.
A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Certificate of Formation, you will name your registered agent.
Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.
To properly register an LLC, the Hawaii Articles of Organization are utilized.
An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.
An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.
When you apply directly with the IRS, EINs are free.