How to Form a Professional Corporation in Hawaii (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
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Forming a Professional Corporation in Hawaii

If you would like to start and learn how to form a corporation in Hawaii, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Hawaii are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Hawaii or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in Hawaii?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Hawaii. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Hawaii, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Hawaii

To form a Professional Corporation in Hawaii for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Hawaii, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Hawaii

After you have decided to form a professional corporation in Hawaii, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In Hawaii, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. You must file a name reservation application in the Hawaii Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Hawaii DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Hawaii Resident Agent

The next step in forming a professional corporation is hiring a Resident Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Hawaii. Forming a professional corporation for your service will be easier if you have Resident Agent in Hawaii.

Alternatively, you can serve as your own Resident Agent if you have the time. Usually, in Hawaii, a Resident Agent costs is ranging from $50 – $150. To make it easier, you can hire Hawaii Resident Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Hawaii

After you hire a Resident Agent to form a professional corporation, the next step is to file the Hawaii Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in Hawaii may be done with four ways, online, by mail, fax, and email. The Articles of Incorporation fee may vary from different state. However, in Hawaii, it costs $50 for filing online, by mail, fax, or by email. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. Email it to [email protected].. For offline filing, Send the form by mail to Office of the Secretary of State, 450 N 4th Street, P.O. Box 83720, Boise, ID 83720-0080 or Fax it to (808) 586-2733..

Step 5: Write an Operating Agreement in Hawaii

An operating agreement in Hawaii is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in Hawaii

The next step is to form the first board of directors for your PC in Hawaii. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Hawaii Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Hawaii, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Hawaii Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Hawaii.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Hawaii. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

The application of an EIN in Hawaii can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Hawaii for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Hawaii easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Hawaii

Before your professional corporation operates in Hawaii, you must have Hawaii Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Hawaii ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Hawaii

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Hawaii tax classification for the taxes that an LLC in Hawaii must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Hawaii.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • Hawaii Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Hawaii

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Hawaii

In Hawaii, you must submit a report. The owners’ and Resident Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year in the Hawaii Secretary of State.

FAQs

What is a professional corporation?
A professional corporation is a corporation made up of licensed professionals, such as doctors, lawyers, and accountants, who are practicing as a group.
Can I form a professional corporation in Hawaii?
Yes, you can form a professional corporation in Hawaii.
What types of professions can form a professional corporation in Hawaii?
In Hawaii, licensed professionals such as lawyers, doctors, accountants, architects, engineers, and psychologists can form a professional corporation.
What steps do I need to take to form a professional corporation in Hawaii?
To form a professional corporation in Hawaii, you must file Articles of Incorporation with the Hawaii Department of Commerce and Consumer Affairs, and obtain any necessary licenses and permits.
Can I form a professional corporation with just one professional?
Yes, you can form a professional corporation with just one professional in Hawaii.
Do I need to have a registered agent to form a professional corporation in Hawaii?
Yes, you must have a registered agent for your professional corporation in Hawaii.
What are the requirements for a registered agent in Hawaii?
The registered agent for a Hawaii professional corporation must be a resident of Hawaii, or a corporation authorized to do business in Hawaii.
What are the licensing requirements for starting a professional corporation in Hawaii?
The licensing requirements for starting a professional corporation in Hawaii will depend on the profession you are in. You will need to check the Hawaii Board of License website for your particular licensing requirements.
Can a foreign corporation form a professional corporation in Hawaii?
Yes, a foreign corporation can form a professional corporation in Hawaii if it meets Hawaii’s requirements for registering as a foreign corporation.
How much does it cost to form a professional corporation in Hawaii?
The fee for filing Articles of Incorporation for a professional corporation in Hawaii is $50. You will also need to pay for any necessary licenses and permits.
How long does it take to form a professional corporation in Hawaii?
It can take several weeks to several months to form a professional corporation in Hawaii, depending on how quickly the Hawaii Department of Commerce and Consumer Affairs processes your application.
Do I need to file separate tax forms for my professional corporation in Hawaii?
Yes, you will need to file separate tax forms for your professional corporation in Hawaii.
Will I need to pay Hawaii state income tax for my professional corporation?
Yes, your professional corporation will need to pay Hawaii state income tax on any income earned in Hawaii.
Can I apply for tax-exempt status for my professional corporation in Hawaii?
The IRS allows certain types of professional corporations to apply for tax-exempt status under Section 501(c)(6) of the Internal Revenue Code. You should consult with a tax professional to see if you qualify.
What are the benefits of forming a professional corporation in Hawaii?
Forming a professional corporation in Hawaii can help protect the personal assets of the corporation’s shareholders, and allows the corporation to take advantage of certain tax benefits.
What are the disadvantages of forming a professional corporation in Hawaii?
The process of forming a professional corporation in Hawaii can be complex and time-consuming, and the corporation will be subject to additional regulatory requirements.
Why should I hire a lawyer to help me form a professional corporation in Hawaii?
A lawyer can help guide you through the process of forming a professional corporation in Hawaii, and can help make sure you comply with all necessary regulations and requirements.
What are some of the ongoing requirements for maintaining a professional corporation in Hawaii?
Some of the ongoing requirements for maintaining a professional corporation in Hawaii include filing annual reports, maintaining corporate records, and filing tax forms.
What happens if my professional corporation fails to comply with Hawaii’s regulatory requirements?
If your professional corporation fails to comply with Hawaii’s regulatory requirements, you could be subject to fines, lawsuits, or even the revocation of your professional license.
Can I dissolve a professional corporation in Hawaii if I need to?
Yes, you can dissolve a professional corporation in Hawaii if you need to. You will need to file Articles of Dissolution with the Hawaii Department of Commerce and Consumer Affairs.
Can I transfer ownership of my professional corporation in Hawaii?
Yes, you can transfer ownership of your professional corporation in Hawaii. This process will depend on the agreement between the shareholders and the requirements of Hawaii’s regulatory agencies.
Can I change the name of my professional corporation in Hawaii?
Yes, you can change the name of your professional corporation in Hawaii, but you will need to file Articles of Amendment with the Hawaii Department of Commerce and Consumer Affairs.
Can I convert my professional corporation into another type of business structure in Hawaii?
Yes, you can convert your professional corporation into another type of business structure in Hawaii, but this process can be complex and will require a thorough review by legal and tax professionals.
Do all shareholders in a professional corporation need to be licensed professionals?
Yes, all shareholders in a professional corporation in Hawaii must be licensed professionals in the same field.
Can a professional corporation be taxed as an S-corporation in Hawaii?
Yes, a professional corporation can elect to be taxed as an S-corporation in Hawaii if it meets the IRS requirements for S-corporation status.
Will forming a professional corporation protect my personal assets from liability?
Forming a professional corporation in Hawaii can help protect your personal assets from liability, but you should consult with a legal professional to understand the extent of this protection.
Can I use my professional corporation’s income to pay for personal expenses?
No, you cannot use your professional corporation’s income to pay for personal expenses. This is known as “piercing the corporate veil” and can result in the loss of liability protection.
Is there a limit to the number of shareholders in a professional corporation in Hawaii?
No, there is no limit to the number of shareholders in a Hawaii professional corporation.
What is a professional corporation in Hawaii?
A professional corporation in Hawaii is a type of corporation that is formed to offer services through a licensed profession.
Can any licensed professional form a professional corporation in Hawaii?
Yes, any licensed professional can form a professional corporation in Hawaii.
What types of professionals can form a professional corporation in Hawaii?
In Hawaii, professionals such as doctors, dentists, and lawyers can form professional corporations.
How many people are required to form a professional corporation in Hawaii?
In Hawaii, at least one licensed professional must form a professional corporation.
Can a foreigner form a professional corporation in Hawaii?
Yes, a foreigner can form a professional corporation in Hawaii, as long as they have a valid license and meet all other requirements.
What types of licenses are required to form a professional corporation in Hawaii?
Different types of professionals require different types of licenses to form a professional corporation in Hawaii.
Is it expensive to form a professional corporation in Hawaii?
Yes, the fees associated with forming a professional corporation in Hawaii are generally higher than fees for forming a regular corporation.
Can multiple licensed professionals form a professional corporation in Hawaii?
Yes, multiple licensed professionals can form a professional corporation in Hawaii.
Is a professional corporation in Hawaii the same as a limited liability company (LLC)?
No, a professional corporation in Hawaii and an LLC are two separate legal entities with different rules and guidelines.
Can a professional corporation in Hawaii offer services in other states?
Yes, a professional corporation in Hawaii can offer services in other states as long as it follows the rules and regulations of each state.
How is a professional corporation in Hawaii taxed?
A professional corporation in Hawaii can be taxed as either a C corporation or an S corporation.
How is a professional corporation in Hawaii formed?
To form a professional corporation in Hawaii, articles of incorporation must be filed with the state and certain regulations must be followed.
Can a professional corporation in Hawaii have a board of directors?
Yes, a professional corporation in Hawaii can have a board of directors.
Can a professional corporation in Hawaii have shareholders?
Yes, a professional corporation in Hawaii can have shareholders.
Is there a limit to the number of shareholders a professional corporation in Hawaii can have?
No, there is no limit to the number of shareholders a professional corporation in Hawaii can have.
What is the process for electing officers in a professional corporation in Hawaii?
The process for electing officers in a professional corporation in Hawaii is outlined in the bylaws of the corporation.
Can a professional corporation in Hawaii have a non-licensed individual as an officer?
No, a professional corporation in Hawaii must have at least one officer who is a licensed professional.
Does a professional corporation in Hawaii need to have a registered agent?
Yes, a professional corporation in Hawaii is required to have a registered agent.
What is a registered agent in Hawaii?
A registered agent in Hawaii is a person or entity designated by the professional corporation to receive legal notices and other official documents.
Can a professional corporation in Hawaii change its registered agent?
Yes, a professional corporation in Hawaii can change its registered agent, but proper notice must be given to the state of Hawaii.
Can a professional corporation in Hawaii be dissolved?
Yes, a professional corporation in Hawaii can be dissolved voluntarily or involuntarily.
Does a professional corporation in Hawaii need to file a tax return?
Yes, a professional corporation in Hawaii must file a tax return with the state of Hawaii.
Does a professional corporation in Hawaii need to renew its license?
Yes, a professional corporation in Hawaii must renew its license every two years.
Can a professional corporation in Hawaii merge with another business?
Yes, a professional corporation in Hawaii can merge with another business, but the proper procedures must be followed.
Can a professional corporation in Hawaii convert to another type of business entity?
Yes, a professional corporation in Hawaii can convert to another type of business entity, but the proper procedures must be followed.
Where can you find more information about forming a professional corporation in Hawaii?
More information about forming a professional corporation in Hawaii can be found on the Hawaii Department of Commerce and Consumer Affairs website.

Also Read

How to Save Money While Forming Hawaii Professional Corporation

Firstly, conducting thorough research and comparisons is vital before diving into the formation process. Familiarize yourself with the legal requirements and available options, such as the specific licenses and permits needed for your profession. Understanding the regulations beforehand will allow you to assess the expenses involved and plan accordingly.

Although it may be tempting to seek the assistance of an attorney or professional services firm for guidance throughout the incorporation process, this may not always be necessary or cost-effective. Consider utilizing online resources and tutorials to get acquainted with the requirements and steps involved. Many official websites, legal blogs, and forums cater to entrepreneurs who are seeking guidance on forming a professional corporation, providing valuable insights and tips for a fraction of the cost.

Furthermore, instead of rushing into unnecessary expenses right from the start, consider prioritizing the essentials. By focusing on the core necessities of your corporation, you can save a significant amount of money. Investing in an efficient online presence, such as a well-designed website and social media accounts, should be high on your list, as these tools are not only cost-effective but also vital for attracting clients or customers.

Forming a professional corporation in Hawaii involves various expenses, including filing fees, licensing costs, and potential professional service fees for legal or financial advice. It’s important to set a realistic budget and identify areas where costs can be minimized. For instance, if you have the time and inclination, you can complete the paperwork and filing process yourself, saving on attorney or filing service fees. However, be mindful of the complexity of the legal procedures involved, as errors or omissions can lead to costly delays or complications.

Additionally, networking and seeking guidance from experienced professionals can provide invaluable insights while reducing expenses. Reach out to entrepreneurs who have already gone through the incorporation process to learn from their experiences. They could provide advice on streamlining the process, managing costs, or recommend reliable and budget-friendly service providers.

Lastly, continuous cost-saving measures should remain an important consideration even after the professional corporation is formed. Regularly review and reassess expenses, looking for areas ripe for optimization. Utilize technology to automate administrative tasks, manage finances effectively, and lower overhead. Exploring avenues for efficiency, such as shared office spaces or remote work arrangements, can significantly reduce operational costs.

Forming a professional corporation in Hawaii may seem like a costly endeavor, but savvy entrepreneurs can implement strategies to mitigate expenses without sacrificing quality. Thorough research, prioritizing essentials, setting budgets, networking, and ongoing cost management are some practical steps aspiring professionals can take. By staying informed, proactive, and resourceful, you can establish your professional corporation with financial prudence and confidence.

Conclusion

In conclusion, forming a professional corporation in Hawaii is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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