How to Create a General Partnership in Hawaii | A Complete Guide

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Create a General Partnership in Hawaii

If you would like to create a general partnership in Hawaii, there are a few guidelines that you should understand. A general partnership is one of the things that a businessman considers since it comprises two or more entities to carry on a trade or business. Each partner contributes money, property, labor, or special skills, and each partner shares in the profits and losses from the business. You can start an LLC in Hawaii for your general partnership to personally carry potentially unlimited liability.

Knowing about the general partnerships will benefit you and several partners, making you form your business properly. If you want to know more about the general partnership, follow our steps to Create a General Partnership in Hawaii.

Webinarcare Editorial Team will help you create with thorough research and market study. Before starting a general partnership in Hawaii, you must be guided by all the factors we have gathered in this article.

What is General Partnership in Hawaii?

A general partnership in Hawaii is a business structure where two or more individuals come together to establish a business and agree to share the profits, losses, and management responsibilities. Each partner contributes skills, resources, and capital to the business and makes decisions collaboratively. In a general partnership, partners have unlimited personal liability for the debts and obligations of the business, meaning their personal assets can be used to cover any debts or liabilities incurred by the partnership. This type of business structure is relatively simple to form and offers flexibility in decision-making and management but lacks the legal protection of limited liability offered by other structures like Hawaii Corporations or limited liability partnerships.

It is recommended that you consult to Hawaii Business Attorney before beginning the process of forming your general partnership. They will understand what is best for you and your company. To shield your personal assets from corporate debts, you can always Start an LLC in Hawaii rather than a general partnership.

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Example of a General Partnership

An example of a general partnership could be a small marketing agency created by two friends, Shane and Jane. Shane has a background in graphic design, while Jane has experience in digital marketing strategies. They decide to join forces and create a marketing agency that offers clients a combination of their expertise.

Shane and Jane contribute their skills, resources, and capital to start the business. They agree to share the profits, losses, and management responsibilities. Both partners actively participate in the agency’s day-to-day operations, making decisions and working with clients collaboratively.

In this general partnership, Shane and Jane have unlimited personal liability for any debts or obligations incurred by their marketing agency. If the agency faced financial difficulties, both partners’ personal assets could be used to cover the debts. However, the simplicity and flexibility of the general partnership structure allow them to manage and grow their business together easily.

Individuals looking to collaborate and numerous service providers have chosen general partnerships as their preferred business entity. That’s frequently because of its simple design, low price, and simplicity of setup. Some general partnership examples include: 

  • Providing Professional Services (architectural firms, medical clinics, etc.)
  • Selling goods at retail 
  • Opening a restaurant
  • Hawaii Business Consulting

General partnerships are also formed by partners who are spouses or other family members who want to operate a business together.

Steps in Creating a General Partnership in Hawaii

To create a general partnership in Hawaii, you must follow the guidelines below: choosing a business name, making a partnership agreement, requesting an EIN, getting a license and permit, and opening a bank account. 

Step 1: Choose a Business Name

Naming your business is one of the most important activities during the startup phase, especially if you will form an LLC in Hawaii. Your general partnership name serves as the foundation for your brand and is what clients use to connect you to the products or services you offer. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity without being hampered by irrelevant factors. 

For example, let’s assume the general partnership focuses on providing eco-friendly landscaping solutions. A potential name for this partnership could be “GreenScape Innovations.” This name highlights the business’s core values (eco-friendly) while also showcasing the industry (landscaping) and the innovative approach the partners aim to bring to the market.

For your to come up with this business name idea, here are some guidelines to consider when choosing a name for a general partnership:

  • Reflect on the Nature of the Business: Choose a name representing your products or services, and communicate your business’s essence to your target audience.
  • Keep it Simple and Memorable: A short, easy-to-pronounce name will be easier for customers to remember and share with others.
  • Make it Unique: Research the names of other businesses in your industry to ensure your chosen name stands out and does not infringe on any existing trademarks or copyrights.
  • Consider the Partners’ Names: Some general partnerships incorporate the partners’ names in the business name (e.g., Smith & Johnson Consulting). However, this approach may only be suitable for some businesses, especially if the names are difficult to pronounce or remember.
  • Test the Name: Share the potential name with friends, family, and potential clients to gather feedback and ensure it resonates with your target audience.
  • Check for Domain Availability: Research the availability of your chosen name as a domain name for your website and on social media platforms to ensure a consistent online presence.
  • Avoid Limiting your Business Scope: Choose a flexible name to accommodate future product or service changes. Avoid using specific locations, product names, or niche markets in the name if you plan to expand or diversify later.
  • Comply with Legal Requirements: Ensure the chosen name complies with any legal requirements or restrictions in your jurisdiction, such as avoiding misleading or offensive terms.
  • Consider Professional Input: Consult with Hawaii Business Attorney or trademark specialist to ensure your chosen name is legally sound and can be registered as a trademark if necessary.

By following these guidelines, you can choose a name for your general partnership that is memorable, unique, and effectively communicates your business’s essence.

In addition, most general partnership businesses use the last name of all of their partners.  For instance, if Jennie Kim and Lalisa Manoban enter business together, the partnership name is “Kim & Manoban” by default. However, if you would like to form a business name under something more appropriate, such as “EJI Design and Build,” then you’ll need to File a DBA in Hawaii with Hawaii Department of Commerce and Consumer Affairs.

Filing a DBA in Hawaii has several methods, online, fax, email, by mail, or in-person, which costs around $50. There is five years validity in renewing your DBA. 

In Hawaii, if you do not wish to file your general partnership business right away but want to hold the name that you have decided on, then you can reserve your business name for 120 days. You must file a name reservation application in the Hawaii Department of Commerce and Consumer Affairs to keep the name. 

Step 2: Make a Partnership Agreement

After you have chosen a business name for your general partnership, the next step would be making a partnership agreement in Hawaii. A partnership agreement is a crucial document that outlines the terms and conditions governing a partnership. It helps to establish a clear understanding of each partner’s roles, responsibilities, and expectations and prevents disputes and misunderstandings.

Additionally, it discusses business management guidelines and potential contingencies that may arise, such as a partner’s passing or a partner’s decision to leave the partnership.

A partnership agreement should include the following:

  • Business name
  • Description of the business
  • Contact information of the business and its owners

Ownership of all business partners, decision-making, capital contribution, profits and distribution, death and disability, and withdrawal and addition of partners is one of the key factors to consider when forming or creating a partnership agreement. In this way, all business partners will understand what this is all about and how to proceed if the mentioned scenarios happen. 

Without a partnership agreement, your company will often be subject to the general partnership default laws of Hawaii. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Hawaii

After completing the partnership agreement, you should get or seek an Employer Identification Number (EIN) in Hawaii. An EIN will serve as your general partnership’s tax identification number. The Internal Revenue Service can provide you with an EIN. (IRS). It is a nine-digit number comparable to your Social Security number. EIN, on the other hand, is distinct from SSN. It is exclusively used for business-related operations, such as filing general taxes. The form must be filled out and sent to the IRS website. Obtaining an EIN cost between $30 and $280. 

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-4PDF application to the appropriate fax number), after ensuring that 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.

You can benefit in various ways once you obtain your EIN number. It will give your general partnership the final advantage to operate at its full potential without legal or court problems.

Step 4: Get a License and a Permit

You must have Hawaii Business License before your general partnership business operates. A business license is a document granted by a government agency that allows you to operate your business in the territory governed by that agency.

To legally operate your partnership, you’ll need a business license. You may need more than one license in Hawaii. Numerous general partnership licenses need to be filed and renewed regularly.

In Hawaii, the business license fee costs about $50 – $300.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in Hawaii.

Step 5: Open a Bank Account

After filing and receiving your general partnership license, you should open a bank account for yourself, your clients, and your employees.

A US bank account may make your business dealings in Hawaii easier because it increases your company’s authenticity and profitability. Most banks require an EIN for firms other than sole proprietorships to open a business account. Keeping separate finances also prevents you from combining personal and professional finances.

If you would like to open a bank account in Hawaii, check out the Best Bank for Hawaii Small Business.

Pros and Cons of a General Partnership in Hawaii

In forming a general partnership in Hawaii, there are pros and cons that you may experience. I will list the pros and cons for you to understand why and how a general partnership is crucial. 

Pros of Forming a General Partnership in Hawaii

  • Easy and Inexpensive to Form: General partnerships are relatively simple to establish, requiring minimal paperwork and registration costs compared to other business structures like corporations or limited liability companies.
  • Decision-Making: Partners can pool their skills, knowledge, and resources, leading to more efficient and effective decision-making and business operations.
  • Flexibility: General partnerships offer flexibility in management structure, profit distribution, and decision-making processes, allowing partners to customize their business relationships to best suit their needs.
  • Tax Benefits: In most jurisdictions, general partnerships are not taxed as separate entities. Instead, profits and losses are passed through to the partners, who report them on their income tax returns. This avoids the issue of double taxation that affects corporations.
  • Greater Access to Capital: With multiple partners, a general partnership may have increased access to capital and resources compared to a sole proprietorship.

Cons of Forming a General Partnership in Hawaii

  • Unlimited Personal Liability: In a general partnership, all partners have unlimited personal liability for the debts and obligations of the business. This means that each partner’s personal assets can be used to cover any debts incurred by the partnership, which can be a significant risk.
  • Potential for Conflicts: As partners share management and decision-making responsibilities, disagreements or conflicts can arise, negatively impacting the business’s operations and success.
  • Limited Lifespan: A general partnership’s existence is often tied to the lives of its partners. The partnership may be dissolved if a partner withdraws, becomes incapacitated, or dies, potentially leading to instability and uncertainty.
  • Difficulty in Raising Capital: While general partnerships may have more access to capital than sole proprietorships, they may still need help raising funds compared to corporations or limited liability companies, as investors may be more hesitant to invest in a business with unlimited personal liability.
  • Lack of Legal Distinction: Unlike corporations or limited liability companies, general partnerships do not have a separate legal identity from their partners, limiting the partnership’s ability to enter into contracts or own property in its name.

When considering a general partnership, weighing the pros and cons and assessing whether this business structure aligns with your goals, risk tolerance, and desired level of management involvement is essential.

Maintain Business License in Hawaii

You must maintain or renew your business license regularly now that you have established your general partnership. Make time at least once a year to check the status of your licenses. Then you will get everything important. You can deal with any problems that arise. In Hawaii, the business license fee ranges from $50 – $300, and varies by jurisdiction and license type.

Pay Your Taxes in Hawaii

Even if you have established your general partnership in Hawaii, pay your taxes and keep everything up to date so you won’t pay any penalty. 

Hawaii taxes information will help you with what to pay before or during the operation of your professional corporation. You can check out the Hawaii Small Business Taxes to further understand why you must pay your taxes on time. 

Can I Convert My General Partnership Into Another Business Entity in Hawaii?

By following the appropriate state procedures, you can convert your general partnership into another business entity, such as Hawaii Corporation converting to an LLC; or Sole Proprietorship to Hawaii LLC. This may involve filing conversion documents with the Hawaii Secretary of State’s office and paying any required fees.

FAQs

What is a general partnership in Hawaii?
A general partnership in Hawaii is a business structure where two or more people join together to own and run a business.
How do I form a general partnership in Hawaii?
To form a general partnership in Hawaii, you need to file a registration form with the Business Registration Division of the Department of Commerce and Consumer Affairs of Hawaii.
Can a general partnership in Hawaii be owned by just one person?
No, a general partnership in Hawaii must have at least two partners.
How much does it cost to register a general partnership in Hawaii?
The registration fee for a general partnership in Hawaii is $25.
Are there any annual fees for maintaining a general partnership in Hawaii?
Yes, a general partnership in Hawaii must file an annual report with the Business Registration Division and pay a fee of $15.
Can non-US citizens form a general partnership in Hawaii?
Yes, non-US citizens can form a general partnership in Hawaii.
What type of businesses can form a general partnership in Hawaii?
Any type of business can form a general partnership in Hawaii, as long as it has at least two partners.
Does a general partnership in Hawaii need a business license?
Yes, a general partnership in Hawaii needs to obtain a business license from the Department of Commerce and Consumer Affairs.
What are the advantages of a general partnership in Hawaii?
The advantages of a general partnership in Hawaii includes sharing of profits and losses, flexibility in ownership and management, and tax benefits.
Who owns the assets and liabilities of a general partnership in Hawaii?
The assets and liabilities of a general partnership in Hawaii are owned jointly by all partners.
Do all partners in a general partnership in Hawaii have equal voting rights?
Yes, all partners in a general partnership in Hawaii have equal voting rights, unless otherwise specified in the partnership agreement.
What happens if one partner dies or leaves the general partnership in Hawaii?
The general partnership in Hawaii will dissolve if one partner dies or leaves, unless the partnership agreement specifies otherwise.
Does a general partnership in Hawaii require a partnership agreement?
No, a partnership agreement is not legally required for a general partnership in Hawaii, but it is recommended.
Is a general partnership in Hawaii subjected to income tax?
No, a general partnership in Hawaii is not subject to income tax. Instead, the profits and losses are reported on each partner’s individual tax return.
Does a general partnership in Hawaii need to have regular meetings?
No, a general partnership in Hawaii is not required to have regular meetings, but it is recommended to have regular communication between partners.
Can partners in a general partnership in Hawaii contribute different amounts of capital?
Yes, partners in a general partnership in Hawaii can contribute different amounts of capital.
Can partners in a general partnership in Hawaii have different roles and responsibilities?
Yes, partners in a general partnership in Hawaii can have different roles and responsibilities, as defined in the partnership agreement.
Can partners in a general partnership in Hawaii be held personally liable for the business’s debts?
Yes, partners in a general partnership in Hawaii can be held personally liable for the business’s debts.
Can a partner in a general partnership in Hawaii transfer their ownership interest to someone else?
Yes, a partner in a general partnership in Hawaii can transfer their ownership interest to someone else with the approval of the other partners.
Can a general partnership in Hawaii have a trade name?
Yes, a general partnership in Hawaii can have a trade name, as long as it is registered with the Department of Commerce and Consumer Affairs.
Is it necessary for all partners in a general partnership in Hawaii to be involved in the day-to-day operations of the business?
No, it is not necessary for all partners in a general partnership in Hawaii to be involved in the day-to-day operations of the business.
How are disputes among partners in a general partnership in Hawaii resolved?
Disputes among partners in a general partnership in Hawaii are typically resolved through mediation or arbitration, as laid out in the partnership agreement.
Can a general partnership in Hawaii be registered online?
Yes, a general partnership in Hawaii can be registered online through the Business Registration Division’s website.
What are the requirements for the name of a general partnership in Hawaii?
The name of a general partnership in Hawaii must include the words “general” or “partnership” and cannot be identical or substantially similar to any existing business names in Hawaii.
Can a general partnership in Hawaii change its name?
Yes, a general partnership in Hawaii can change its name by filing a name change application with the Business Registration Division.
Is it possible to convert a general partnership in Hawaii into another business structure, such as a corporation or LLC?
Yes, it is possible to convert a general partnership in Hawaii into another business structure by filing the necessary forms with the Business Registration Division.
Can I still register a general partnership in Hawaii during COVID-19?
Yes, registrations for a general partnership in Hawaii are still being accepted during COVID-19 via mail and online services.
What is the processing time for registering a general partnership in Hawaii?
The processing time for registering a general partnership in Hawaii may take a few weeks, but expedited processing is available for an additional fee.
How many partners can there be in a general partnership in Hawaii?
There can be two or more partners in a general partnership in Hawaii.
Do the partners in a general partnership in Hawaii need to file paperwork with the state?
No, partners in a general partnership in Hawaii do not need to file paperwork with the state. However, there are certain requirements and forms that need to be filed for tax and legal purposes.
Do general partnerships need to be registered with the state of Hawaii?
No, general partnerships do not need to be registered with the state of Hawaii.
How do I register my general partnership in Hawaii?
You don’t need to register your general partnership in Hawaii.
Do I need a partnership agreement in Hawaii?
While you’re not required to have a partnership agreement in Hawaii, it’s highly recommended that you create one to clearly define the responsibilities and rights of each partner.
Can a general partnership in Hawaii be sued?
Yes, a general partnership can be sued in Hawaii.
Is a general partnership in Hawaii liable for the actions of their partners?
Yes, each partner in a general partnership is liable for the other partner’s actions, regardless of whether they were aware of them or not.
How do I end a general partnership in Hawaii?
You can end a general partnership in Hawaii by dissolving it. This can be done through a written agreement or a court order.
Do I need to file for dissolution with the state of Hawaii?
No, you don’t need to file for dissolution with the state of Hawaii.
How are taxes handled in a general partnership in Hawaii?
General partnerships in Hawaii are considered “pass-through” entities, which means that the partners report their share of the profits or losses on their individual tax returns.
Are there any taxes that the partnership needs to pay?
No, general partnerships in Hawaii don’t need to pay taxes.
How do I get a tax ID number for my general partnership in Hawaii?
You can get a tax ID number for your general partnership in Hawaii by applying online or mailing in Form SS-4 to the IRS.
What do I need to do if I want to change the name of my general partnership in Hawaii?
You can change the name of your general partnership in Hawaii by filing a Certificate of Amendment with the state.
Can a general partnership in Hawaii hire employees?
Yes, a general partnership in Hawaii can hire employees.
Are the partners in a general partnership in Hawaii considered employees?
No, partners in a general partnership in Hawaii are not considered employees.
Do general partners in Hawaii have limited liability?
No, general partners in Hawaii do not have limited liability.
What happens if one partner decides to leave the general partnership in Hawaii?
If one partner decides to leave the general partnership in Hawaii, the remaining partners must decide whether to terminate the partnership or continue operating it.
How are profits and losses divided in a general partnership in Hawaii?
Profits and losses in a general partnership in Hawaii are divided equally among the partners, unless there is a partnership agreement that specifies a different division.
Are general partnerships in Hawaii subject to any specific laws or regulations?
General partnerships in Hawaii are subject to the Uniform Partnership Act, which governs the formation and operation of partnerships.
Can a general partnership in Hawaii be owned by a corporation?
Yes, a general partnership in Hawaii can be owned by a corporation.
Can a general partnership in Hawaii be owned by a foreign national?
Yes, a general partnership in Hawaii can be owned by a foreign national.
What is a registered agent in Hawaii?
A registered agent in Hawaii is a person or company designated to receive legal documents and other important communications on behalf of a business.
Does a general partnership in Hawaii need a registered agent?
Yes, a general partnership in Hawaii needs a registered agent.
Can a partner in a general partnership in Hawaii own other businesses?
Yes, a partner in a general partnership in Hawaii can own other businesses.
Can a general partnership in Hawaii operate in other states?
Yes, a general partnership in Hawaii can operate in other states.
Is maintaining a business license in Hawaii required in order to operate a general partnership?
Yes, maintaining a business license in Hawaii is required in order to operate a general partnership.
What are the legal liabilities involved in creating a general partnership in Hawaii?
Partners in a general partnership in Hawaii have unlimited personal liability for the actions of the business.
Can a general partnership in Hawaii own real estate?
Yes, a general partnership in Hawaii can own real estate.

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Conclusion

A general partnership can be viable for individuals looking to establish a business in Hawaii with shared decision-making, management responsibilities, and profits. This type of business structure is relatively simple to establish and offers flexibility in operations. However, it is essential for potential partners to carefully consider the unlimited personal liability aspect of general partnerships, which means that each partner’s personal assets could be at risk to cover any debts or obligations incurred by the business. Before forming a general partnership, the partners should have a clear and well-drafted partnership agreement that outlines the roles, responsibilities, profit-sharing, and dispute-resolution mechanisms to ensure a smooth working relationship and minimize potential conflicts. Partners should also explore other business structures, like limited liability partnerships or corporations, to determine the best fit for their needs and goals.

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