How to Start a Limited Liability Partnership in Hawaii | 2024 Guide

Start a Limited Liability Partnership in Hawaii

A Limited Liability Partnership (LLP) is a popular business structure offering the flexibility of a partnership while providing limited liability protection like starting an LLC in Hawaii. LLP structure is ideal for attorneys, accountants, and consultants. If you’re considering starting a Limited Liability Partnership in Hawaii, this comprehensive guide will walk you through the necessary steps, from researching and planning to ongoing compliance and reporting requirements.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your Hawaii LLP, all the steps in this article must guide you.

What is a Limited Liability Partnership?

Forming an LLP is like starting an LLC as well. However, there are differences in terms of it. A Limited Liability Partnership (LLP) is a type of business structure that combines elements of partnerships and corporations. It allows multiple individuals, known as partners, to jointly own and manage the business while providing limited liability protection to each partner. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.

LLPs are popular among professional service providers, such as lawyers, accountants, and consultants, as they allow for flexible management structures and profit-sharing arrangements. The partners in an LLP can directly manage the business, unlike forming a Corporation in Hawaii, where a board of directors typically handles the management.

Each partner’s liability is also limited to the extent of their investment, and they are not personally responsible for the negligence or misconduct of other partners. This is a key difference between an LLP and Hawaii General Partnership, where partners have unlimited liability for the partnership’s actions and other partners.

It is suggested that you speak with a legal professional before you begin setting up your limited liability partnership. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC rather than a limited liability partnership.

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Steps in Starting a Limited Liability Partnership in Hawaii

To form a limited liability partnership in Hawaii, you must consider following the below guidelines that include research and planning, choosing an LLP name, designating a Resident Agent, filing for Articles of Organization, drafting a partnership agreement, get an EIN, obtaining necessary licenses and permits, the opening of business bank account and maintain ongoing compliance and reporting requirements. 

Step 1: Research and Planning

Before forming an LLP in Hawaii, you must familiarize yourself with the state’s laws and regulations governing LLPs. Conduct thorough research to determine if an LLP is the right business structure for your needs, and create a detailed business plan outlining your goals, strategies, and financial projections.

Step 2: Choose an LLP Name

Selecting a unique and appropriate name for your LLP is crucial. First, check the availability of your desired LLP name with the Hawaii business registry. Ensure that your chosen name follows Hawaii naming guidelines and requirements, which typically include the use of “Limited Liability Partnership” or “LLP” in the name. You can register and reserve the name with Hawaii Secretary of State if desired.

Here are some guidelines you must follow while naming your LLP in Hawaii- 

  • Be distinguishable from other businesses registered in your state
  • Include the words “Limited Liability Partnership,” “LLP,” or a similar abbreviation.
  • Not include words that are restricted by your state
  • Ensure that your chosen name does not infringe on any existing trademarks or intellectual property rights.

However, to check the availability of your desired LLP name, you can also search the Hawaii Secretary of State business name database and Hawaii Business Name Search. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $10 and mail name reservation fee of $10. If your LLP plans to operate under a name other than its legal name, you may also need to register a fictitious or “Doing Business As” (DBA) name. 

The DBA filing can be done by several methods, online, fax, email, by mail, or in-person, which costs around $50. In addition, the DBA’s validity in Hawaii is five years, which you can file in the Hawaii Secretary of State.

You can check out how to file a DBA in Hawaii for clearer understanding.

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Step 3: Designate a Resident Agent

In Hawaii, you’ll need to designate a Resident Agent for your LLP. The Resident Agent is responsible for receiving the partnership’s important legal and tax documents. Choose a qualified individual or Hawaii Resident Agent Services to serve as your LLP’s Resident Agent, ensuring that they meet Hawaii requirements.

However, If you plan to become a Resident Agent of your own LLP, follow the steps below. Also, this applies a guideline in hiring your registered agent.

  • Research the requirements in the state where you want to offer your service. Each state has specific criteria, such as having a physical address and being available during normal business hours.
  • Obtain a physical address in the state(s) if needed.
  • Be familiar with the rules, regulations, and compliance requirements for businesses in your state.
  • Create a business plan outlining your services, pricing, and marketing strategy.
  • Register your business entity, such as an LLP, if required.

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Step 4: File a Certificate of Limited Liability Partnership

To officially form your LLP, you must file a Certificate of Limited Liability Partnership with the Hawaii Secretary of State. Obtain the necessary forms and provide the required information, such as the LLP name, principal office address, registered agent’s name and address, names and addresses of partners, and management structure. Pay the required filing fee and submit the completed forms to the Hawaii Secretary of State’s office.

Step 5: Draft a Partnership Agreement

A well-crafted partnership agreement is essential for governing your LLP and protecting the interests of its partners. This document should cover crucial provisions such as roles and responsibilities of partners, profit and loss sharing, decision-making processes, partner admission and withdrawal, and dispute resolution. Consider having the partnership agreement reviewed by an attorney to ensure its completeness and compliance with Hawaii laws.

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 in Hawaii might not be appropriate for your requirements.

Step 6: Get an EIN

Your LLP must obtain Hawaii Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The application of an EIN 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 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, you can benefit in several ways. It will give your LLP the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 7: Obtain the Necessary Licenses and Permits

Depending on your specific industry, you may need to obtain Hawaii Business Licenses and permits to operate your LLP. Research your business’s licensing and permit requirements and apply for them accordingly.

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

Step 8: Open a Business Bank Account and Obtain Insurance

Maintaining clear financial records is crucial for any business, so open a separate bank account for your Hawaii LLP. Additionally, obtain the necessary Hawaii Business Insurance, such as general liability insurance, professional liability insurance (if applicable), and workers’ compensation insurance (if you have employees). 

Check the Best Bank for Small Businesses in Hawaii to open a bank account.

Step 9: Maintain Compliance and Reporting Requirements

Stay informed about and comply with relevant laws and regulations to keep your LLP in good standing. File Annual Reports with the Hawaii Secretary of State (if required), maintain accurate financial and operational records, and file and pay required taxes at the federal, Hawaii, and local levels.

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Advantages of Forming a Limited Liability Partnership in Hawaii

While the specific advantages of forming an LLP in Hawaii can vary depending on the state’s unique laws and regulations, several public benefits associated with LLPs often apply across jurisdictions. Here are some advantages to consider when forming an LLP in Hawaii:

  • Limited Liability Protection: One of the main benefits of an LLP is its limited liability protection to its partners. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.
  • Pass-through Taxation: An LLP typically enjoys pass-through taxation, which means that the profits and losses of the business are passed through to the partners, who report them on their personal income tax returns. This avoids the double taxation often associated with corporations.
  • Flexible Management Structure: Unlike corporations requiring a board of directors, LLPs allow for a more flexible management structure. Partners in an LLP can directly manage the business and make decisions without needing a formal board.
  • Profit-sharing Flexibility: The partnership agreement can outline the distribution of profits and losses among partners, allowing for a customized profit-sharing arrangement based on the partners’ preferences and contributions.
  • Easier Formation and Compliance: Forming an LLP is generally less complicated and expensive than forming a corporation. Ongoing compliance requirements may also be less burdensome than other business entities, depending on the specific laws and regulations in Hawaii.
  • Professional Credibility: Forming an LLP can enhance your business’s professional credibility, as it demonstrates a commitment to a formal business structure and can offer reassurance to clients, customers, and potential investors.

Bear in mind that the advantages of forming an LLP in Hawaii may vary based on the specific laws and regulations governing LLPs. Researching the applicable laws and consulting with legal or financial advisors is essential to fully understand the benefits and requirements of forming an LLP in Hawaii.

Cost of Forming an LLP in Hawaii

The cost of forming an LLP in Hawaii may vary depending on the required filing fees and any additional services you may need. The filing fee for a Certificate of Limited Liability Partnership typically ranges from $50 to $200, depending on the state.

Can I Form an LLP in Other States?

You can form an LLP (Limited Liability Partnership) in other states. To form an LLP in a different state, you must follow that state’s specific registration requirements and filing procedures. This usually involves filing an application or certificate of registration, paying a registration fee, and obtaining any necessary permits or licenses.

Additionally, you may need to register your LLP as Hawaii Foreign LLC if you plan to conduct business in multiple states. It is advisable to consult with an attorney or a business consultant familiar with the laws and regulations of the state where you plan to form your LLP.

Can an LLP Need to Have One Owner?

An LLP (Limited Liability Partnership) cannot have just one owner. By definition, an LLP is a partnership, which means it requires at least two partners to be formed. If you want a business structure with limited liability protection and only one owner, you may consider forming a Single-Member LLC in Hawaii instead. An LLC can have one or more owners, known as members, and offers limited liability protection and pass-through taxation. The requirements for forming an LLC will vary by state, so consult your state’s laws and regulations.

FAQs

What is a limited liability partnership in Hawaii?
A limited liability partnership in Hawaii is a partnership that has multiple owners, but all of its owners are protected from personal liability for the company’s debts and obligations.
Who can start a limited liability partnership in Hawaii?
Any individual or group of individuals can start a limited liability partnership in Hawaii.
Do I need to register my limited liability partnership in Hawaii?
Yes, you need to register your limited liability partnership in Hawaii by filing the necessary formation documents with the Secretary of State.
What is the name reservation process in Hawaii for a limited liability partnership?
To reserve a name for your limited liability partnership in Hawaii, you’ll need to file a name reservation application with the Secretary of State and pay a fee.
What are the filing fees for forming a limited liability partnership in Hawaii?
The filing fee for forming a limited liability partnership in Hawaii is $50.
Can I form a limited liability partnership in Hawaii online?
Yes, you can form a limited liability partnership in Hawaii online through the Hawaii Business Express portal.
Do I need to appoint a registered agent for my limited liability partnership in Hawaii?
Yes, you are required to appoint a registered agent for your limited liability partnership in Hawaii.
Can the registered agent for my limited liability partnership in Hawaii be a member of the partnership?
Yes, a member of the partnership can be the registered agent for the limited liability partnership in Hawaii.
Can I change the name of my limited liability partnership in Hawaii?
Yes, you can change the name of your limited liability partnership in Hawaii by filing a certificate of amendment with the Secretary of State.
Can I have multiple limited liability partnerships under the same name in Hawaii?
No, you cannot have multiple limited liability partnerships under the same name in Hawaii.
How do I dissolved my limited liability partnership in Hawaii?
To dissolve your limited liability partnership in Hawaii, you will need to file a certificate of dissolution with the Secretary of State.
What happens if I fail to file the necessary paperwork to form my limited liability partnership in Hawaii?
If you fail to file the necessary paperwork to form your limited liability partnership in Hawaii, you will not be able to legally operate the business and may face fines and penalties.
What is the minimum number of partners required to form a limited liability partnership in Hawaii?
There is no minimum number of partners required to form a limited liability partnership in Hawaii.
Can non-residents start a limited liability partnership in Hawaii?
Yes, non-residents can start a limited liability partnership in Hawaii.
Am I required to have a physical office in Hawaii to form a limited liability partnership in the state?
No, you are not required to have a physical office in Hawaii to form a limited liability partnership in the state.
What is the tax structure for a limited liability partnership in Hawaii?
A limited liability partnership in Hawaii is not considered a taxable entity, so profits and losses of the partnership are passed through to each partner’s personal income tax returns.
How do I register for taxes as a limited liability partnership in Hawaii?
To register for taxes as a limited liability partnership in Hawaii, you’ll need to contact the Hawaii Department of Taxation and obtain a Hawaii Tax ID number.
Am I required to pay sales tax as a limited liability partnership in Hawaii?
Yes, you are required to pay sales tax as a limited liability partnership in Hawaii if you are selling tangible personal property in the state.
What is the average processing time for the registration of a limited liability partnership in Hawaii?
The average processing time for the registration of a limited liability partnership in Hawaii is approximately 5-7 business days.
Can I register for Hawaii tax exemptions as a limited liability partnership?
Yes, you can register for Hawaii tax exemptions as a limited liability partnership if you qualify for them.
Can I open a business bank account with the name of my limited liability partnership in Hawaii?
Yes, you can open a business bank account with the name of your limited liability partnership in Hawaii.
Is insurance required for my limited liability partnership in Hawaii?
No, insurance is not required for your limited liability partnership in Hawaii, but it is still recommended.
Can I transfer ownership of my limited liability partnership in Hawaii?
Yes, you can transfer ownership of your limited liability partnership in Hawaii, but you will need to follow the transfer procedures outlined in your partnership agreement.
Are there any ongoing compliance requirements for my limited liability partnership in Hawaii?
Yes, you will need to file an annual report with the Secretary of State and maintain your compliance with all other state requirements to keep your partnership in good standing.
Can I have a business office overseas for my limited liability partnership in Hawaii?
Yes, you can have a business office overseas for your limited liability partnership in Hawaii.
How long is the formation period for a limited liability partnership in Hawaii?
The formation period for a limited liability partnership in Hawaii can be anywhere from a few days to a few weeks, depending on the amount of paperwork and filings required.
What annual fees are there for a limited liability partnership in Hawaii?
The annual fee for filing an annual report for a limited liability partnership in Hawaii is $15.
Can we have an indefinite duration for our limited liability partnership in Hawaii?
Yes, you can have an indefinite duration for your limited liability partnership in Hawaii, unless specified otherwise in your partnership agreement.
How active must members of a limited liability partnership in Hawaii remain within the company?
There is no specified level of activity required for members of a limited liability partnership in Hawaii as long as it is defined in their partnership agreement.
What is a limited liability partnership?
A limited liability partnership (LLP) is a type of business structure where partners have limited liability protection similar to corporate shareholders.
How do I form a limited liability partnership in Hawaii?
To form an LLP in Hawaii, file a certificate of limited liability partnership with the Secretary of State.
What is the filing fee for a certificate of limited liability partnership in Hawaii?
Currently, the filing fee for a certificate of limited liability partnership in Hawaii is $50.
Do I need to have a registered agent in Hawaii for my LLP?
Yes, Hawaii law requires LLPs to have a registered agent who has a physical address in Hawaii.
What are the annual requirements for LLPs in Hawaii?
LLPs in Hawaii must file an annual report and pay a fee of $15.
Can I form an LLP by myself or do I need a partner?
You need at least two partners to form an LLP.
Do LLP partners pay Hawaii state income tax?
Yes, LLP partners are required to pay Hawaii state income tax.
What kind of liability protection do LLP partners have in Hawaii?
LLP partners in Hawaii have limited liability protection, meaning that they are not personally responsible for the debts or liabilities of the partnership.
Can an LLP be sued in Hawaii?
Yes, LLPs in Hawaii can be sued just like any other business entity.
Can LLP partners in Hawaii limit their liability for their own actions?
No, LLP partners in Hawaii are not protected from their own malpractice or negligence.
What is the difference between a member and a partner in an LLP in Hawaii?
In an LLP in Hawaii, partners are allowed to participate in management of the business entity, while members are strictly passive investors.
Can an LLC be converted to an LLP in Hawaii?
Yes, Hawaii law allows for the conversion of an LLC to an LLP.
Can I register an LLP in Hawaii if I don’t live there?
Yes, as long as you have a registered agent with a physical address in Hawaii.
What information is required on the certificate of limited liability partnership in Hawaii?
You will need to provide the partnership name, the names and addresses of partners, and the name and address of the registered agent.
Can a foreign LLP register to do business in Hawaii?
Yes, foreign LLPs can register to do business in Hawaii.
What annual fees are required for LLPs doing business in Hawaii?
LLPs doing business in Hawaii are required to file an annual report and pay a fee of $15.
Can an LLP protect me from professional malpractice in Hawaii?
LLPs in Hawaii can offer some protection from professional malpractice claims.
What obligations do partners have to each other in an LLP?
LLP partners have a fiduciary duty to act in the best interests of the partnership and each other.
Is a partnership agreement required for an LLP in Hawaii?
While not required, a partnership agreement is highly recommended for an LLP in Hawaii in order to establish proper procedures and guidelines.
Can an LLP in Hawaii have more than one office?
Yes, an LLP in Hawaii may have more than one office.
Can I operate more than one business under one LLP in Hawaii?
No, LLPs in Hawaii may only conduct business that falls under the original purpose for which it was created.
If I move out of Hawaii, can I take my LLP with me?
Yes, as long as you qualify to do business in your new state of residency and officially dissolve your LLP in Hawaii.
How long does it take to form an LLP in Hawaii?
Formation times can vary, but it usually takes around two weeks for the certificate of limited liability partnership to be processed in Hawaii.
Can an LLP in Hawaii sell ownership interests?
Yes, an LLP in Hawaii may sell its ownership interests to new partners.
What happens to an LLP in Hawaii if a partner dies or leaves?
The terms of the partnership agreement will determine what happens next. These provisions usually include buying out the interests of the departing partner.
Can an LLP in Hawaii terminate voluntarily?
Yes, an LLP in Hawaii may terminate volutarily with agreement from all partners.
What happens to an LLP in Hawaii if not all partners can agree to terminate it voluntarily?
In such cases, petitioning the courts for dissolution is the only solution within the state of Hawaii.
What happens to an LLP’s liabilities upon dissolution in Hawaii?
Upon dissolution, LLP members are still liable for the debts and obligations of the partnership, and they will remain so until all liabilities are resolved.
Can partnerships between professionals such as doctors operate as LLPs in Hawaii?
Yes, LLPs are a common business structure for such operators in Hawaii.

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Conclusion

Starting an LLP in Hawaii may seem daunting, but you can successfully establish and run your business with thorough research, planning, and compliance with legal requirements. Feel free to seek professional assistance from legal or financial advisors when needed to ensure your Limited Liability Partnership’s smooth operation and growth in Hawaii.

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