How to Start a Limited Partnership in Hawaii | A Step-by-Step Guide

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Start a Limited Partnership in Hawaii

A limited partnership is an attractive business structure for those who want to start an LLC in Hawaii. It combines the best of both worlds, offering limited liability protection for limited partners and the ability to manage the business for general partners actively. This article will outline the steps on How to Start a Limited Partnership in Hawaii, covering everything from researching and preparing to registering your limited partnership with the Hawaii government and beyond.

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

Steps in Starting a Limited Partnership in Hawaii

What is a Limited Partnership?

A Limited Partnership (LP) is a business structure comprising two types of partners: general and limited. It is a legal entity distinct from its partners and combines certain features of partnerships and corporations.

General partners are responsible for the day-to-day management of the business, make decisions on behalf of the partnership, and have unlimited liability for the partnership’s debts and obligations. This means their assets can be seized to cover the partnership’s liabilities if necessary.

Limited partners, on the other hand, are passive investors who do not participate in business management. They provide capital to the partnership and receive a share of the profits in return. Their liability is limited to the amount they have invested in the partnership, meaning that their assets are generally not at risk for the partnership’s debts beyond their investment.

It is suggested that you speak with a legal professional before you begin setting up your limited partnership in Hawaii. 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 partnership.

– WEBINARCARE EDITORIAL TEAM

Steps in Starting a Limited Partnership in Hawaii

To form a limited partnership in Hawaii, you must consider following the below guidelines that, include research and preparation, establishing the limited partnership structure, drafting the limited partnership agreement, registering the limited partnership, complying with additional Hawaii requirements, and ongoing management and compliance and reporting requirements. 

Step 1: Research and Preparation

Before starting a limited partnership in Hawaii, you must familiarize yourself with this business structure’s laws and regulations. In the United States, limited partnerships are primarily governed by the Uniform Limited Partnership Act (ULPA). However, each state has its laws and regulations, so it’s essential to know the specific rules that apply in Hawaii.

While researching, consider whether a limited partnership is the most suitable structure for your business needs. Limited partnerships are ideal for businesses with one or more passive investors who want to avoid taking on the business’s day-to-day responsibilities. Consider alternative structures like Hawaii Corporations if a limited partnership doesn’t seem right.

Step 2: Establishing The Limited Partnership Structure

Once you’ve determined that a limited partnership is the right choice for your business, the next step is to establish the structure of your partnership. This involves choosing a name, hiring a Resident Agent, and determining the roles of the partners.

Choose a Name for the Limited Partnership

The name you choose for your limited partnership is essential to your business identity. In Hawaii, there are specific requirements that your limited partnership name must meet, such as including the words “Limited Partnership” or the abbreviation “LP.” Before settling on a name, conduct Hawaii Business Name Search through the Hawaii Business Express to ensure the name you’ve chosen is available and not already used by another business.

Naming requirements for a Limited Partnership in Hawaii may include:

  • The name must be unique and distinguishable from other business entities registered in the state.
  • The name must include the words “Limited Partnership,” “L.P.,” or “LP.”
  • Certain words and phrases may be restricted or require additional approval from Hawaii.

If the limited partnership 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 corporation 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 Hawaii Secretary of State.

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

Hire a Resident Agent

A Resident Agent is a person or entity responsible for receiving legal documents and official notices on behalf of your LP. In Hawaii, your Resident Agent must:

  • Be a resident of Hawaii or a business entity authorized to do business in the state
  • Have a physical address in Hawaii (P.O. boxes are not acceptable)

Choosing a reliable and responsible Resident Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. 

You can serve as your own Resident Agent or appoint a friend or family member, or hire a professional Hawaii Resident Agent Services. With that, we reviewed some of the best-registered agent services and provided features as an add-on with their formation packages for you to check out.

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Determine the Roles of the Partners

A limited partnership consists of two types of partners: general and limited. General partners are responsible for the day-to-day management of the business and have unlimited liability for the partnership’s debts and obligations. Limited partners, on the other hand, are passive investors who don’t participate in the management of the business and have limited liability up to the amount they’ve invested in the partnership.

As you structure your partnership, carefully consider who will take on the roles of general and limited partners. Remember that general partners will have more responsibility and potential liability, so choose those individuals wisely.

Step 3: Drafting the Limited Partnership Agreement

With the partnership structure established, the next step is to draft a limited partnership agreement. This document sets forth the partnership’s terms and conditions and should be carefully crafted to ensure it meets all legal requirements in Hawaii.

Include Essential Elements

A well-drafted limited partnership agreement should include the following essential elements:

  •  Name of the limited partnership
  •  Purpose of the limited partnership
  •  Duration of the limited partnership
  •  Names and addresses of general and limited partners
  •  Capital contributions of each partner
  •  Allocation of profits and losses
  •  Management and decision-making structure
  •  Process for admitting new partners

Address Optional Elements

In addition to the essential elements, it’s a good idea to address the following optional elements in your limited partnership agreement:

  •   Transfer of partnership interests
  •   Withdrawal or removal of partners
  •   Dissolution and winding up the process

To ensure your limited partnership agreement is legally sound and compliant with Hawaii laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Hawaii with experience in limited partnerships.

Step 4: Registering the Limited Partnership

Once your limited partnership agreement is in place, the next step is to register your limited partnership with the Hawaii government. This process typically involves filing a Certificate of Limited Partnership with the Hawaii Secretary of State’s office.

Prepare and File the Certificate of Limited Partnership

To file the Certificate of Limited Partnership, complete the required forms, which can typically be found on the Hawaii Secretary of State. Include all necessary information and signatures, and pay the filing fee of $50.

Obtain an Employer Identification Number (EIN) from the IRS

After registering your limited partnership with the Hawaii government, you’ll need to obtain Hawaii Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is used to identify your partnership for tax purposes and is required for filing federal and state tax returns.

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.

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Register For Hawaii Taxes

Depending on your business activities and location, you may need to register for certain Hawaii taxes. Check with the Hawaii Department of Taxation or a tax professional to determine which taxes apply to your limited partnership.

Step 5: Complying With Additional Hawaii Requirements

In addition to registering your limited partnership with the Hawaii government, there may be other requirements you need to meet to operate your business legally. These may include obtaining business licenses or permits, filing annual reports with the Hawaii Secretary of State, and maintaining proper records and documentation.

Obtain Any Necessary Business Licenses or Permits.

Depending on the nature of your business, you may need to obtain various licenses or permits from state or local authorities. Check with the Hawaii Department of Business and Industry or a licensing professional to determine which licenses and permits apply to your limited partnership. However, in Hawaii, the costs of Hawaii Business Licenses range from $50 – $300.

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

File Annual Reports 

Hawaii require limited partnerships to file Annual Reports with the Hawaii Secretary of State’s office. These reports typically include updated information about the partnership, such as the names and addresses of partners and any changes to the partnership agreement. 

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Maintain Proper Records and Documentation

As a limited partnership, it’s essential to maintain proper records and documentation, including copies of your limited partnership agreement, tax returns, financial statements, and any other relevant documents. These records should be kept in a safe and accessible location and may be required in the event of an audit or legal dispute.

Step 6: Ongoing Management and Compliance

Starting a limited partnership in Hawaii is the beginning. To ensure the ongoing success of your business, it’s crucial to stay on top of management and compliance tasks. It is better to have regular meetings with your partners to ensure everyone is on the same page regarding the direction and performance of your business. These meetings can also help identify and address issues or concerns before they become more significant problems.

As a limited partnership, you must file annual tax returns and pay any required taxes at the federal and state levels. Consult with a tax professional to ensure you comply with all tax laws and deadlines.

Advantages of Limited Partnerships in Hawaii

Here are some key advantages of forming a limited partnership in Hawaii:

  • Limited Liability for Limited Partners: One of the main benefits of a limited partnership is that limited partners enjoy limited liability protection. This means their assets are generally not at risk for the partnership’s debts and obligations beyond their investment in the partnership. This limited liability can be attractive for investors who want to participate in a business venture without taking on the same level of risk as general partners.
  • Pass-through Taxation: Limited partnerships are typically subject to pass-through taxation, meaning the partnership’s profits and losses flow to the partners’ individual tax returns. This structure avoids double taxation, as the partnership is generally not subject to federal income tax. Instead, each partner is responsible for paying taxes on their share of the partnership’s income at their individual tax rate.
  • Flexibility: A limited partnership allows for flexibility in the management structure. General partners have the authority to make decisions and manage the business, while limited partners can remain passive investors. This division of responsibilities and decision-making power can appeal to both parties. It allows general partners to maintain control over the business operations and limited partners to invest without being involved in day-to-day management.
  • Ease of Formation: A limited partnership is typically less complicated and expensive than a corporation. Limited partnerships generally require filing a Certificate of Limited Partnership with the state and creating a limited partnership agreement, which is less complex than the documentation required for a corporation.
  • Attracting Capital: Limited partnerships can attract capital from investors who want to participate in a business venture without taking on the responsibilities and risks of being a general partner. This structure can help businesses secure funding while allowing limited partners to benefit from the partnership’s profits.
  • Continuity of the Partnership: In Hawaii, limited partnerships can continue to exist even if one of the general partners dies, withdraws, or is replaced, as long as there is at least one remaining general partner. This continuity can provide stability and help ensure the ongoing success of the partnership.

Can a Foreign Limited Partnership Do Business in Hawaii?

Yes, a foreign Limited Partnership can do business in Hawaii by registering as a foreign LP with the Hawaii Secretary of State or appropriate state agency. The foreign LP must provide a certificate of good standing from its home state and pay any required registration fees.

What are the Tax Implications of Forming a Limited Partnership in Hawaii?

Limited Partnerships are generally considered pass-through entities for tax purposes, meaning that the profits and losses of the business are passed through to the individual partners, who report them on their personal income tax returns. However, specific tax implications may vary depending on the state and the nature of your business. It is recommended to consult with a tax professional to determine your specific tax obligations.

FAQs

What is a limited partnership in Hawaii?
A limited partnership in Hawaii is a type of business structure that consists of at least one general partner who manages the business and at least one limited partner who provides financing but does not take part in the management.
How do I form a limited partnership in Hawaii?
To form a limited partnership in Hawaii, you need to file a certificate of limited partnership with the Department of Commerce and Consumer Affairs Business Registration Division.
Can foreigners form a limited partnership in Hawaii?
Yes, foreigners can form a limited partnership in Hawaii.
What are the requirements for being a general partner in a limited partnership in Hawaii?
The requirements for being a general partner in a limited partnership in Hawaii are the same as those for any other general partner, including having management responsibility and unlimited liability.
What are the requirements for being a limited partner in a limited partnership in Hawaii?
The requirements for being a limited partner in a limited partnership in Hawaii are limited to the contribution of capital or property and limited liability.
How is a limited partnership in Hawaii taxed?
A limited partnership in Hawaii is taxed like any other partnership, with income and losses flowing through to the partners.
Can a limited partnership in Hawaii be converted to an LLC?
Yes, a limited partnership in Hawaii can be converted to an LLC.
What are the advantages of a limited partnership in Hawaii compared to a sole proprietorship?
A limited partnership in Hawaii offers limited liability protection, tax flexibility, and easier access to capital than a sole proprietorship.
Can a limited partnership in Hawaii be dissolved?
Yes, a limited partnership in Hawaii can be dissolved by the vote of the partners or by a court order.
What happens if a limited partnership in Hawaii is dissolved?
If a limited partnership in Hawaii is dissolved, the assets will be liquidated and the proceeds will be used to pay off any debts and liabilities before the remaining equity is distributed to the partners.
What are the filing fees for a limited partnership in Hawaii?
The filing fees for a limited partnership in Hawaii vary depending on the type of business and the size of the partnership.
Are there any residency requirements for forming a limited partnership in Hawaii?
There are no residency requirements for forming a limited partnership in Hawaii.
How long does it take to form a limited partnership in Hawaii?
The time it takes to form a limited partnership in Hawaii can vary depending on the complexity of the business structure and the workload of the Business Registration Division.
Can a limited partnership in Hawaii be owned by a trust?
Yes, a limited partnership in Hawaii can be owned by a trust.
What is the difference between a general partner and a limited partner in a limited partnership in Hawaii?
The main difference between a general partner and a limited partner in a limited partnership in Hawaii is that a general partner has unlimited liability while a limited partner has limited liability.
Can a limited partner in a limited partnership in Hawaii also be a general partner?
No, a limited partner in a limited partnership in Hawaii cannot also be a general partner.
What is the renewal process for a limited partnership in Hawaii?
The renewal process for a limited partnership in Hawaii involves filing an annual report and paying a fee.
Who is responsible for managing a limited partnership in Hawaii?
A general partner is responsible for managing a limited partnership in Hawaii.
Can a limited partnership in Hawaii have more than one general partner?
Yes, a limited partnership in Hawaii can have more than one general partner.
Do I need a lawyer to form a limited partnership in Hawaii?
No, you do not need a lawyer to form a limited partnership in Hawaii, but it may be helpful to consult with one.
Can I include foreign assets in a limited partnership in Hawaii?
Yes, you can include foreign assets in a limited partnership in Hawaii.
What are the main features of a limited partnership in Hawaii operating agreement?
The main features of a limited partnership in Hawaii operating agreement can vary but should include how profits and losses are distributed, what percentage of control each partner has, and the exit strategy for the partners.
How do I register for state taxes as a limited partnership in Hawaii?
To register for state taxes as a limited partnership in Hawaii, you need to fill out a tax registration application with the Hawaii Department of Taxation.
Can a limited partnership in Hawaii have only one limited partner?
No, a limited partnership in Hawaii must have at least two partners, including one general partner and one limited partner.
Do I need insurance as a limited partnership in Hawaii?
Depending on the nature of your business, you may need insurance as a limited partnership in Hawaii, such as general liability insurance or workers’ compensation insurance.
Are there any special requirements for raising capital as a limited partnership in Hawaii?
There are no special requirements for raising capital as a limited partnership in Hawaii, but it is always a good idea to consult with a financial advisor or attorney.
Can a limited partnership in Hawaii operate in other states?
Yes, a limited partnership in Hawaii can operate in other states, as long as it meets the requirements for doing business in each state.
What is the liability protection for a limited partner in a limited partnership in Hawaii?
A limited partner in a limited partnership in Hawaii has limited liability, which means their personal assets are protected from the business’s debts and liabilities.
How can I find a name for my limited partnership in Hawaii?
To find a name for your limited partnership in Hawaii, you can check the availability of the name through the Business Registration Division and must ensure that the LLC name includes “limited partnership” or “LP”.
What is the most common reason for forming a limited partnership in Hawaii?
Typically, a person will form a limited partnership in Hawaii to share the risk of a business venture with someone else while ensuring that their financial exposure is limited to the amount they have invested.
Can foreign nationals form a limited partnership in Hawaii?
Yes, foreign nationals can form a limited partnership in Hawaii as long as at least one of the partners is a U.S. citizen or resident alien.
Do limited partners get paid in a limited partnership in Hawaii?
Usually, limited partners in a limited partnership in Hawaii receive a share of the profits, but typically do not have any decision-making power in the partnership.
What is required to maintain a limited partnership in Hawaii?
In Hawaii, a limited partnership must file an annual report and registered agent and pay a yearly fee.
What are the tax implications of forming a limited partnership in Hawaii?
The tax implications of forming a limited partnership in Hawaii depend on the state and federal tax laws governing partnerships and the status of each partner’s tax liability.
What are the legal implications of forming a limited partnership in Hawaii?
The legal implications of forming a limited partnership in Hawaii may include increased liability protection for the general partner, provision of a basis for obtaining financing needed to carry out the business, and establishing common ownership.
Can a limited partnership in Hawaii accomplish both a business objective and a social objective?
Yes, a limited partnership in Hawaii can pursue both business objectives and social goals, such as environmental preservation, social justice, and community development.
Does Hawaii require any operating agreement for a limited partnership to have?
It is not required by Hawaiian law, but it’s advisable that the partners in the limited partnership draft an Operating Agreement.
What is the general liability of a limited partner in Hawaii?
Limited partners are only liable to the extent of their contributed capital and have limited control.
What is the initial cost to form a limited partnership in Hawaii?
The initial cost of forming a limited partnership in Hawaii varies based on the specific filings and services required for the specific limited partnership.
Can a limited partnership have both a corporation and an individual as partners?
Absolutely! A Hawaii limited partnership may have any combination of General Partners or Limited Partners that are corporations or individuals, provided the statutory restrictions are complied with.
How is management handled in a limited partnership in Hawaii?
In a limited partnership in Hawaii, the General Partner handles management, and limited partners have certain controls provided by the Local Act and Operating Agreement.
What is the difference between a limited partner and a general partner in Hawaii?
A limited partner in Hawaii is passive and without any decision-making control in the partnership, while a general partner actively supports the business and has full liability.
What is the expected time required to form a limited partnership in Hawaii?
It typically takes two to three weeks to form a limited partnership in Hawaii.
What are the advantages of starting a limited partnership in Hawaii?
The advantages of starting a limited partnership in Hawaii are risk limitation and securing funds quickly and easily.
What ongoing filing and qualification requirements apply in Hawaii?
Ongoing filing requires the annual report which includes these files such as Hawaii Cost Information Relations. After receiving notice that an LP has filed its annual report or other annual requirement with the Department, if you have any inquiry questions contact the Hawaii Department’a Business Registration.
Does a limited partnership in Hawaii require a retail license?
A Hawaii limited partnership will need a retail license if it engages in retail activities for business.
Can a limited partnership in Hawaii buy and sell property?
Yes, a limited partnership in Hawaii has the right to buy and sell property with approval from the General Partner.
How is an LP registered for state taxes in Hawaii?
Hawaii limited partnerships meet taxable and nontaxable void period situations, with requirements for filing Hawaii Taxation e/tailing system for registering tax compliance.
Does Hawaii tax capital gains generated by a limited partnership?
Yes, Hawaii taxes capital gains generated by a limited partnership in Hawaii.
What is the difference between a limited partnership and a general contractor?
A general contractor in Hawaii is an easier structure that provides more legal control once it is allowed by law. Limited Partnership permits custom projects to be applied and there are different hierarchal role-based issues to manage.
What is/are the most frequent reasons when a limited partnership fails in HI?
Frequently it is when a limited partnership fails due to poor financial management, an excess of unexpected risk without voting stages, or no sufficient support by the General Partner such as do informal responsibilities in contrast to legal requirements.
What information must a limited partnership release publicly in Hawaii?
In Hawaii, a limited partnership must report annually many business and financial-related transactions. It will cost chargeable fees may apply to support media.
What type of businesses is required to have a license in HI?
Businesses laboring meat inspector rental landlords require a license in Hawaii and can require certification of their functions if required.
How long can a partnership exist in Hawaii?
Hawaii limited partnerships exist for the period described in the agreement or until partners collectively agree to dissolution.
What is an EIN, and does my limited partnership in Hawaii need one?
An EIN is a Federal Employment Identification Number, and a limited partnership doing business and/or expecting at least one employee to work for the business in Hawaii must obtain an EIN from the Internal Revenue Service.
Can partners in a Hawaii limited partnership run another business while managing the limited partnership as well?
Yes, partners may run another separate business in Hawaii as a Limited Partnership because it is handled and managed through periodic stakeholder review.

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Conclusion

Starting a limited partnership in Hawaii can be a rewarding experience, providing you with the benefits of limited liability protection for passive investors and the opportunity to manage your business actively. By following the steps outlined in this article and staying on top of ongoing management and compliance tasks, you can establish a successful limited partnership and enjoy the benefits of this unique business structure.

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