How to Start a Business in Hawaii (Complete Guide)

Starting a business in Hawaii means turning your idea into action in one of the most unique places in the U.S. Whether you're setting up shop in Honolulu or a small town on the Big Island, Hawaii gives you a chance to serve a local market and visitors from around the world.

Having helped hundreds of entrepreneurs as a business consultant, I’ve guided them through the process of building successful companies from the ground up.

With my experience and understanding of what works in the Aloha State, I created this guide to help you start your business in Hawaii.

If you opt for an LLC over other business structures, check our guide on starting an LLC in Hawaii.

Quick Summary

Step-by-Step Hawaii Business Formation Process

Step 1: Choose Your Business Structure

The first step is to decide which type of business entity is right for you. Every entity type has its own rules for taxes, ownership, and liability.

Here's a quick breakdown:

Business Type	Personal Assets Liability Protection	Taxed As	Ideal For
LLC	Yes	Pass-through or corporate	Small to mid-sized businesses
Corporation	Yes	Corporate or S-Corp	Startups seeking investors
Sole Proprietorship	No	Individual income tax	Individuals starting alone
Partnership	No	Pass-through	Two or more owners
LLP	Yes (for partners)	Pass-through	Licensed professionals
Nonprofit	Yes	Tax-exempt (if approved)	Charities and public services

Step 2: Name Your Business

Each structure in Hawaii has its own naming rules.

Here’s what to know:

• LLCs must include “LLC” or “Limited Liability Company”
• Corporations must include “Corp” or “Inc”
• Partnerships and LLPs need “Limited Partnership” or “LLP” in the name
• Sole proprietors can use their own name or a trade name
• Nonprofits should avoid misleading terms about commercial intent

Check if your business name is available on the Hawaii Business Registration Division website.

You can also reserve your business name for 120 days by submitting an Application for Reservation of Name (Form X-1) along with a nonrefundable $10 filing fee.

Step 3: Register Your Business

Every type of business must file with the Department of Commerce and Consumer Affairs (DCCA).

When registering your business online in Hawaii, the required registration forms will vary depending on your business structure.

For an LLC, you'll need to file the Articles of Organization (Form LLC-1), while corporations require the Articles of Incorporation (Form DC-1).

If you’re forming a partnership or LLP, you'll need to submit the appropriate partnership forms Form LP-1 or Form LLP-1.

Sole proprietors must register a trade name if they choose one, and nonprofits will need to file the Articles of Incorporation (Form DNP-1).

Filing fees vary depending on the legal structure:

• LLCs: Around $50
• Corporations: $50
• Nonprofits: $25
• Trade name: $50
• LPs and LLPs: Around $25–$50

You are required to appoint a registered agent with a Hawaii address who is responsible for receiving legal documents on behalf of your business, such as tax notices or court summons.

The process of registering your business is simple and efficient through Hawaii Business Express, an online platform of the business registration division that allows you to complete the registration quickly.

Step 4: Write an Operating Agreement

An operating agreement is a legal document that outlines how your business will be run, including management structure, member roles, profit distribution, and decision-making processes.

While Hawaii doesn't legally require LLCs to have an operating agreement, it's crucial for protecting your business and establishing clear rules among owners.

Without this document, your LLC will be governed by Hawaii's default LLC laws, which may not suit your specific needs.

Step 5: Get Federal and Hawaii State Tax IDs

You’ll need a Federal Employer Identification Number (EIN) from the IRS if you plan to hire employees or run anything other than a sole proprietorship. It’s free and you can do it online.

In Hawaii, your business also needs a Hawaii Tax ID from the Department of Taxation [1]. You’ll use this for general excise tax (GET) and any sales tax.

Hawaii Tax Requirements

• Income Tax: 1.4% to 11% (highest in the U.S.)
• General Excise Tax (GET): 4% statewide, plus 0.5% surcharge on O‘ahu [2]
• Unemployment Insurance: Required for employers
• Property Tax: Paid to the county; rates vary
• Credits: Hawaii offers tax credits for renewable energy, film production, and some new businesses

Step 6: Open a Business Bank Account

To open a business bank account in Hawaii, you’ll need a few key documents, including your Federal EIN, Hawaii business registration documents, business name paperwork, and an operating agreement if you're setting up an LLC.

For your account, you can choose between basic checking or interest-bearing options, with fees typically ranging from $10 to $30 per month.

Recommended banks with a strong local presence include the Bank of Hawaii, First Hawaiian Bank, and Central Pacific Bank, all of which offer business accounts suited to different needs.

Step 7: Obtain Required Licenses and Permits

Hawaii requires a General Excise Tax License for all businesses.

Other permits depend on your industry:

• Food service: Department of Health permit
• Contractors: Hawaii Professional & Vocational Licensing
• Retail: Resale certificate
• Local zoning regulations: Check with your city or county

You can find these requirements at the Hawaii Department of Commerce and Consumer Affairs website.

Step 8: Get Business Insurance

The state does not force all businesses to carry insurance, but many should.

General Liability Insurance covers injuries and property damage that may occur during business operations.

Workers' Compensation is required if you have employees, providing coverage for workplace injuries.

Professional Liability insurance is important for service providers like doctors, lawyers, and consultants, protecting against claims of negligence or mistakes in their work.

Check with Hawaii-based providers like Island Insurance, First Insurance, and national carriers.

Why Start a Business in Hawaii?

Hawaii offers strong tourism, a loyal local customer base, and a government that supports small companies.

• Economic: Hawaii offers incentives for energy companies, tech startups, and food businesses. Business registration is simple, and general excise tax is easier to manage than sales tax.
• Market: With 1.4 million residents and 9 million visitors a year, there’s steady demand for local goods, services, and hospitality.
• Infrastructure: Hawaii has stable internet, air and sea freight access, and a young, educated workforce.Hawaii has stable internet, air and sea freight access, and a young, educated workforce.

Employment and Labor Laws in Hawaii Department

Hawaii has specific laws and regulations to ensure fair treatment and safety for workers. Here are some key points every business owner should be aware of:

• Minimum Wage: The minimum wage in Hawaii is $14 per hour in 2024, with an increase to $16 per hour by 2026.
• Hiring: You must use Form I-9 and E-Verify to verify the employment eligibility of your workers [3].
• Workers' Rights: Hawaii laws protect workers from discrimination and unfair treatment in the workplace.
• Safety: OSHA (Occupational Safety and Health Administration) rules apply to all workplaces to ensure employee safety and health standards are met.

Financing Your Hawaii Business

Securing funding is a crucial step for any new business. Fortunately, Hawaii offers several options to help you get started:

• High Technology Development Corporation (HTDC): Provides funding and resources for technology-based businesses looking to grow in Hawaii.
• SBA 7(a) loans and microloans: These federal loans are ideal for small businesses and startups that need capital to get off the ground.
• Angel investors in Honolulu: Hawaii has a growing network of angel investors who are eager to support promising startups.
• Local banks and credit unions: Traditional lending options are available through banks and credit unions across the state.

Common Mistakes to Avoid

Avoiding these mistakes will help you stay compliant and keep your business running smoothly:

• Skipping business registration with the state
• Missing general excise tax filings
• Not renewing business licenses
• Failing to carry required insurance
• Ignoring employee pay and safety rules

Ongoing Compliance Requirements

To keep your business running smoothly and avoid penalties, there are key compliance tasks you must stay on top of:

• File annual reports with DCCA: You’ll need to file your business's annual report with the Department of Commerce and Consumer Affairs (DCCA) to stay in good standing.
• Pay state and federal taxes on time: Ensure you meet both state and federal tax deadlines to avoid penalties and interest.
• Renew licenses every year: Business licenses need to be renewed annually to ensure you remain legally authorized to operate.
• Keep business records for audits: Maintain accurate and up-to-date business records, including your business plan, as they are essential for audits and tax filings.
• Monitor updates to state employment laws: Stay informed about changes to state employment laws to ensure your business remains compliant.

Case Studies / Success Stories

1. Mana Up

Mana Up is a Hawaii-based business accelerator that has supported over 85 local companies, helping them grow into major brands. Focused on product makers, it provides mentorship, funding, and strategic partnerships to help businesses scale.

The accelerator specializes in exporting Hawaiian culture through locally made goods, such as food, fashion, and home products. With its support, many companies have expanded their reach beyond Hawaii, proving that local products can thrive in the global market.

2. Lanikai Juice

Lanikai Juice began as a small juice bar in Kailua, Hawaii, and has since expanded into multiple locations across O‘ahu. The company is known for using fresh, locally sourced ingredients in its juices, smoothies, and acai bowls.

By focusing on quality and maintaining a strong, consistent brand identity, Lanikai Juice has built a loyal following of both locals and tourists. Its success highlights the importance of aligning product quality with effective branding to grow a business in Hawaii’s competitive market.

FAQs

Hawaii offers a unique business climate with a strong mix of local demand and visitor spending. With the right planning and proper steps, anyone with a solid business idea can start a business and find success in the Aloha State. Take your time, follow the rules, and grow with confidence.

References:

1. https://tax.hawaii.gov/geninfo/a2_b2_9tsm2/
2. https://files.hawaii.gov/tax/legal/brochures/GE_brochure-23.pdf
3. https://www.uscis.gov/i-9