Wondering how to start a business in Hawaii? We have good news. With a low General Excise Tax and a long list of small business incentives, the Aloha State could be the perfect place for your business. Follow the steps in this guide to launch a service business in paradise.
Checklist: start a business in Hawaii
- Create a business plan
- Name your Hawaii business
- Check Hawaii zoning requirements
- Select a business structure
- Register your business
- Open a business bank account
- Secure funding for your business
- Apply for licenses and permits
- Insure your business
- Invest in time-saving software
- Understand your tax obligations
- Build your team
How to start a business in Hawaii
1. Create a business plan
Every successful business starts with a detailed business plan. Although you might be tempted to skip this step, outlining the most important aspects of your new venture can save you plenty of time, money, and hassle in the long run.
A detailed business plan can help you:
- Make sure your business idea has growth and profit potential
- Calculate startup business costs and ongoing business expenses
- Set short- and long-term business goals
- Research your competition
- Define your ideal customer and create an initial marketing plan
- Brainstorm service and business ideas that could generate additional profit
- Acquire capital from investors and other sources
Need help writing your business plan? Check out the free business plan templates from the Business Development and Support Division of the Government of Hawaii and the Small Business Administration (SBA).
2. Name your Hawaii business
Follow these steps to name a business in Hawaii.
- Brainstorm some options that comply with Hawaii’s naming rules. You also need to ensure that your chosen name does not infringe on existing names according to the naming rules set by the DCCA. Some business structures must include designations in the name, such as Corp., LLC, Ltd., etc.
- Check if the name you want is available. Search to see which trade names are already taken via the Department of Commerce & Consumers Affairs (DCCA) Hawaii Business Express name search.
- Claim your business name. Found an available name that works for you? You can claim it at the time you register your business during the step-by-step registration process provided by Hawaii Business Express.
How to reserve a business name in Hawaii
Found the perfect name, but not ready to register it just yet? You can reserve a business name for 120 days in Hawaii. Name reservations can be filed online through Hawaii Business Express.
3. Check Hawaii zoning requirements
Zoning keeps disruptive businesses away from residential and commercial areas, and you’ll need to be sure your type of service business is allowed at the business location you’ve chosen.
Even a mobile service provider will need to have a physical address inside the state of Hawaii in order to register the business, and that address will need to have the correct zoning.
Depending on your business’s location, you may need to check the regulations at the Office of Planning and Sustainable Development Land Use Division or the Regulatory Planning Division of your county, such as the County of Kaua’i.
If you plan on operating your home-based business, you may need to fill out additional forms depending on your county. For example, home-based companies in Hawaii County must complete a Home Occupation Declaration and Zoning Clearance form.
4. Select a business structure
Every business needs to elect a business structure (aka “business entity” or “legal entity”). The legal structure of your service business will define business formation, business taxes, personal liability, personal asset protection, and even how big your business can grow.
You can choose from the following business entity types in Hawaii:
- Sole proprietorship
- General partnership
- Limited partnership
- Limited liability company (LLC)
- Limited liability partnership
- C corporation
- Nonprofit corporation
Although many small service business owners operate as sole proprietors, it’s common for service business entrepreneurs to form a limited liability company due to the added layer of liability protection that this business structure offers. Work with a business accountant, CPA, or business attorney to choose the right one for your service business.
Check out our guide to business structure types for an in-depth rundown of each business structure.
5. Register your business
It’s time to put pen to paper (or fingers to keyboard) and register your business. You can start the registration process at Hawaii’s DCCA Business Registration Division.
To register a new business in Hawaii, most business owners will need to:
- Hire or elect a registered agent. This person or company is responsible for receiving and distributing legal communications on behalf of your business. A registered agent must be located at a physical address in Hawaii.
- Set up a Hawaii Business Express (HBE) account and file forms. This is the state’s online business registration division portal and provides access to the forms you will need to complete and submit for your business.
- File for a Federal Employer Identification Number (FEIN or EIN). This number functions like a social security number for your business. You’ll need it to pay your taxes, open business accounts, and hire staff. You can apply online.
- Apply for a General Excise Tax License. Hawaii does not have a state sales tax. Instead, the government applies a General Excise Tax (GET) to all business transactions. You can apply for a GET license through the HBE portal.
You’ll need to fill out many legal documents, formation documents, and other business documents to register your service business. It’s always best to work with a business accountant or CPA to make sure everything is done right the first time.
How much does it cost to register a business in Hawaii?
In Hawaii, business registration fees start as low as $15 but be sure to factor in additional costs associated with registration, such as registered agent fees ($100) and trade name filing fee ($50). For up-to-date business registration costs in Hawaii, check out the fee schedule from Hawaii’s Business Registration Division.
6. Open a business bank account
Technically, sole proprietors can commingle business and personal funds in the same account, whereas other business structures require a clear separation between personal assets and business assets. But no matter which business structure you choose, it's always a good idea to manage business funds in dedicated business accounts—checking, savings, even a business credit card.
When opening a business bank account, be sure to shop around. Major banks, credit unions, and neo banks all have their perks. Choose the option that caters to your business needs.
7. Secure funding for your business
Now that you have a bank account, it’s time to put some money in it. Your business plan will tell you how much capital you need to start your service business.
If you happen to have the cash for all of your startup costs on hand, you’re off to a great start! However, if you need additional capital to get off the ground, you’ll need to apply for startup funding.
There are plenty of places to find small business funding in Hawaii:
- Loans from friends and family
- Bank loans for small businesses
- Equity partners
- SBA loan
- Venture capital
If you’re working on a tight timeline and don’t like the idea of applying for a loan, you could also look for a credit card that offers a promotional 0% introductory interest rate and treat it like a loan. But don’t forget to pay it all back before the interest rate goes back to normal or you could find yourself under a mountain of debt in a short time.
Not sure where to start with small business funding? Contact the Hawaii Small Business Development Center for advice.
8. Apply for licenses and permits
The State of Hawaii does not require you to apply for a general business license, opting instead for the General Excise Tax (GET) license. However, regional governments such as cities and counties may require you to apply for a license or permit depending on the type of business you intend to operate. For example, pawnbrokers in the County of Hawaii must pay $100 for a business license. Check with the local government where your business is located.
The State of Hawaii does require licensing for some professional and vocational occupations, such as accountants, nurses, and travel agents, via the DCCA Professional and Vocational Licensing (PVL) Division.
Some businesses are also federally regulated. You can find out if you need a federal license or permit via the SBA licenses and permits page.
9. Insure your business
All businesses should have insurance to protect them from legal and financial liabilities. Even service providers without products or storefronts need insurance in the case of accidents or civil legal proceedings.
Here are the types of business insurance you may need in Hawaii:
- Worker’s compensation. You’ll need Worker’s Compensation (WC) coverage if you intend to hire employees.
- Property insurance. You’ll probably need property insurance if you own the building where you do business.
- Commercial auto insurance. Service businesses are often mobile. Any commercial vehicles must be properly insured.
- Professional liability insurance. Protects professionals and businesses against claims of negligence, copyright infringement, personal injury, and more from clients or customers.
The type(s) of insurance you need will ultimately depend on the type of service business you operate. Your business structure may provide some level of personal asset protection, but insurance is another layer of defense in the face of any unfortunate situations. Business insurance agents can help you determine what’s best for your service business.
Read more: What type of small business insurance do I need?
10. Invest in time-saving software
Providing a product or service is only half the work when running your own business. The remaining 50% is administrative. This is all the day-to-day management that happens behind the scenes, like invoicing, accounting, and cleaning the bathroom.
While your computer isn’t going to keep your toilet clean, apps and software can certainly save you time and money while operating your business.
Choosing the right business software is a great way to streamline back-office tasks like:
- Invoicing. Durable can automate your invoice creation and distribution and even accept credit card payments. Less hassle for you, more convenient for your clients.
- Accounting. Bookkeeping and tax filing aren’t fun. Business accounting software like Quickbooks or Xero can make your life—and your accountant’s life—a whole lot easier.
- Customer reviews. A great reputation online doesn’t happen like magic. Durable’s customer review management tool can help you source and collect reviews while providing a simple way to resolve customer issues.
- Customer relationship management. Getting to know your clients is essential to providing the best service possible. A customer relationship management (CRM) tool tracks important details about your customers, allowing you to cater your service to their specific needs. Durable’s CRM uses automation to take this burden off your shoulders so you can stay organized and focus on other areas of your business.
- Scheduling. Many service businesses need to book appointments with clients, which can get complicated and disorganized in a hurry. Offload your scheduling to an automated tool like Calendly or MeetFox—your clients will get the time they want, and you’ll get a little time for yourself.
If you operate an especially unique service business that could use some help from software, do some research online to see what’s out there. Chances are if you can think of a way that software could help, someone has already turned it into an app.
11. Understand your tax obligations
It’s essential to fully understand and comply with all of your business’s tax obligations in Hawaii. Work with a CPA to go through the details. Tax codes are complicated, and taxes must be paid at different levels of government, so be sure to have a professional help you outline what the taxes, forms, and deadlines you’ll need to deal with as a new business owner.
Here are some Hawaii business tax obligations to keep in mind:
- Income tax. While sole proprietors pay business income tax on their personal tax returns, other business structures must file and pay separate corporate income tax or S corporation income tax to the state.
- General Excise Tax. The state levies a GET on all business transactions in place of sales tax.
- Withholding tax. If you have employees, withholding income tax from their pay is required by the Department of Taxation.
- County surcharge. Some counties in Hawaii apply a surcharge to the GET. Learn more about surcharges from the Department of Taxation.
- Product tax. Some products may require additional tax payments, such as liquor, which is taxed by volume.
12. Build your team
It’s common for small service businesses to work with independent contractors, especially when they’re just starting out. But if you plan to hire employees, there are a few more steps you’ll need to take to comply with labor laws in Hawaii.
- Get an EIN. You got an EIN as part of the registration process in step 5, but just in case you need a refresher, check out the IRS for more information.
- Understand and comply with state labor laws. The Hawaii Department of Labor and Industrial Relations (DLIR) provides a comprehensive guide to labor law requirements for new employers, covering everything from WC and healthcare to unemployment and beyond.
- Verify each employee’s eligibility. When you get close to hiring, have potential employees fill out a federal i-9 form to verify that they are legally allowed to work in the United States.
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