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After you start a Hawaii LLC, there are two main types of ongoing filings. The first is the Annual Report with the state, and the other is taxes.
Paying taxes is an important part of running a business, but figuring out which taxes you need to pay can be a pain.
This lesson will provide you with general resources and the basics of Hawaii LLC tax filing requirements.
What taxes does a Limited Liability Company pay in Hawaii?
Each LLC has a different tax situation, so the taxes paid for a Hawaii LLC varies.
The amount of taxes owed for your LLC depends on rules like:
- how your LLC is taxed
- state and local tax rules
- any sales and use tax requirements, or
- whether you have employees
Additionally, some business types are required to register for industry-specific taxes.
Pro Tip: We recommend hiring an accountant to ensure your LLC meets all of its tax obligations.
We also recommend getting an EIN Number for your LLC. An EIN is also called a Federal Tax Identification Number. They mean the same thing.
Not only will an EIN number be used to open an LLC bank account, but it will also be used for filing taxes with the local, state, and federal governments.
LLC pass-through taxation (Who pays the taxes?)
By default, LLCs don’t pay taxes.
Instead, the LLC Members are responsible for reporting the income (or losses) on their personal 1040 tax return. The Members pay taxes on any LLC profits. This is because of LLC pass-through taxation.
Simply put, pass-through taxation means the responsibility for reporting tax information from an LLC “passes through” the LLC to the LLC Members.
How are LLCs taxed in Hawaii?
By default, a Hawaii LLC is taxed by the Internal Revenue Service (IRS) based on the number of Members the LLC has. Then the Hawaii Department of Taxation honors this and taxes your LLC the same way at the state level.
An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship.
An LLC with 2 or more owners (Multi-Member LLC) is taxed like a Partnership.
The above are referred to as the “default status“. Meaning, they are automatically applied based on the number of LLC Members.
Alternatively, you have the option of requesting an “elective status” for your LLC. This is done by filing an extra form with the IRS. Once granted, this elective status means the IRS will treat your LLC as a Corporation (either an S-Corporation or C-Corporation) for tax purposes.
Note: Your Hawaii LLC Operating Agreement should also include information about how your LLC is taxed.
Federal Income Taxes
There are several different options for how the IRS can treat your LLC for tax purposes.
Single-Member LLC taxes (default status)
The IRS treats all Single-Member LLCs as Disregarded Entities for tax purposes. This just means that the IRS doesn’t expect the LLC to file its own federal income tax return.
Instead, the owner of the Single-Member LLC files the return (and pays the federal income taxes).
How the LLC pays federal income tax is determined by who owns the LLC:
- If the LLC is owned by an individual, the LLC is taxed like a Sole Proprietorship.
- If the LLC is owned by another company, the LLC is taxed as a branch/division of the parent company.
Multi-Member LLC taxes (default status)
If an LLC has two or more owners, the LLC is taxed like a Partnership.
The LLC needs to file a 1065 Partnership Return and issue a Schedule K-1 to the LLC owners.
The K-1s report each owner’s distributive share of profits. And the K-1 income “flows through” to the owners. The income taxes are then paid by each owner on their personal income tax return (Form 1040).
Husband and Wife LLC taxes
You may have heard that in some states, a husband and wife LLC has the option to file taxes as a Single-Member LLC (aka Qualified Joint Venture) instead of a Multi-Member LLC.
This is true for community property states (like Texas). That said, Hawaii isn’t a community property state, which means Qualified Joint Ventures are not available in this state.
Electing to have your LLC taxed as a Corporation
Instead of the default statuses above, a Limited Liability Company (LLC) can be taxed like a Corporation.
Note: We recommend speaking with an accountant before making a corporate election.
There are two types of corporate elections:
- S-Corporation
- C-Corporation
LLC taxed as an S-Corporation (elective status)
By filing Form 2553 with the IRS, your LLC can request to be taxed like an S-Corporation.
Being taxed as an S-Corp can help businesses (with established profits) save money on self-employment taxes.
Tip: There are additional expenses to having your LLC taxed as an S-Corporation Most new business owners shouldn’t make this tax election until their business is established and revenue is consistent. Once there is at least $70,000 in annual net income per LLC Member, we recommend speaking to your accountant about this option.
LLC taxed as an C-Corporation (elective status)
By filing Form 8832 with the IRS, your LLC can request to be taxed like a C-Corporation.
Being taxed as a C-Corp can help large employers save money on healthcare fringe benefits.
Note: This election is not common. Most of our readers don’t choose to have their LLC taxed as a C-Corporation.
Hawaii State Income Tax for Hawaii LLCs
Single-Member LLCs in Hawaii: The LLC itself usually doesn’t file a state-level return. However, the owner files a personal state-level return that includes the LLC’s profits or losses.
Multi-Member LLCs in Hawaii: The LLC itself may need to file a Partnership return at the state-level. And the owners file a personal state-level return that include the LLC’s profits or losses.
There are other types of Hawaii business tax that apply to certain industries and types of businesses.
We recommend hiring an accountant to prepare and file your state income taxes.
Hawaii State Tax ID Number
All businesses in Hawaii are required to get a State Tax ID Number in order to do business in the state.
You can get your Hawaii Tax ID online through the Hawaii Department of Taxation or through Hawaii Business Express.
The fee is $20 for the State Tax ID Number, but you may owe more if your LLC needs additional tax licenses based on your location, industry, and business activities.
Read more on how to get a State Tax ID number and how long it takes on the Hawaii Department of Taxation Licensing and Tax Information for New Businesses page.
You can also contact the Hawaii Department of Taxation for more information about Hawaii state taxes.
Local Income Tax for Hawaii LLCs
You and/or your LLC may need to file and pay income taxes with your local municipality (town, city, county, etc.).
We recommend hiring an accountant to prepare and file your local income taxes.
You can also contact your municipality to check on their requirements.
Hawaii General Excise Tax
Hawaii doesn’t have a Sales Tax. Instead, they have what’s called General Excise Tax (GET).
The difference is that a Sales Tax is a tax on customers, whereas GET is a tax on your business.
You must pay General Excise Tax every year using your State Tax ID. And the amount of excise tax your LLC will need to pay depends on its business activities and industry.
You can register for General Excise Tax at the same time you get your State Tax ID number using the Hawaii Department of Taxation or through Hawaii Business Express.
You can read more information about Hawaii excise tax from these Hawaii DOTAX resources:
For more information on permits, read Hawaii Business Licenses and Permits.
And if you have any questions about Hawaii General Excise Tax, you can read Tod Marcus’s top 10 FAQs. Or, contact the Hawaii Department of Taxation at 808-587-4242.
Tip: Save time by hiring an expert. We recommend using TaxJar. They'll help you register for, collect, and pay sales tax.
Hawaii LLC Payroll Taxes
If your Hawaii LLC will have employees, you must submit payroll taxes. Payroll taxes are essentially a group of taxes and filings, including:
- Federal income tax withholding
- State income tax withholding
- Social Security tax
- Medicare tax
- Federal unemployment taxes (FUTA)
- State unemployment taxes (SUTA)
- Local/county deductions
- Employee deductions
As an employer in Hawaii, you need to set up payroll, withhold payroll taxes from employees’ paychecks, and then submit those filings and taxes to various state and government agencies.
You’ll also need to register for Hawaii Unemployment Taxes with the Hawaii Department of Labor and Industrial Relations. You can get a Department of Labor Number, aka Employer Account ID Number online by visiting the New Employer Registration page.
And if you have any questions about Unemployment Taxes, you can call the Hawaii Department of Labor at 808-586-8844.
Although you can file payroll taxes yourself, the calculations can be burdensome and very complex. And if done improperly can lead to penalties and fines. Most people hire a payroll company or ask their accountant for help.
Our favorite payroll company is Gusto Payroll. They’ll automate and take care of your payroll taxes.
For more Hawaii payroll tax resources, please see the references section at the bottom of this page.
Managing your books & staying organized
You can keep track of income and expenses using Microsoft Excel or Google Sheets. Or you can use software to help automate things and save time.
The accounting software we recommend is Quickbooks Online.
Working with an accountant
As you can see, figuring out the different types of taxes you owe can be complicated, let alone how to properly fill out all the forms. And doing taxes improperly or missing deadlines can be harmful to your business
We strongly recommend working with an experienced accountant in Hawaii to help make sure you file your federal, state, and local taxes correctly.
Check out our guide on how to find an accountant.
Hawaii Department of Taxation Contact Information
There are other types of Hawaii business tax that apply to certain industries and types of businesses.
You can contact the Hawaii Department of Taxation at 808-587-1791 for more information about Hawaii state taxes.
Hawaii LLC Taxes FAQs
Do I have to pay an annual fee for my LLC in Hawaii?
Yes, all Hawaii LLCs have to pay an annual fee by filing a Hawaii LLC Annual Report every year. This is separate from the federal, state, and local taxes that you pay.
The LLC Annual Report is filed with the Hawaii Department of Commerce and Consumer Affairs’ Business Registration Division. It is not a tax paid to the Hawaii Department of Taxation.
The Annual Report for Hawaii LLCs costs $15 per year. This is paid every year for the life of your LLC.
How much is an LLC in Hawaii?
Hawaii LLC Costs include:
$50 to form your Hawaii LLC (to file your LLC Articles of Organization).
$15 in annual fees (to file your LLC Annual Report) for a Hawaii LLC.
Do I need to file a Hawaii state tax return for my LLC?
Maybe – it depends on what type of LLC you have.
Single-Member LLC taxed as a Sole Proprietorship: No. You only need to file your personal tax return (Federal Form 1040 and Hawaii Form N-11 for full-time residents) and include your LLC profits on the return.
Multi-Member LLC taxed as a Partnership: Yes. Your LLC must file a IRS Form 1065 and a Hawaii Partnership Return (Form N-20).
LLC taxed as a Corporation: Yes. Your LLC must file tax returns with the IRS and the Hawaii Department of Taxation to pay your Hawaii income tax. Check with your accountant to make sure you file all the correct documents.
How do I know my LLC tax classification?
You can tell your LLC’s tax classification by looking at how many Members are in your LLC.
This is because LLCs receive their tax classification from the IRS based on the number of Members (owners) your LLC has.
If you have one Member, your LLC is taxed as a Sole Proprietorship.
If your LLC has more than one Member, your LLC is taxed as a Partnership.
This is called being taxed in your default status. Meaning, you don’t have to file any paperwork to let the IRS know that’s how your LLC will be taxed because they tax LLCs that way by default.
However, in order for your LLC to be taxed as a Corporation, you or your accountant would have to file paperwork with the IRS letting them know you’ve chosen to be taxed as a Corporation.
And then the IRS would mail you an Approval Letter to confirm you’ve chosen the Corporate tax election for your LLC.
Note: Being taxed as a Corporation is rare for LLCs, so most people don’t need to worry about this.
And if you’re still unsure about how your LLC is taxed, we recommend calling your accountant or the IRS (1-800-829-4933). To speak to a live person at the IRS, press option 1, option 1 again, and then option 3.
How to start an LLC in Hawaii?
Here are the steps for starting an LLC in Hawaii:
- Choose an LLC name and make sure it’s available
- Choose who will be your Hawaii Registered Agent
- File the Hawaii LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Open an LLC bank account
- Check whether you need a business or sales tax license in Hawaii
References
IRS: Tax Information for Businesses
Hawaii Business Registration Division
Hawaii Department of Taxation: Tax Forms and Publications
Hawaii Department of Taxation: Tax Forms (Alphabetical Listing)
Hawaii Department of Taxation: General Excise and Use Tax Forms
Hawaii Department of Taxation: Employer’s Withholding of State Income Tax
Hawaii Department of Taxation: County Surcharge on General Excise and Use Tax
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
HAWAII LLC GUIDE
Follow the lessons below to form your Hawaii LLC.
Hello Matt, I am a 50% owner of an LLC in Hawaii member-managed and I would like to remove myself from the LLC. What are the steps I need to take? Thanks
Hi Herman, you can either sell – or assign – your LLC Membership Interest to the other Member(s). The form would be called Sale of LLC Membership Interest or Assignment of LLC Membership Interest. There are no forms provided by the state. It’s a private document. You can sometimes find templates online, or it might be best to work with an attorney. The Members should also amend the LLC Operating Agreement. And if you’re listed on the Hawaii LLC Articles of Organization, you’ll want to file an amendment with the Hawaii Business Registration Division to remove yourself. Hope that helps.
Thank you for the helpful easy to understand information
You’re very welcome David :)
Thank you so much for this super helpful, very accurate and easy to understand information and step-by-step instructions! You made this process so much easier for me, and helped me feel so accomplished in finishing this all up on my own!
Hi Lindsey, you’re very welcome! Thanks so much for your lovely comment :) It’s greatly appreciated. We spend a tremendous amount of time making things very accurate, yet step-by-step, with the end goal of empowering people to do it themselves, learn, and grow. So that fact that your comment mentions all that really means a lot to us. Thanks again and best wishes!
So if I form my LLC in a different state, like Delaware for instance, would I have to pay Hawaii G.E. tax?
Hi Jay, please run this by an accountant as we’re not 100% sure. However, we believe you’ll still have to pay the GE tax since taxes are paid where the money is made, so even if you form an LLC in another state, you’re still operating and doing business in Hawaii. Hope that helps.