A limited liability partnership (LLP) is one way to organize your business aside from the more commonly known options of limited liability companies (LLCs) and corporations. An LLP consists of two or more owners, or general partners, who have limited liability regarding the LLP and other partners.
Despite not being liable for the actions of other partners involving the LLP, each general partner is obligated to share equally in the management and representation of the LLP with the other general partners. Also, your company needs to be registered as an LLP with Hawaii’s Department of Commerce and Consumer Affairs (DCCA) to be an LLP.
What Are the Requirements for an LLP?
There are several requirements under Hawaii state law that a company must meet if it wishes to become an LLP. For instance, a company must have a name that is unique, barring a few narrow exceptions, and contains one of the following:
- Registered Limited Liability Partnership
- Limited Liability Partnership
- RLLP
- LLP
- R.L.L.P.
- L.L.P.
Another task that an LLP must accomplish is appointing a registered agent who can be served legal documents on behalf of the LLP. The registered agent must be either a company registered with the DCCA or a physically present person in Hawaii. All LLPs must conduct a vote among members agreeing to the partnership to be an LLP instead of a general partnership. Finally, an LLP must file the appropriate paperwork with the DCCA.
What Paperwork Do I Need to Form an LLP?
The paperwork requirements are outlined on the DCCA’s website. You can file the paperwork online or find the forms to print out and mail. There are different paperwork requirements for domestic or Hawaii-based LLPs and foreign LLPs, which were initially created outside of Hawaii. However, domestic and foreign LLPs must file a Registration Statement for Partnership.
For this form, you will need to indicate whether the LLP is a foreign or domestic company and provide the LLP’s name, date of formation, and a mailing address for the principal office of the partnership. A foreign LLP will also need to provide where it was initially formed and began transacting business in Hawaii. You will also need to include the names and addresses of all partners and the registered agent. This form will need to be signed by two LLP partners.
A domestic LLP will also need to fill out and submit a Statement of Qualification. To complete this form, you will need to list the name of the partnership before it became an LLP, the new name of the LLP that meets the requirements mentioned above, and the address of the LLP’s principal office. You will also need to put down the name and the address of the LLP’s registered agent. One of the LLP’s partners needs to sign the form.
Foreign LLPs must file both a certificate of good standing from the location where they were initially registered and a Statement of Foreign Qualification along with the Registration Statement for Partnership. To complete the Statement of Foreign Qualification, you will be required to put down:
- The original name of the partnership before it became an LLP
- The current name of the LLP as it appears on the LLP’s certificate of good standing
- The registered agent’s name and address
- The location where the LLP was originally created
- The LLP’s principal office’s address
A general partner of the LLP needs to sign the form.
In Hawaii, limited liability partnerships must register with the Department of Commerce and Consumer Affairs Business Registration Division by filing a Registration Statement for Partnership FORM GP-1 and a Statement of Qualification FORM LLP-1 and paying the appropriate fees.
What Benefits Does Hawaii Give to an LLP?
The state provides numerous tax breaks for businesses through the Hawaii Enterprise Zone Partnership program. For example, a company in an enterprise zone is not required to pay the general excise tax for its first seven years. Businesses in an enterprise zone also benefit from lowered property taxes on improvements to their property.
What Disadvantages Does Hawaii Give to an LLP?
All LLPs have to file an annual statement, and they will be charged $25 for every 30 days that the statement is late. If an LLP fails to file a statement for two consecutive years, the Director of the DCCA may dissolve the LLP. LLPs must pay a general excise tax on their gross income every year, even though the income for an LLP is traditionally taxed as part of the partners’ personal income. The rates are 0.15% on commissions from insurance sales, 0.5% on profits gained through wholesale or manufacturing, and 4% on income earned through other business activities. This tax can be passed onto customers, but the passing of the tax onto the customer has to be directly stated.
What Are the Liability & Tax Considerations?
Partnerships are pass-through entities, meaning the profits and losses from the company pass through to the owners’ personal income. The partnership doesn’t file any tax returns. Although the IRS considers partnerships as pass-through entities, they require partnerships to submit an annual report detailing the business’s profits earned or losses sustained.
Personal liability should be considered when forming a business. Personal liability is a legal term that explains how closely your debts and assets are tied up with your business. If you have no personal liability, none of your business’s debts are counted against your assets. The business is separate from you. If the business takes on a debt, such as a loan or a lawsuit, then those creditors can’t seize your home, cash, or other personal assets to settle the debt. While no legal structure gives you complete liability protection, some grant more options than others.
How Do I Determine if I Need an EIN, Additional License, or Tax ID?
Partnerships with employees should obtain an Employer Identification Number (EIN) from the IRS. An EIN is commonly required to open a bank account for the business. It is usually wise to get an EIN even if you aren’t hiring employees.
Some businesses require additional licenses from the state to operate. Other taxes may be necessary as well, depending on your business.
How Can I Get My Day-to-Day Business Affairs Together?
After registering your business name and filing the necessary forms with the Department of Commerce and Consumer Affairs, you can legally do business in Hawaii. Consider completing the following to get your business up and running:
- Opening a bank account for the business
- Getting insurance to protect your company’s assets
- Creating a website for your company
Lawyers at LegalMatch will help you choose which partnership may be right for you. A business lawyer in Hawaii can also file the paperwork to form your business, help you find a registered agent, and get you in touch with a tax professional.
Should I Hire a Lawyer?
Registering a business as an LLP in Hawaii can be difficult, especially since one must fill out and file multiple documents during the process. A corporate lawyer in Hawaii can help you file all of the required documents and help you avoid any mistakes while establishing your company as an LLP in Hawaii.
