How to Establish a Sole Proprietorship in Hawaii
To establish a sole proprietorship in Hawaii, here's everything you need to know.
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In Hawaii, you can establish a sole proprietorship without filing any legal documents with the Hawaii state government. There are four simple steps you should take:
- Choose a business name.
- File a trade name with the Department of Commerce and Consumer Affairs.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
1. Choose a Business Name
In Hawaii, a sole proprietor may use his or her own given name or may use an assumed name or trade name. You cannot use a name that is similar to or the same as another registered business name including trade names. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
- Hawaii Department of Commerce and Consumer Affairs
- U.S. Patent & Trademark Office: (Click on the TESS link under Tools.)
2. File a Trade Name
If you use a business name that is different from your legal name, Hawaii allows you to register the trade name. This is not a mandatory requirement in Hawaii. To file your trade name you have the option to file online at the Department of Commerce and Consumer Affairs Hawaii Business Express or you can download the trade name application and file via mail. The filing fee is $50.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. Hawaii State Department of Taxation issues a general excise tax license to those planning to start a business in Hawaii. By signing up with the Hawaii Business Registration Division, your new business will be registered to do business in Hawaii. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even though sole proprietors without employees are not required to have an EIN, you may want to obtain one anyway. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Hawaii, businesses are required to obtain several identification numbers for taxes and employee reports. You will need to use your EIN when registering your business through the Hawaii Business Express - Registration. If you have employees, you must report and pay employment taxes on a periodic basis. You will need to register and obtain a taxpayer withholding number. To register as a new business and employer in Hawaii, see the Hawaii Department of Labor New Employer Brochure.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with Hawaii’s Business Registration Division Business Express Registration.