A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.

Here are the steps you need to take to form an LLC in Hawaii. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.

1. Choose a Name for Your LLC

Under Hawaii law, an LLC name must contain the phrase "Limited Liability Company" or the abbreviation "L.L.C.," or "LLC." "Limited" may be abbreviated as "Ltd.," and "Company" may be abbreviated as "Co."

Your LLC's name must recognizably different from the names of other business entities already on file with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division. Names may be checked for availability by searching the Business Registration Division business name database. You may reserve a name by filing an Application for Reservation of Name with the Business Registration Division. You can file online or by postal mail. The reservation fee is $10.

2. Appoint a Registered Agent

Every Hawaii LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC's behalf if it is sued. A registered agent may be an individual who resides in Hawaii, or a domestic or foreign business authorized to transact business in Hawaii. The registered agent must have a physical street address in Hawaii.

3. File Articles of Organization

An Hawaii LLC is created by filing Articles of Organization For Limited Liability Company with the Hawaii Department of Commerce and Consumer Affairs Business Registration Division. The articles must include:

• the LLC's name
• the LLC's address
• the name and address of the LLC's registered agent
• the names and addresses of all the LLC's organizers
• the duration of the LLC if not perpetual
• a statement whether the LLC will be managed by members or managers
• the names and addresses of the initial managers if the LLC is Manager-managed, or the initial members if the LLC Member-managed.
• a statement whether the LLC's members are to be liable for the company's debts and obligations, and
• signature of the LLC's organizer.

The filing fee is $50. The articles may be filed online or by postal mail.

4. Prepare an Operating Agreement

An LLC operating agreement is not required in Hawaii, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.

For help creating an LLC operating agreement, see Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo) or use Nolo's Online LLC. If an operating agreement is created, it need not be filed with the Articles of Organization.

5. Obtain an EIN

If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

6. File Annual Reports

All LLCs doing business in Hawaii must file an annual report with the Business Registration Division and pay a $15 filing fee. The report may be filed online or or you may print out the Domestic Limited Liability Company Annual Report form (Form C5) and file by mail. The state will send an annual report reminder to your LLC. The annual report is due during the calendar quarter of the anniversary month of your LLC's formation. For example, if your LLC was formed on July 15, then your report would be due each subsequent year between July 1 and—at the latest—September 30. An annual report is not required to be filed in the year the domestic LLC was organized. For more details on Hawaii's annual report requirements, see Nolo's article Hawaii LLC Annual Filing Requirements.