Hawaii Business License: Everything You Need to Know
Hawaii State requires a Hawaii business license for all businesses operating in the jurisdiction. 8 min read
What is a Hawaii Business License?
Hawaii State requires a Hawaii business license for all businesses operating in the jurisdiction. Rules to registration and licensing apply to all categories of business ownership, including home-based and small enterprise start-ups with no employees. Specific licensing and permit requirements to operating a business in the state, depend on the classification of a business entity and its activity. Licensing and permit requirements may vary according to county. Business operators can obtain information about licensing and other details about setting up tax reporting entity from the Hawaii State and its agencies dedicated to oversight of the various aspects of commerce, trade, and taxation.
What business licenses are required by Hawaii State?
Registration for the General Excise Tax license can be done through Hawaii’s Department of Commerce and Consumer Affairs (DCCA), Business Registration Division. The general business license enables the state to collect business tax withholdings from entities operating in the jurisdiction. The General Excise Tax is a levy on all business income, and is not a sales tax. Form BB-1 applicants are designated a state tax number issued under the general excise tax license certification. Additionally, Hawaii State also regulates 49 professions and vocations requiring license registration. Among those professions and vocations, medical, accounting, mortgage, real estate brokers, and sports agent professionals are required to license for operation in the state. Information about professions requiring State of Hawaii licensing, and/or county permits can be obtained at the state website.
How to Apply for a Business License in Hawaii State?
Form BB-1 and related information about how to register a business for incorporation, including limited liability corporation status, is available on the DCCA website. Businesses with employees should apply for an employer identification number “EIN” through the state’s Department of Labor and Industrial Relations. Registrants can apply at the Business Action Center in Honolulu. Call in advance of application: 808-586-2545. Registration for the General Excise Tax License can be done in person or online at the Hawaii Business Express website.
What is Hawaii’s General Excise Tax?
Hawaii’s general excise tax is applied to gross receipts or gross income from a business, and is not a sales tax on retail sales. Taxation is based on type of business activity conducted (i.e. manufacturing, retail, wholesale operations), and typically ranges between 0.5 % and 4%. Some types of business operations are exempt from the state’s general excise tax. Consultancy with an accountant or tax advisor is recommended prior to general business license application.
What information is required to complete the general excise tax license application in Hawaii?
Submission of Form BB-1 for General Excise Tax license application requires accompanying information about a registrant for consideration. Applicants must be able to provide the DCCA with: Business Name; Type of Business (i.e. Corporation, Partnership, Single Member LLC, or Sole Proprietorship); Federal Tax ID “EIN” or social security number for sole proprietorship; Record of accounting period; Owner names, business partners, company shareholders (i.e. name, address, phone number, driver’s license); Business address and phone number; Number of estimated employees.
Obtain One or More Business Licenses
Those businesses not required to obtain a general business license in Hawaii State, may still be obligated to apply for an operating permit depending on county and municipal jurisdiction and type of activity. For example, Hawaii’s environmental health and safety regulation rules provide that some businesses must apply to the Department of Health for permit in order to operate in the state. Businesses holding permits by state, county or municipal agencies are subject to rules of operation in the jurisdiction of issuance. Details about permit requirements can be found at the various state, county, and municipal agency websites assigned responsibility for the permit granting process. Some entities are exempt from local licensing rules under state or federal law. Inquiries about rules and requirements of permit application and issuance should be directed to an agency of oversight concerned with the type, and activity associated with a business.
Record Filing for Type of Business
In addition to licensing, records filing of an entity’s organizational information may be required of a business operating in Hawaii. Recordkeeping generally consists of regulatory and standards compliance reporting, tax reporting and licensing and permit registration documentation. Information about document registration can be obtained under the Business Registration (BREG) section of the Hawaii Department of Commerce and Consumer Affairs (DCCA) website.
Obtain Professional Licensing
The DCCA Professional and Vocational Licensing Division (PVL) registers applicants of 49 different professions and vocations for licensing. Members of DCCA listed professions and vocations must obtain licensure for practice in Hawaii State. Check the PVL website for a list of professions and vocations requiring licensure in the state, as well as links to professional boards providing certification. Licensing boards for attorneys and physicians are not listed by the PVL. Professionals operating medical practice or legal practice in Hawaii State, must be licensed by their respective regulatory boards.
Register a Trademark or Service Mark
Distinguishing a product, service, or business with a registered trademark or service mark protects an entity from usury by potential competitors. Registration of intellectual property (IP) in the form of trademarks, service marks, and trade names identifying the unique goods and services of a business can be done via the Trade Name, Trademark, Service Mark section on the DCCA website by filing a Form T-2 Application for Registration of Trademark. The application includes a filing fee.
Businesses operating in Hawaii must comply with state tax rules guiding sales tax, use tax, unemployment tax, and income tax withholding. General tax information and forms, tax identification numbers, permits, and licensing and can be obtained through Hawaii’s Business Express office.
Registration of an entity’s articles of incorporation establishes a business as a legitimate and operating company in Hawaii. Business license and professional license holders in adherence with operating permits, are considered fully operational entities meeting Hawaii’s rules to Business Entity Registration. Incorporation of a business under a different name than originally listed on its business license, can be done by filing a Form T-1 Registration of Trade Name.
Doing Business As (DBA)
Entities registered with a fictitious name or Doing Business As (DBA), do not require the names of partners or the officially registered name of a LLC or corporation when operating in the State of Hawaii.
Registration requirements for businesses with employees are:
- Employer Identification Number (EIN). Hold a nine-digit EIN number for Internal Revenue Service tax filing. Corporations, employers and business partnerships can apply for an EIN online, or by calling 800-829-4933. New EIN registration is generally required for changes in ownership or structure.
- Controller Record. Preparation for audit requiring four-year record of past withholding tax filings, including financial statements and supporting information such as receipts.
- Business Insurance. Documenting workers’ compensation insurance, unemployment insurance and disability insurance where required.
- Public Disclosure. Public notice and display of workplace posters required by federal and state law.
- Tax Filings. Federal and state tax filings on record, including tax record of wages paid to employees as part of the Federal Wage and Tax Statement (Form W-2). Hawaii’s Department of Taxation can provide more information about employer obligation to state tax filings http://tax.hawaii.gov/eservices/.
- Employment. Reporting of new hires, and workplace employment recordkeeping, including the Federal Income Tax Witholding Form W-4, and Employment Eligibility Verification Form I-9 verifying employee’ eligibility to work in the United States; as well as record of workplace safety practices, and federally mandated employee benefit plan in compliance with all Equal Employment.
Business entities employing workers must provide disability insurance for compensation of time of work due to work-related, or non-work-related illness or injury under Hawaii law. Temporary disability insurance paid to workers taking time off work due to a non-work-related injury or illness is covered by the standard disability insurance tax deduction taken from each employee paycheck. Unemployment Insurance Tax is required of some businesses operating in the state. Hawaii businesses can register with the state’s Department of Labor and Industrial Relations to pay unemployment insurance taxes. Workers’ Compensation Insurance can be purchased through the state Workers’ Compensation Insurance program or a private insurer.
Starting a Small Business in Hawaii – Business Types
Sole proprietorship is the most basic type of business. Registration of a sole proprietorship may be accompanied by Limited Liability Corporation status. Corporation, partnership, or single member LLC entities are commonly set up to protect an owner from insurance risk. Sole proprietorships are treated as single member LLC by the IRS, requiring a simple Schedule C reporting of income. Tax filings for different categories of corporation or partnership vary in requirement depending on business type and level of activity. New business owners can consult with a tax professional, the Hawaii Department of Taxation and Internal Revenue Service for more information about advanced tax reporting such as S-Corp filings.
Starting a Small Business in Hawaii – Registration
When starting a new business in Hawaii, the first two steps are IRS EIN registration and the General Excise Tax license. Large entities scheduled to hire employees must also register with the U.S. Department of Labor. A Form BB-1 General Excise Tax license application filing with the State of Hawaii’s DCCA, is a short process with just a few business registration procedures that can be done online. Auto-fill forms on the DCCA’s online website, streamlines the application process. Application for a federal tax number, known as a “EIN” or a “TIN” provides an entity with tax status. A social security number can be used to start a sole proprietorship if a business was not established as a corporation, partnership or single member LLC.
Starting a Small Business in Hawaii – Keeping Books
Recordkeeping is a required aspect of business operations in the State of Hawaii. Financial control of an organization should include maintenance of up-to-date record of all sales income and expenses. Tax preparation record ensures that a business can meet the demands of audit by the Internal Revenue Service or the state’s Department of Taxation should it be requested. Financial control of an organization is ideally accompanied by all supporting legal documents related to business registration, as well as bank deposit statements and investment portfolio activity. Digital record of business financial record in Quickbooks or other accounting software, improves compatibility of internal control processes with official tax reporting procedure, and has the capacity to simplify a company’s quarterly and annual reporting process, and allow for online submission of tax filings.
Starting a Small Business in Hawaii – Income Taxes
Small businesses registered as sole proprietorship or a single member LLC must disclose income to the Internal Revenue Service and Hawaii’s Department of Taxation. Income and deductible business expense reporting activity can be submitted on IRS federal Form 1040, Schedule C. More complex tax filings may require a business tax CPA specializing in the type of entity associated with an entity’s tax classification. Professionally prepared financial statements and tax filings can protect a business from audit that might otherwise be costly as result of missing or incorrect reporting. Scheduling estimated tax payments throughout the year assists a small business in avoiding penalties, and the potential of a more sizeable end of year tax bill. New businesses in Hawaii can consult with a professional tax agent or CPA for more information about planning for income tax reporting.
Business owners requiring assistance in filing articles of incorporation, or for partnership or single member LLC status in the State of Hawaii, can consult with UpCounsel. Inquiries about the getting a Hawaii business license and state registration can be submitted for a legal consultancy. You can post your legal need on UpCounsel’s marketplace. UpCounsel lawyers represent the top 5% attorneys in the United States, graduating from top law schools such as Harvard Law School and Yale Law School. UpCounsel attorneys have an average 14 years of legal experience, and have represented corporate clients like Google and Menlo Ventures.