Congratulations! You have a winning idea, and now you want to make it a reality! But where do you begin? What should you do first? Fear not! If you don't know how to start a business in Hawaii, ProService Hawaii is here to help. With over 25 years of supporting 2,500 local businesses with payroll, benefits, and HR, we've seen a thing or two. This article shares step-by-step instructions and advice on turning your business idea into a reality, from registering your business in Hawaii to hiring your first employees. Let's get started!
A profitable business doesn't happen overnight. Even companies that manage to get off the ground struggle with turning a profit. And if you live and work in Hawaii, you're no stranger to reports that rank Hawaii as the worst state in the nation to start a business. But don't let this deter you. Hawaii has a rich history of entrepreneurship, going back to Hawaii's first immigrants who hustled to move beyond plantation life and became prominent figures in our business community. What then? You can launch your business with hard work and determination. But thoughtful planning from the get-go may help you navigate obstacles and make a profit faster. With that said, let's dig in!
Before you take action or invest your savings, dig into the critical planning and prioritizing work that will help you get off the ground and stay in business for years to come. Get your arms and legs around your market, customers, competitors, and suppliers. Start by doing some research to answer these basic questions:
To get data and insights to fuel your research and planning, visit the Hawaii Department of Commerce and Consumer Affairs (DCCA)
A business plan outlines your business goals and how you'll achieve them. To write an effective business plan, you should include the following sections:
First time writing a plan? Visit the Small Business Association or the Hawaii Small Business Development Center Network and Service Corps of Retired Executives (SCORE). Both organizations offer free business counseling and assistance with drafting business plans.
The proper business structure can bring much value to your company. It can influence everything from day-to-day operations to business taxes. Some common business structures include Sole Proprietorships, Partnerships, Limited Liability Companies, Cooperatives, Corporations, and S Corporations. Whether you’re creating an LLC in Hawaii, or some other business structure, make sure to read the SBA's Choose a Business Structure article to determine the proper structure for your business and the ins and outs of each type
Think about a name that fits your brand, values, and growth goals. A strong business name should be simple and easy to spell and pronounce. After you have brainstormed and identified a few favorites, visit Hawaii Business Express to see if the business name you want is available. Make sure your business name is also available on popular platforms like Facebook, Instagram, TikTok, and Twitter to help your customers discover your brand.
Note: Depending on the business structure you select, you may also need a DBA (“Doing Business As”). DBA is a fictitious name different from your business entity name and is sometimes necessary to open a business bank account in certain situations. To learn more, check out this article: Understand DBAs and How They May Be Beneficial to Your Small Business.
Starting a business in Hawaii can incur many expenses, from branding and marketing to real estate and critical equipment. There are several ways to fund your business, depending on your business situation. Here are a few options to consider:
To start a business in Hawaii, you must register your business with a few local agencies. Filing appropriate documents with each agency ensures you're ready to pay local taxes, withhold taxes from your employees' paychecks, or sell specific goods. So whether you’re wondering how to get a business license in Hawaii or how to pay business taxes, this next section breaks down some of these critical steps.
Before you file your business with the State of Hawaii, apply for a federal employer identification number (FEIN), also known as a Tax ID or EIN, from the IRS. This number is essential for filing federal taxes, hiring employees, or in some cases, opening a business bank account. Not all businesses need a FEIN. For example, you can use your Social Security Number as your Tax ID if you operate a Sole Proprietorship or LLC with no employees. To learn more, read Do I need a Tax Id Number for My Business?
An essential next step is registering your business and filing for necessary licenses, permits, and other employer requirements. You must register a business in Hawaii with Hawaii DCCA's Business Registration Division (BREG). Pro-tip: If you want to shorten your to-do list, you can now accomplish Steps 7-10 by filing a single application with the State of Hawaii. Visit the Hawaii Business Express site to register a business in Hawaii and apply for the essential licenses and permits you need.
You will also need a Hawaii Tax Identification Number (HI Tax ID) and a General Excise Tax (GET) license. You can obtain both from the Hawaii Department of Taxation. Your HI Tax ID, like your FEIN, is a unique identifier for your business. It allows you to register for various tax licenses and permits with the Hawaii Department of Taxation. Meanwhile, your GET license is a sales tax permit that enables you to do business in Hawaii. You can get both from the Hawaii Department of Taxation. Depending on your business, you might also need a state license, county-level business license, or both. Business licenses in Hawaii also exist for selling specific items, such as cigarettes, liquor, etc.
If you plan to have employees, you will need a license to withhold taxes from your employees' paychecks to pay taxes to the government. For example, local businesses must withhold Hawaii income taxes from their employee's wages and pay the withheld taxes to the State of Hawaii each quarter.
Like a withholding license, you will need an unemployment license (UI) and account number if you plan to have employees. Why? As an employer, you must pay state unemployment taxes (commonly referred to as SUTA or SUI) on your employees' wages. In Hawaii, you will receive a UI account number, sometimes referred to as a DOL account number. To determine all your local licensing requirements, visit DCCA's Permit and Licenses site.
Not every business requires a business bank account. However, creating a business bank account is a best practice to help you stay organized and separate your personal and business expenses. When shopping for the best business bank account for your business in Hawaii, consider these factors:
According to various local laws, businesses must purchase several types of insurance to employ workers in Hawaii. These locally mandated insurances include workers' compensation insurance, temporary disability insurance, and employer-sponsored health insurance. This section will highlight each kind required, plus spotlight other business insurances you might consider along the way.
According to local law, every business that employs workers in Hawaii must have workers' compensation insurance. We've written an entire guide for local employers to learn more about workers' compensation in Hawaii. In a nutshell, workers' compensation will provide employees with the critical medical and wage replacement benefits they need if they have a work-related illness or injury. It also protects your business by limiting your liability in lawsuits from such incidents. You can purchase workers' compensation insurance for various local or national providers, including ProService Hawaii. Download The Ultimate Guide to Workers' Compensation in Hawaii to learn more about what's covered and what is not.
Like workers' compensation insurance, employers must provide Temporary Disability Insurance (TDI) according to local law. TDI will provide employees with partial wage replacement benefits to pay for eligible expenses when they cannot work because of an off-the-job injury or illness. Unlike workers' compensation, TDI does not cover medical care. Typically, you can get TDI from your workers' compensation insurance provider.
Next up, healthcare. According to the Prepaid Health Care Act, Hawaii businesses must provide health insurance to eligible employees. Companies must pay at least 50% of the premium cost for eligible employees for single coverage. Generally, employees are eligible for employer-sponsored health insurance if they work at least 20 hours per week for four consecutive weeks. There are multiple ways to shop for health insurance for your small business. For example, you can shop directly with providers like HMSA or Kaiser. Another way to shop is to inquire about health insurance plans with HR partners like ProService Hawaii. If you're shopping for health insurance or other benefits, we've written a helpful guide you should check out: How to Create a Benefits Package That's Right for Your Business.
Businesses are not required to have Employment Practices Liability Insurance (EPLI) by law. However, more companies are purchasing this insurance. Why? 90% of all businesses experience a lawsuit at some point in their lifespan, according to SmallBizDiaily. EPLI protects you against potential lawsuits made by your own employees. EPLI will cover legal fees and other costs incurred when an employee files a workplace rights violation like discrimination, wrongful termination, or sexual harassment.
Hiring your very first employee is a massive milestone in your business journey. It means your business is growing! It also means you have a meaningful opportunity to provide a livelihood for someone else. However, there are many things to consider during recruiting and hiring. This section highlights some critical considerations and the nitty gritty employer rules and regulations you should know.
When you hire workers, you will need a process and a system for paying employees accurately and on time. At first, paying employees may seem pretty straightforward. However, once you start digging into the details, you'll quickly realize it's an administrative beast! To pay employees, you must track hours worked, calculate pay according to labor laws, withhold taxes, make deductions, and distribute payments. And each step includes nitty-gritty details that connect to various labor and tax laws.
So before you can begin hiring, you must determine how you will handle payroll. Some things to consider are costs, the time it will take, and the risks and liabilities you may incur for doing it incorrectly. In general, you have three main options:
We've written extensively on this topic. You can download our free guide: The HR Dilemma: In-House, Outsource, or In-between? Or read our article: Should You Keep HR In-House or Get an HR Partner?
Once you have figured out how to pay employees, you can dig into your recruiting process. Recruiting and hiring the right people is one of the most critical things you can do for your business. It is also one of the top five challenges that Hawaii leaders face today. Successful recruiting comes down to knowing what type of employee you want, where you're willing to compromise (or not), and optimizing your recruiting process for speed and quality. As a local company with over 300 employees, we are no stranger to recruiting challenges. But we've written a blog post summarizing our best 18 Tips for Successful Hiring in Hawaii. Check it out!
Once your candidate accepts your job offer, you need your new employee to complete some hiring paperwork. Here are some of the things you may need to collect:
Additionally, according to labor laws, businesses must report new hires to the Hawaii Child Support Enforcement Agency within a specific time frame from their hire date.
One of your most significant responsibilities as an employer is paying federal and state taxes. Failure to file taxes correctly or on time may result in fines or other penalties. Here are some of the taxes you need to be aware of if you run a business in Hawaii:
Who pays for what varies for each tax type. For example, businesses are wholly responsible for paying FUTA and SUTA taxes. Meanwhile, employees and employers split the cost of FICA taxes. And employees are responsible for paying income taxes. However, as an employer, it's your responsibility to collect/withhold the employee's portion of FICA tax and income tax from their paychecks and remit them to appropriate government agencies.
We know it's a lot to digest. Fortunately, if you decide to outsource your payroll, you don't have to worry about this! A payroll provider, like ProService Hawaii, can calculate and withhold taxes and even file your taxes and payroll reports for you.
Learning how to start a business in Hawaii can be exciting and a bit overwhelming. Especially during the ups and downs of unexpected circumstances like a global pandemic! That's where providers like us come in. ProService Hawaii has been providing Hawaii entrepreneurs and employers with comprehensive payroll and human resource services for over 25 years. As Hawaii's most trusted HR partner, we handle payroll, employment taxes, healthcare, workers' comp, safety programs, HR, and more (to name a few things) so busy entrepreneurs like yourself can focus on doing their best work. We focus our time and energy on this work because we know running a business in Hawaii is no easy feat.
When you choose a partner like ProService Hawaii, you don't just get “human resources services” or some do-it-yourself software. You get a team of certified, local HR professionals at a fraction of the cost of a full-time hire.