Starting a business in Hawaii is exciting. But the Aloha State has a few unique requirements that trip up newcomers and locals alike. Hawaii is the only state with a General Excise Tax instead of a sales tax. It requires health insurance for most employees under the Prepaid Health Care Act. And the business registration process runs through the Department of Commerce and Consumer Affairs (DCCA), not the Secretary of State.

This guide walks you through every step, from choosing your business structure to running your first payroll. Follow it in order and you will be legally set up, properly licensed, and ready to operate.

Who is this guide for? Anyone starting a business in Hawaii, whether you are launching a food truck in Kailua, opening a retail shop in Lahaina, starting a consulting practice in Honolulu, or running an online business from Hilo. This guide covers the legal and administrative steps every Hawaii business must complete.

Step 1: Choose Your Business Structure

Your business structure affects everything: your personal liability, how you pay taxes, the paperwork you file, and how easy it is to bring on partners or investors. Hawaii recognizes the same entity types as other states, but there are Hawaii-specific tax considerations you should understand before you choose.

Sole Proprietorship

The simplest structure. You and the business are legally the same entity. No formation paperwork is required with DCCA. You just start operating (though you still need a GET license and may need a trade name registration).

  • Pros: No filing fees, no annual reports, simple tax filing (Schedule C on your personal return), full control
  • Cons: You are personally liable for all business debts and lawsuits. If someone sues the business, your house, car, and personal savings are on the line. No separation between personal and business assets.
  • Hawaii tax note: Business income passes through to your personal Hawaii income tax return (rates range from 1.4% to 11%). You also owe GET on all gross receipts.

General Partnership

Two or more people operating a business together. Like a sole proprietorship but with partners. You can register with DCCA but it is not required for a general partnership.

  • Pros: Easy to form, shared resources and expertise, pass-through taxation
  • Cons: Each partner is personally liable for the actions of every other partner. If your partner signs a bad contract, you are both on the hook. This is the riskiest structure for multi-owner businesses.
  • Hawaii tax note: The partnership files a Hawaii Form N-20 information return. Income passes through to each partner’s individual Hawaii return.

Limited Liability Company (LLC)

The most popular choice for Hawaii small businesses, and for good reason. An LLC gives you liability protection (your personal assets are shielded from business debts) with the flexibility of pass-through taxation.

  • Pros: Personal liability protection, flexible management structure, pass-through taxation by default, relatively simple compliance, credibility with vendors and banks
  • Cons: Filing fees ($50 online at DCCA), annual report required ($15/year), operating agreement recommended (though not legally required)
  • Hawaii tax note: Single-member LLCs are taxed as sole proprietorships by default. Multi-member LLCs are taxed as partnerships. You can elect S-Corp or C-Corp taxation if it benefits you. All LLCs owe GET on gross receipts.
Most Hawaii small business owners choose an LLC. It gives you real liability protection for a minimal cost ($50 to form, $15/year to maintain). Unless you have a specific reason to choose another structure, an LLC is almost always the safest starting point. Read our complete Hawaii LLC formation guide for detailed instructions.

S-Corporation

An S-Corp is not a business entity. It is a tax election. You form an LLC or corporation with DCCA, then file IRS Form 2553 to elect S-Corp tax treatment. This can save you money on self-employment taxes if your business earns enough.

  • Pros: Potential self-employment tax savings (you pay yourself a “reasonable salary” and take remaining profit as distributions, which are not subject to self-employment tax), liability protection, credibility
  • Cons: Must pay yourself a reasonable salary (payroll is mandatory), more complex accounting, stricter IRS rules, limited to 100 shareholders, only one class of stock
  • Hawaii tax note: Hawaii recognizes the S-Corp election. The S-Corp files Hawaii Form N-35. Income passes through to shareholders’ personal returns. The S-Corp itself does not pay Hawaii income tax, but it does owe GET on gross receipts. The self-employment tax savings typically only make sense when your net profit exceeds $50,000–$70,000 per year.

C-Corporation

A separate legal entity that pays its own taxes. This creates “double taxation”: the corporation pays corporate income tax, and shareholders pay personal income tax on dividends.

  • Pros: Strongest liability protection, unlimited shareholders, multiple stock classes, easiest to attract investors, can retain earnings in the corporation at the 21% federal rate
  • Cons: Double taxation (corporate level + personal level on dividends), most complex and expensive to maintain, corporate formalities required (board meetings, minutes, bylaws)
  • Hawaii tax note: Hawaii corporate income tax rates range from 4.4% to 6.4%, on top of the 21% federal corporate tax rate. Plus GET. C-Corps are generally only recommended if you plan to seek venture capital or go public.
Not sure which structure is right? Read our detailed Hawaii Business Entity Types comparison for a side-by-side breakdown. When in doubt, talk to a Hawaii CPA or business attorney before filing. It is much easier (and cheaper) to choose the right structure up front than to change it later.

Step 2: Name Your Business

Your business name is more than a marketing decision. It has legal implications. Hawaii has specific rules about business names depending on your entity type.

Check Name Availability

Before you commit to a name, search the Hawaii DCCA Business Registration Division (BREG) database to make sure it is not already taken:

  1. Go to hbe.ehawaii.gov/documents/search.html
  2. Search for your desired business name
  3. Check for exact matches and similar names that could cause confusion

Hawaii will reject your registration if your name is too similar to an existing registered business. The name must be “distinguishable on the record” from other registered names.

Name Requirements by Entity Type

  • LLC: Must include “Limited Liability Company,” “LLC,” or “L.L.C.” in the name
  • Corporation: Must include “Corporation,” “Incorporated,” “Corp.,” or “Inc.”
  • Sole Proprietorship/Partnership: If operating under a name other than your legal name, you must register a Trade Name (DBA) with DCCA

Trade Name (DBA) Registration

If you are a sole proprietor named John Smith but want to do business as “Aloha Web Design,” you need to register that trade name with DCCA. The filing fee is $50. You can file online through Hawaii Business Express (hbe.ehawaii.gov).

Pro tip: Also check if the matching domain name and social media handles are available before you finalize your business name. You do not want to build a brand around a name and then discover someone else owns the .com.

Step 3: Register with DCCA/BREG

Hawaii’s Department of Commerce and Consumer Affairs (DCCA), Business Registration Division (BREG) handles all business entity filings. This is the Hawaii equivalent of a Secretary of State.

What to File

  • LLC: Articles of Organization: $50 (plus $25 for expedited handling)
  • Corporation: Articles of Incorporation: $50 (plus $25 for expedited handling)
  • Partnership (LP/LLP): Certificate of Limited Partnership: $25; LLP: general partnership registration $15 plus Statement of Qualification $25
  • Trade Name (DBA): Trade Name Registration: $50 (plus $20 for expedited handling)
  • Sole Proprietorship: No DCCA registration required (unless using a trade name)

How to Register Online

  1. Go to hbe.ehawaii.gov (Hawaii Business Express)
  2. Create an account or log in
  3. Select the type of entity you are forming
  4. Enter your business name, registered agent, principal office address, and other required details
  5. Pay the filing fee by credit card
  6. Your registration is typically processed within a few business days for online filings
Registered Agent Requirement: LLCs and corporations must designate a registered agent in Hawaii: a person or company with a physical Hawaii address who can accept legal documents on behalf of your business. You can serve as your own registered agent if you have a Hawaii address (P.O. boxes are not accepted).

Get Your Federal EIN

After registering with DCCA, apply for a Federal Employer Identification Number (EIN) from the IRS. You need an EIN if you:

  • Have or plan to have employees
  • Operate as an LLC with more than one member, a corporation, or a partnership
  • Want to open a business bank account (most banks require it)

Apply online at IRS.gov. It is free and you get your EIN immediately. Do not pay a third-party service for this. The IRS does not charge a fee.

Watch out for EIN scam sites. Many websites charge $50–$200 to file your EIN application. The IRS provides this service for free. Make sure you are on irs.gov, not a lookalike site.

Step 4: Get Your General Excise Tax (GET) License

This is the single most important step that new Hawaii business owners overlook. Every business operating in Hawaii must have a General Excise Tax license before conducting any business activity. This is not optional. This is not “when you start making real money.” This is before dollar one.

Do not skip this step. Operating without a GET license in Hawaii is illegal. The fine for doing business without a license is up to $500 (from $500 to $2,000 for a cash-based business) under HRS §237-9, and back taxes, interest, and additional penalties will apply. The license only costs $20 and can be obtained online in minutes. There is no reason not to get it immediately.

What Is the GET?

Hawaii does not have a traditional sales tax. Instead, it has the General Excise Tax (GET), which is levied on all business gross receipts, not just retail sales. This means the GET applies to services, wholesale transactions, rentals, commissions, and virtually every other type of business income. The current GET rate is 4% for most businesses, plus a 0.5% county surcharge that all four counties levy (bringing the effective rate to 4.5% statewide).

Unlike a sales tax, the GET is technically a tax on your business, not on the customer. However, Hawaii law allows you to visibly pass the tax on to customers (most businesses do).

How to Get Your GET License

  1. Go to hitax.hawaii.gov (Hawaii Tax Online)
  2. Create an account
  3. File Form BB-1 (Basic Business Application)
  4. Pay the $20 license fee
  5. Your license is processed and your GET ID is issued, often immediately for online filings

The GET license is valid for the life of your business (it does not expire or need renewal). Once you have it, you must file periodic GET returns (monthly, quarterly, or semi-annually), depending on your expected tax liability. Most new small businesses file quarterly using Form G-45, with an annual reconciliation on Form G-49.

File your GET returns even if you had no revenue. If you are registered for GET, you must file returns on schedule even if your gross receipts were $0 for the period. Failure to file results in penalties. If you are not actively doing business, you can file a zero return.

For a deep dive on GET rates, filing schedules, common mistakes, and how to pass the tax to customers, read our complete Hawaii GET guide.

Step 5: Register for Hawaii Withholding Tax

If you will have employees (or plan to hire them soon), you must register to withhold Hawaii income tax from their paychecks. This is separate from your GET registration, but you can do both through the same system.

How to Register

  1. Use the same Form BB-1 at hitax.hawaii.gov that you used for GET
  2. Check the box for withholding tax when completing the application
  3. If you already filed your BB-1 for GET only, you can amend it to add withholding tax

Once registered, you will withhold Hawaii income tax from each employee’s paycheck based on their Form HW-4 (Hawaii’s equivalent of the federal W-4). You must file Form HW-14 (the quarterly Withholding Tax Return) each quarter and deposit withheld taxes with Form VP-1 quarterly, monthly, or semiweekly, depending on your annual withholding.

Federal withholding too: Do not forget that you also need to withhold federal income tax and remit it to the IRS. You will need to register with the IRS (your EIN handles this) and file federal Form 941 quarterly. Hawaii withholding and federal withholding are completely separate systems.

Step 6: Register for Unemployment Insurance (UI) with DLIR

If you have employees, you must register with the Hawaii Department of Labor and Industrial Relations (DLIR) for Unemployment Insurance (UI) tax. This is a state payroll tax paid by the employer. It is not deducted from employee wages.

How to Register

  1. Go to uiclaims.hawaii.gov (the DLIR employer site; paper Form UC-1 is no longer accepted) or contact the DLIR Unemployment Insurance Division
  2. Complete the online employer registration
  3. You will receive a Hawaii UI employer account number and your initial tax rate

UI Tax Basics

  • Who pays: The employer. UI tax is not withheld from employee wages in Hawaii.
  • Tax rate: New employers receive an initial rate set by the DLIR (2.40% for 2026). Your rate adjusts over time based on your experience rating; specifically, how many former employees have filed unemployment claims against your account.
  • Taxable wage base: UI tax applies to each employee’s wages up to $64,500 for 2026 (the taxable wage base is adjusted annually by the DLIR).
  • Filing: You will file quarterly UI contribution reports and pay the tax due.
Register early. You should register with DLIR before your first employee’s start date. Do not wait until the end of the quarter. Late registration can result in penalties and makes your first quarterly filing more complicated.

Step 7: Get Required Insurance

Hawaii has some of the most employee-friendly insurance requirements in the country. If you have employees, you must carry several types of coverage. These are not optional.

Workers’ Compensation Insurance

Hawaii requires workers’ compensation insurance for all employees, including part-time workers. There is no minimum employee count or hours threshold. Even if you have a single part-time employee working five hours a week, you must carry workers’ comp.

  • Purchase from a licensed insurance carrier or through the Hawaii Employers’ Mutual Insurance Company (HEMIC)
  • Covers medical expenses, lost wages, and rehabilitation for employees injured on the job
  • Failure to carry workers’ comp carries a penalty of at least $500 or $100 per employee per day (HRS §386-123), plus personal liability for injuries

Read our complete Hawaii workers’ comp guide for details on coverage, costs, and compliance.

Temporary Disability Insurance (TDI)

Hawaii is one of the few states that requires Temporary Disability Insurance. TDI provides partial wage replacement to employees who cannot work due to a non-work-related illness or injury (work-related injuries are covered by workers’ comp).

  • You can purchase TDI coverage through an insurance carrier or set up an approved self-insured plan
  • Employers and employees can share the cost of TDI premiums (up to half the cost, but no more than 0.5% of the employee’s weekly wage, with a $7.50 per week maximum for 2026, can be deducted from the employee)
  • A notice of insurance must be filed with the DLIR within 30 days after you obtain coverage (HRS §392-42); your carrier can confirm it has done this

Prepaid Health Care Act (PHCA) Compliance

Hawaii’s Prepaid Health Care Act (the first employer health insurance mandate in the nation) requires employers to provide health insurance to employees who work 20 or more hours per week for four consecutive weeks.

  • The plan must meet minimum coverage standards set by the PHCA
  • Employers must pay at least 50% of the premium cost
  • Employees can be required to contribute up to half the premium, but no more than 1.5% of their monthly wages
PHCA is in addition to the federal ACA. Hawaii employers must comply with both the Hawaii Prepaid Health Care Act and the federal Affordable Care Act. The PHCA threshold (20 hours/week) is more aggressive than the ACA threshold (30 hours/week for large employers). If an employee qualifies under PHCA, you must provide coverage regardless of your company size.

For a full breakdown of all required and recommended insurance, see our Hawaii business insurance guide.

Step 8: Open a Business Bank Account

Keeping your business finances separate from your personal finances is more than good practice. It is essential for maintaining your liability protection (especially if you are an LLC or corporation) and staying organized for tax time.

What You Need to Open a Business Account

  • EIN (or SSN if you are a sole proprietor without an EIN)
  • DCCA registration documents (Articles of Organization for LLCs, Articles of Incorporation for corps)
  • Operating agreement (for LLCs) or bylaws (for corporations); some banks require these
  • GET license (some Hawaii banks ask for this)
  • Personal identification for all signers on the account

Choosing a Bank

Hawaii has several strong local banking options:

  • First Hawaiian Bank: Largest Hawaii-based bank, full-service business banking
  • Bank of Hawaii: Extensive branch network, good digital banking tools
  • American Savings Bank: Popular with small businesses, competitive fees
  • Central Pacific Bank: Strong small business lending programs
  • Hawaii National Bank: Community-focused banking
Use a local bank. While national banks work fine, a Hawaii-based bank will understand your business context, offer more relevant services, and provide in-person support at local branches. Relationships matter in Hawaii business. Your banker can be a valuable connection.

Open both a checking account (for daily operations) and a savings account (for setting aside tax payments). Many Hawaii business owners set aside 30–35% of revenue for taxes (GET + income tax + payroll taxes) in a separate savings account so they are never caught short at filing time.

Step 9: Set Up Your Accounting System

Good recordkeeping is not glamorous, but it will save you stress, money, and potential legal trouble. Hawaii’s GET system means you need to track all gross receipts, not just sales, so your accounting system needs to capture everything from day one.

Choosing Accounting Software

For most Hawaii small businesses, one of these options will work well:

  • QuickBooks Online: The industry standard for small business accounting. Handles invoicing, expense tracking, bank reconciliation, and generates reports your CPA will love.
  • Xero: Cloud-based alternative to QuickBooks with a clean interface and strong bank feed integrations.
  • Wave: Free accounting software suitable for freelancers and very small businesses. Limited features compared to QuickBooks or Xero.
  • FreshBooks: Great for service-based businesses that primarily need invoicing and time tracking.

What to Track from Day One

  • All gross receipts (every dollar that comes in; you need this for GET returns)
  • All business expenses (with receipts; the IRS requires documentation)
  • GET collected from customers (if you pass the tax through)
  • Mileage (if you use your vehicle for business)
  • Payroll records (wages, withholding, employer taxes)
  • Asset purchases (equipment, furniture, vehicles)
Consider hiring a bookkeeper. Many Hawaii small business owners try to handle their own books and fall behind, leading to messy records and missed deductions. A professional bookkeeper familiar with Hawaii taxes (especially GET) can save you far more than they cost. Pacific Data Services offers bookkeeping services specifically designed for Hawaii businesses.

Step 10: Set Up Payroll

If you have employees, payroll is one of the most complex and high-stakes parts of running a Hawaii business. Hawaii payroll involves federal withholding, state withholding, GET (on your service fees if you are a payroll provider), UI tax, TDI, PHCA compliance, workers’ comp, and more. Getting any of it wrong can result in penalties, interest, and even personal liability.

What Hawaii Payroll Involves

  • Federal income tax withholding (based on employee’s W-4)
  • Hawaii income tax withholding (based on employee’s HW-4)
  • Social Security and Medicare (FICA) (6.2% + 1.45% employee share, matched by employer)
  • Federal Unemployment Tax (FUTA) (employer-paid)
  • Hawaii Unemployment Insurance (employer-paid, quarterly filing)
  • TDI contributions (shared between employer and employee)
  • PHCA health insurance compliance (for employees working 20+ hours/week)
  • Workers’ comp premium payments (employer-paid)
  • New hire reporting (within 20 days of hire; see our new hire reporting guide)

Your Options for Running Payroll

Option 1: Do it yourself. Technically possible using payroll software like QuickBooks Payroll or Gusto, but you are responsible for calculating all taxes correctly, filing returns on time, and staying current with Hawaii’s unique requirements. One mistake can be costly.

Option 2: Hire a payroll provider. This is what most Hawaii businesses do once they have employees. A good payroll provider handles all calculations, filings, deposits, and compliance. The cost is typically a few dollars per employee per pay period, far less than the cost of a penalty for late or incorrect filing.

Why local matters for payroll. National payroll companies often struggle with Hawaii’s unique requirements: GET, TDI, PHCA, and the state’s specific withholding rules. A Hawaii-based payroll provider like Pacific Data Services (PDS) knows these requirements inside and out. PDS has been handling Hawaii payroll since 1969 and works exclusively with Hawaii businesses.

Payroll Filing Deadlines

  • Federal 941: Quarterly (by the last day of the month following the quarter end)
  • Hawaii HW-14: Quarterly, by the 15th of the month after the quarter (deposits may be due monthly or semiweekly)
  • UI contributions: Quarterly
  • W-2s: Annually by January 31
  • Federal tax deposits: Monthly or semi-weekly depending on your total tax liability

See our Hawaii payroll overview for a complete breakdown of payroll requirements, and check the 2026 Hawaii tax calendar for every deadline.

Putting It All Together: Your Startup Checklist

Here is a summary checklist you can use to track your progress:

  1. Choose your business structure (LLC for most people)
  2. Choose and search your business name at DCCA
  3. Register with DCCA/BREG at hbe.ehawaii.gov
  4. Get your EIN from the IRS (free, instant online)
  5. Get your GET license via Form BB-1 at hitax.hawaii.gov ($20)
  6. Register for withholding tax (if you will have employees)
  7. Register for UI with DLIR (if you will have employees)
  8. Get workers’ comp, TDI, and PHCA-compliant health insurance (if you will have employees)
  9. Open a business bank account
  10. Set up accounting/bookkeeping
  11. Set up payroll (or hire PDS to handle it)
The most common mistake new Hawaii business owners make is starting to operate before they have their GET license. Someone starts freelancing, picks up a few clients, deposits checks, all without a GET license. Then they find out they owe back taxes, penalties, and interest on every dollar they earned. The license costs $20. Get it before you earn your first dollar.
How long does all this take? If you are organized, you can complete Steps 1 through 6 in a single day. Insurance setup (Step 7) may take a few days to get quotes and bind policies. Banking (Step 8) is usually same-day if you have your documents ready. Accounting and payroll setup (Steps 9 and 10) can be done within a week. From start to finish, most businesses can be fully operational within one to two weeks.
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Need Help Getting Started? Talk to PDS.

Pacific Data Services has helped thousands of Hawaii businesses get set up and stay compliant since 1969. From payroll and bookkeeping to GET filing and tax compliance, our local team handles the details so you can focus on building your business. Free consultation. No obligation. No long-term contracts.

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Disclaimer

This article is for general informational purposes only and does not constitute legal, tax, or professional advice. Laws and regulations change frequently. Always consult a qualified attorney, CPA, or professional familiar with Hawaii law before making business decisions.

Pacific Data Services and Hawaii Business Hub make no warranties regarding the accuracy, completeness, or timeliness of the information presented here.