Starting a Professional Corporation in Hawaii 2024: Ultimate Guide

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How to Start a Professional Corporation in Hawaii

Licensed professional? Level up your business with Hawaii professional corporation! Enjoy unique benefits like Hawaii LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Hawaii with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Hawaii, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

Start a Professional Corporation

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Hawaii is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Hawaii.

The primary purpose of Hawaii Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Hawaii professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Hawaii.

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Who Can File Under Professional Corporation Laws

Under Hawaii Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Hawaii, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: Hawaii Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in Hawaii are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of Hawaii Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Hawaii: A Guide

Here is a detailed guide to starting a professional corporation in Hawaii that you should follow.

Step 1: Appointment of Resident Agent

The first step in forming a Professional Corporation is appointing Resident Agent in Hawaii. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Hawaii and be available during regular business hours.

We compiled the list of the best registered agent services in Hawaii to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your Hawaii Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Hawaii Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Hawaii Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Hawaii professional corporations must file an annual report with the Hawaii Secretary of State. This document includes essential information about the corporation, including its name, address, Resident Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Hawaii Department of Taxation, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Hawaii Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Hawaii

Here are some of the most common fees when starting a professional corporation in Hawaii.

  • State Laws and Regulations: To form a professional corporation in Hawaii, it is crucial to comply with the state laws and regulations governing professional corporations. The Hawaii Revised Statutes Title 23 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Hawaii is to draft and file the Articles of Incorporation with the Hawaii Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $50 for most professions. However, it is essential to check with the Hawaii Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Hawaii. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Hawaii Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $10 online and $10 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Hawaii. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Hawaii Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Hawaii may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Hawaii Secretary of State every Quarter of the anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $12.50.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Resident Agent Fee: Hiring of Resident Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Hawaii:

Federal income tax

A professional corporation in Hawaii is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Hawaii Professional Corporation is also subject to state taxes, such as the Hawaii franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Hawaii.

Tax deductions and exemptions

A professional corporation in Hawaii can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Hawaii

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in Hawaii avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation (PC) and how is it different from other business entities?
A professional corporation is a specific type of corporation intended for individuals who provide professional services, such as doctors, lawyers, and accountants. It is different from other business entities in that it typically requires specific licenses, registrations, and qualification filings.
What licenses and registrations do I need for starting a professional corporation in Hawaii?
You will need to file for registration with the Department of Commerce and Consumer Affairs’ Business Registration Division, as well as any relevant professional licensing boards, such as the Hawaii Medical Board or the Hawaii State Bar Association.
Can I form a professional corporation in Hawaii with just one member?
Yes, Hawaii allows for the formation of a professional corporation with only one member.
Am I required to file articles of incorporation with the state of Hawaii to start a professional corporation?
Yes, you will need to file articles of incorporation with the Hawaii Department of Commerce and Consumer Affairs’ Business Registration Division.
What must be included in my articles of incorporation for my Hawaii professional corporation?
Your articles must at minimum include the name of the corporation, the purpose of the corporation, the names and addresses of the initial directors, and the number of shares authorized.
Can I use a registered agent service for my Hawaii professional corporation?
Yes, Hawaii requires you to designate a registered agent for your corporation, who can either be an individual with a physical address in Hawaii or a registered agent service.
What is the filing fee for registering my Hawaii professional corporation?
The filing fee for registering a Hawaii professional corporation is $50.
Can I reserve a corporate name before filing my articles of incorporation with the state of Hawaii?
Yes, you can reserve a corporate name for up to 120 days by filing a Name Reservation Request with the Hawaii Business Registration Division.
Can I change my Hawaii professional corporation’s name after it’s been approved?
Yes, you can amend your articles of incorporation to change your professional corporation’s name, but you will also need to file a Name Change Request form with the Hawaii Business Registration Division.
How long will it take for my Hawaii professional corporation to get approved?
State processing times vary, but generally expect a minimum of two weeks after filing.
Do I need to file annual reports for my Hawaii professional corporation?
Yes, you will need to file annual reports and pay an annual fee. This is required to maintain your Hawaii professional corporation’s active status.
Who should I contact if I need help starting a Hawaii professional corporation?
You can contact the Hawaii Business Action Center or the Hawaii State Bar Association for assistance with starting a professional corporation in Hawaii.
What is the Hawaii Professional Corporation Act?
The Hawaii Professional Corporation Act specifies the requirements for and regulations of professional corporations in the state.
Are there any restrictions on who can become a shareholder in a Hawaii professional corporation?
Yes, only individuals licensed to provide professional services in Hawaii can become shareholders of a Hawaii professional corporation.
Can I own other businesses or form another business entity while owning a Hawaii professional corporation?
Yes, individuals owning a Hawaii professional corporation can generally pursue ownership in other non-professional businesses, but should consult with an attorney or licensed CPA.
Can I merge with another corporation as a professional corporation in Hawaii?
Yes, Hawaii professional corporations can merge with other corporations, but should consult with an attorney or licensed CPA.
What protections do shareholders of Hawaii professional corporations have for debts or liabilities incurred by the corporation?
Shareholders are generally protected from personal liability for debts or liabilities incurred by the Hawaii professional corporation.
Can my Hawaii professional corporation have more than one class of shares?
No, Hawaii professional corporations may only have one class of shares.
Can I form a Hawaii professional LLC instead of a professional corporation?
No, Hawaii only recognizes professional corporations for individuals seeking to provide professional services.
What taxes will my Hawaii professional corporation need to pay?
Hawaii professional corporations are subject to state and federal corporate income taxes.
Do Hawaii professional corporations need to have a board of directors?
Yes, Hawaii professional corporations do need to have a board of directors.
Can shareholders be members of the board of directors in a Hawaii professional corporation?
Yes, shareholders can be members of the board of directors in a Hawaii professional corporation.
Can the board of directors hire non-shareholders to provide professional services for the Hawaii professional corporation?
Yes, a Hawaii professional corporation’s board of directors can hire non-shareholders to provide professional services to the corporation.
Are there requirements for meeting minutes for Hawaii professional corporations?
Yes, Hawaii professional corporations must keep detailed records of their bylaws and meeting minutes, and can be required to provide certain records to shareholders upon request.
Can a Hawaii professional corporation be held liable in a lawsuit?
Yes, Hawaii professional corporations can be held liable in a civil lawsuit.
Can I hold a meeting of shareholders for my Hawaii professional corporation outside of the state?
Yes, meetings of shareholders can be held outside of Hawaii.
Can I keep my Hawaii professional corporation’s records electronically?
Yes, the Hawaii Business Corporation Act (HBCA) recognizes electronic files as acceptable recordkeeping and documentation tools.
What can I do if I have unanswered questions about starting a Hawaii professional corporation?
Keep in mind that this list is not exhaustive of all the rules and regulations that apply. Further, laws and policies do change–hence consulting experts remain advisable. Seek expert legal/fiscal advice from industry specialists specialized in business formation laws of Hawaii and can provide specialized advice for steps toward forming a Hawaii professional corporation.
What is a professional corporation in Hawaii?
A professional corporation in Hawaii is a corporation formed by professionals such as doctors, lawyers, dentists, and accountants for the purpose of providing professional services to clients.
Is a professional corporation limited liability in Hawaii?
Yes, a professional corporation in Hawaii offers limited liability protection to its members, which means that the personal assets of the members are protected from business liabilities.
How do I set up a professional corporation in Hawaii?
To set up a professional corporation in Hawaii, you need to file Articles of Incorporation with the Hawaii Department of Commerce and Consumer Affairs. You also need to obtain a Certificate of Good Standing from the Hawaii Bureau of Conveyance.
Does Hawaii require a minimum number of shareholders for a professional corporation?
Hawaii does not require a minimum number of shareholders for a professional corporation.
What types of professionals can form a professional corporation in Hawaii?
Hawaii allows professionals, such as doctors, lawyers, dentists, and accountants, to form a professional corporation.
What is the minimum capital requirement for a professional corporation in Hawaii?
Hawaii does not require a minimum capital requirement for a professional corporation.
Do I need to register a professional corporation in every state where I do business?
If you provide professional services in other states, you may need to register your professional corporation in those states. Each state has its own requirements, so you should consult with an attorney to determine your obligations.
Is a professional corporation required to have a Board of Directors in Hawaii?
Hawaii does not require a professional corporation to have a Board of Directors, but it may be beneficial to have one to oversee the corporation’s operations.
What is an S corporation in Hawaii?
An S corporation in Hawaii is a type of corporation that is treated as a pass-through entity, which means that the corporation’s income is passed through to its shareholders for tax purposes.
Can a professional corporation be an S corporation in Hawaii?
Yes, a professional corporation can elect to be treated as an S corporation for tax purposes in Hawaii.
What are the benefits of forming a professional corporation in Hawaii?
The benefits of forming a professional corporation in Hawaii include limited liability protection, tax benefits, and the ability to raise capital by selling shares in the corporation.
Is the Hawaii Certificate of Good Standing required to form a professional corporation?
Yes, a Hawaii Certificate of Good Standing is required to form a professional corporation in Hawaii.
What are the filing fees for forming a professional corporation in Hawaii?
The filing fees for forming a professional corporation in Hawaii are $50 for the Articles of Incorporation and $5 for the Certificate of Good Standing.
Do I need to file Corporate Bylaws with the Hawaii Department of Commerce and Consumer Affairs?
No, you do not need to file Corporate Bylaws with the Hawaii Department of Commerce and Consumer Affairs, but it is recommended to have them in place to govern the corporation’s operations.
What is the Annual Report filing requirement for professional corporations in Hawaii?
Professional corporations in Hawaii must file an Annual Report with the Hawaii Department of Commerce and Consumer Affairs. The fee for the Annual Report is $15.
How long does it take to form a professional corporation in Hawaii?
The processing time for forming a professional corporation in Hawaii depends on the workload of the Hawaii Department of Commerce and Consumer Affairs but is typically around 1-2 weeks.
Can a professional corporation be a Nonprofit Corporation in Hawaii?
No, a professional corporation cannot be a Nonprofit Corporation in Hawaii.
Can I file the Articles of Incorporation online with the Hawaii Department of Commerce and Consumer Affairs?
Yes, you can file the Articles of Incorporation online using the Hawaii Business Express Website.
Can a foreign professional corporation do business in Hawaii?
Yes, a foreign professional corporation can do business in Hawaii but must register with the Hawaii Department of Commerce and Consumer Affairs.
How often do I need to file the Annual Report for my professional corporation in Hawaii?
You need to file the Annual Report for your professional corporation in Hawaii every year.
Can I change the name of my professional corporation in Hawaii after it has been formed?
Yes, you can change the name of your professional corporation in Hawaii by filing Articles of Amendment with the Hawaii Department of Commerce and Consumer Affairs.
What is the Registered Agent requirement for a professional corporation in Hawaii?
A professional corporation in Hawaii is required to have a Registered Agent who is located in Hawaii and is available during regular business hours to accept legal documents on behalf of the corporation.
Can out-of-state attorneys form a professional corporation in Hawaii?
Yes, out-of-state attorneys can form a professional corporation in Hawaii, but they must comply with Hawaii’s licensing and ethical rules of conduct.
What is the Professional Service Corporation lien law in Hawaii?
The Professional Service Corporation lien law in Hawaii allows certain professionals, such as doctors, to place a lien on a patient’s insurance settlement to secure payment for their services.
How do I open a business bank account for my professional corporation in Hawaii?
To open a business bank account for your professional corporation in Hawaii, you will need to provide the bank with a copy of your Hawaii Certificate of Good Standing and your Articles of Incorporation.
Do I need a business license to operate a professional corporation in Hawaii?
Yes, you are required to obtain a business license in Hawaii to operate a professional corporation.
Are there any ongoing maintenance requirements for a professional corporation in Hawaii?
Yes, there are ongoing maintenance requirements for a professional corporation in Hawaii, including filing an Annual Report and keeping accurate corporate records.
Can I dissolve my professional corporation in Hawaii if I no longer need it?
Yes, you can dissolve your professional corporation in Hawaii by filing Articles of Dissolution with the Hawaii Department of Commerce and Consumer Affairs.
What is the tax filing requirement for a professional corporation in Hawaii?
A professional corporation in Hawaii is required to file a Hawaii Department of Taxation Enterprise Income Tax Return (Form N-30) and a Hawaii Taxation Nonresident Composite Return (Form N-30C) if the corporation has nonresident shareholders, among other state and federal tax requirements.

Also Read

How to Save Money While Forming Hawaii Professional Corporation

One of the first things to consider when looking to save money on forming a Hawaii Professional Corporation is to do your research and educate yourself on the process. Understanding the requirements and steps involved in the formation of your professional corporation can help you avoid any unnecessary costs or fees that may arise from misunderstandings or mistakes along the way. By taking the time to familiarize yourself with the process upfront, you can make more informed decisions and potentially save money in the process.

Another way to save money on forming a Hawaii Professional Corporation is to carefully consider the legal structure of your corporation. Choosing the right legal structure can have a significant impact on the costs associated with forming and maintaining your professional corporation. For example, selecting a Limited Liability Company (LLC) as the legal structure for your professional corporation may come with lower filing fees and ongoing administrative costs compared to a traditional corporation. By evaluating your options and choosing the legal structure that best fits your needs and budget, you can save money in the long run.

When it comes to filing your paperwork and documents with the state of Hawaii, consider handling the process yourself instead of hiring a professional service or attorney. While seeking professional assistance can provide peace of mind and ensure the paperwork is completed correctly, it can also come with a hefty price tag. By taking the time to thoroughly review the requirements and guidelines provided by the state of Hawaii, you may be able to successfully file your paperwork on your own and save money on unnecessary service fees.

Additionally, consider leveraging online resources and tools to streamline the formation process and save money on professional fees. There are numerous online platforms and services available that offer affordable solutions for forming a professional corporation, such as online filing services and legal document templates. By utilizing these resources, you can save time and money on professional fees while still ensuring that your professional corporation is set up correctly and compliant with state regulations.

Lastly, consider networking with other professionals and seeking advice from those who have experience in forming a Hawaii Professional Corporation. By connecting with other professionals in your industry or seeking guidance from mentors who have gone through the process themselves, you can gain valuable insights and tips that can help you save money and avoid common pitfalls. Building a network of support can not only provide guidance and advice but may also lead to opportunities for cost-saving collaborations or partnerships in the future.

Forming a Hawaii Professional Corporation can be a rewarding process, but it doesn’t have to break the bank. By taking a proactive and informed approach to the formation process, you can save money on unnecessary costs and expenses while setting yourself up for success in your professional practice.

Conclusion

Hawaii Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Hawaii.

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