Benefits of a corporation
When you form a corporation, you establish limited liability, which means that the corporation’s shareholders do not have personal liability for the corporation’s debts and obligations. A corporation’s limited liability may also help protect your personal assets if an employee is sued.
Requirements for incorporating in Hawaii
Preparing your articles of incorporation
A corporation’s existence begins when you file articles of incorporation with the state. To form a corporation, you must file the articles of incorporation with the Business Registration Division of the Department of Commerce and Consumer Affairs and pay a fee.
The articles may contain many provisions, but they must contain the following:
- Name of the corporation
- Mailing address of the corporation’s principal office
- Details on corporate stock structure
- Registered agent
- Names and addresses of incorporators
A corporation can have different types of stock, called classes or series. These types of stocks can have different advantages. For example, one can offer voting rights while another may not. In regards to stock structure, the articles of incorporation must include the following information:
- The articles of incorporation must list the total number of shares the corporation is authorized to issue.
- If there is more than one class of shares, the articles must list the number of shares in each class and provide a distinguishing designation for each class. Before shares in a class are issued, the articles must state the preferences, limitations, and relative rights of that class.
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Naming your corporation
Before you file articles of incorporation, you should research whether your proposed corporate name is available. You can conduct a preliminary search of registered business names on the Business Registration Division website. You can reserve a corporate name for 120 days by filing an application with the Business Registration Division. Your corporation name must meet the following requirements:
- Your corporation’s name must contain the words “corporation,” “incorporated,” or “limited,” or the abbreviations “corp.,” “inc.,” or “ltd.”
- The name cannot be the same as or substantially similar to the name of any entity registered or authorized to conduct business in Hawaii, the fictitious name of an out-of-state entity doing business in Hawaii, a trade name, trademark, or service mark registered in Hawaii or a name that has been reserved.
An incorporator is responsible for filing the articles of incorporation with the Business Registration Division. Incorporators’ names and addresses must be listed in the articles of incorporation.
When specifying incorporators, you must adhere to the following guidelines:
- Your corporation may have one or more incorporators.
- An incorporator must be a person.
- If the articles of incorporation do not list directors, the incorporators must hold an organizational meeting to elect directors. Directors may also approve bylaws. Once the directors have been chosen, the incorporators have no further duties.
Corporate directors determine corporate policies and strategies and are responsible for implementing them. Directors must exercise good business judgment and be diligent and prudent in managing the corporation’s affairs.
When specifying your corporation’s directors, you must adhere to the following guidelines:
- There must be at least one director.
- There is no other limit on the number of directors. The number of directors should be established in the articles of incorporation or bylaws.
- Hawaii does not have specific eligibility requirements for directors, although your articles of incorporation can establish qualifications. Directors do not have to be Hawaii residents or shareholders of the corporation.
Specifying a registered agent
A registered agent receives legal documents that are addressed to the corporation and forwards them to the corporation.
When specifying a registered agent for your corporation, you must adhere to the following guidelines:
- The articles of incorporation must list the registered agent’s name and business address. If the agent is an entity, the articles should list the state or country where the entity was formed.
- The registered agent may be an individual who resides in Hawaii or a business entity formed in Hawaii or authorized to transact business in Hawaii.
Stating a corporate purpose
Although some states require you to state your corporation’s purpose in the articles of incorporation, this is not required in Hawaii. Every Hawaii corporation has a purpose of engaging in any lawful business.
Determining incorporation bylaws
A corporation’s bylaws describe the way the corporation will operate. Bylaws are not filed with the state but are kept at the corporation’s place of business.
Bylaws include provisions for managing the affairs and regulating the business of the corporation. Typically, they establish the number of officers and directors and specify how directors’ and shareholders’ meetings will be conducted and how voting will occur.
When defining your corporation’s bylaws, you must adhere to the following guidelines:
- The board of directors or incorporators must adopt bylaws.
- Bylaws must be consistent with the law and the articles of incorporation.
Costs of incorporating in Hawaii
The Business Registration Division of Hawaii requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.
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