12 Steps to Starting a Small Business in Hawaii and Living Your Best Island Life

If you’ve always dreamed about living that laid-back island life, opening a small business in Hawaii might sound like the perfect way to create a new source of income to fund your new lifestyle.

But moving to a relatively isolated island state with a distinctly different vibe from the rest of the country can be a hard transition — especially if you’re trying to start a small business at the same time.

Fortunately, establishing a small business in Hawaii is pretty straightforward. We’ve outlined exactly how to start a small business in the Aloha State. 

Following these steps can help you transition to full-time business owner and part-time beach bum without many hiccups along the way.

Every successful business starts with a great idea, but what counts as a great business idea in one area of the country might be a bad one somewhere else. 

If your business idea doesn’t fill a specific need within the community, it isn’t likely to succeed. 

Before retiring early and uprooting your life, do extensive market research to make sure your idea will have a built-in audience and isn't in an oversaturated market.

Each Hawaiian island has a distinct personality, population, and mini-economy. For instance, Maui is a top tourist destination, Kauai is sparsely populated with soaring housing prices, and Oahu is home to the state’s major metropolitan area, Honolulu. 

Settling on the right place will have a big impact on whether or not you and your business will thrive in Hawaii.

One of the most important things to research before starting a business in Hawaii is whether or not you can even afford to live there. Hawaii has the highest cost of living of any state in the nation. 

Housing, food, and transportation in Hawaii are so high that the cost of living in Honolulu is estimated to be 88% higher than the national average in the U.S., with housing alone estimated to be about 200% more expensive.

So before you uproot your entire life, take a cold, hard look at your finances and ask yourself if moving to Hawaii and opening a business there will work with your retirement budget.

Your business can’t have the same name as any other business registered with the state. 

Once you have a name you love, search the Hawaiian state government’s business site, Hawaii Business Express, to make sure your name hasn’t been taken. If it has, you’ll need to start another brainstorming session.

Before you can register your business with the Hawaiian state government, you need to figure out what business structure you’re going to have. 

The Hawaiian government site has a page explaining different business entities, but you’ll typically register as either an LLC or a corporation.

If you’re the sole owner of your business, you’ll probably register your business as a single-member LLC. If you have a business partner, you’ll probably register as a multi-owner LLC. 

If you’re opening a more complicated business with multiple owners and investors, you’ll likely register as either a C corporation or an S corporation.

Now that you have your idea, your name, and your business structure down, you can actually start to register your business. 

First things first: Create an account on eHawaii.gov. From there, you can go to the homepage of the Hawaii Business Express site to submit your articles of organization (for an LLC) or articles of incorporation (for a corporation).

Your business’s articles of incorporation or organization will include information like the business’s name and address, which could be your home address if you’re working from home. 

You’ll also specify if you and your business partners are or aren’t responsible for the business’s debts and liabilities. (Hint: If you’re filing as an LLC, or limited liability company, you won’t be personally responsible for your business’s liabilities.)

While filing your business’s articles, you’ll have to specify if you or someone else is the business’s registered agent. 

A registered agent is someone who can legally handle your business’s finances, including taxes. That person must be physically present in Hawaii. 

You can find a list of registered agents on the Hawaii Business Express’s agent search page. Note that each search costs $2.

Once you’ve typed in all your information, you need to make a one-time non-refundable payment of $50. From there, you can expect to hear back from the state government with confirmation of your business registration within three to five business days. 

If you need the business to be registered immediately, you can pay an extra $25 to expedite the process and get your business registration within one business day.

If you’re the sole owner of your business, you don’t necessarily have to separate your business and personal finances — but you should strongly consider it. 

Having one can protect you if your company goes under and can also help you keep better track of your business finances.

Once you have your business bank account, apply for an Employer Identification Number (EIN) from the federal government. 

This number is basically a Social Security Number for your business, meaning it’s a unique number the government uses to identify your business for tax purposes.

Your business is now registered with the state government, but you might need additional licenses to operate legally. 

Some businesses, including liquor stores and restaurants, have to get certain licenses or certifications proving that they’re in compliance with all state and federal laws. You can learn more about which licenses you need, if any, on the Hawaii state site.

Starting a small business is a big lift, whether you’re on Hawaii’s Big Island or on the U.S. mainland. 

But after your idea is off the ground, you can likely turn it into a solid way to boost your bank account and supplement your Social Security once you retire. 

And with a little planning and thorough consideration of the pros and cons, you can even make your dream of loving life in your own tropical paradise a reality.