Hawaii law allows a business to incorporate and be identified as its own legal entity. An incorporated business acts in its own name, whether buying and selling property, agreeing to contracts or exercising legal rights. In Hawaii, the process of incorporation is begun by filing with the Secretary of State in accordance with certain guidelines.
Benefits of Incorporation in Hawaii
An incorporated business enjoys certain advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to fulfill its liabilities. A corporation also allows creditors in the Hilo area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to get loans more easily. Finally, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee might be charged in Hawaii for any business that wants to incorporate. Also, a corporation is taxed as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local Hilo lawyer, you can avoid this disadvantage.