Starting a Business in Hawaii
Have you been wondering: just how do I start a business in Hawaii? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Hawaii during a recession?
Hawaii New Business Advantages and Disadvantages
Business Insider called Hawaii the worst state to start a new business in, for the whole country, per a 2016 article. High costs and a burdensome cost of living were the main reasons.
Plus the potential employee education level ranks near the bottom of the 50 states. But Hawaii ranks well in its opportunity share of new entrepreneurs. This is the percent of new business owners employed before starting their businesses. It means they were more likely to start because they saw new opportunities.
Hawaii’s remoteness and unique time zone do not help, either.
The “Hawaii Open for Business” initiative was created as a Hawaii business resource. It creates a more competitive environment within the state. As part of Hawaii’s “Five Point Economic Plan,” this initiative is aimed at creating and retaining new jobs. The idea is also to bring new industries to the islands.
Tourism has always been a mainstay of the Hawaiian economy. However, increasingly the state has been looking to reform business rules and regulations in order to attract outside capital and create new jobs.
But still, what gives?
Fit Small Business praises Hawaii for a great labor market and an above average quality of life, and decent costs of starting a business. Labor market is a measure of both the desirability of an area (of course Hawaii did well here), coupled with the number of people who have bachelor’s degrees.
Taxes and startup activity were decent. Yet access to capital was below average. And the worst was the cost of living – as in, 50th in the nation.
Forbes says Hawaii has a pretty average economic climate and labor supply. Quality of life was below average (some of the discrepancy with Fit Small Business is due to there being some subjective factors for this area). But the economic climate, the regulatory environment, and the business costs ranking were all in the worst ten.
Paradise is costly – and there might not be a good number of potential workers to choose from. And expect costs in all sorts of places. Only you can decide whether it’s worth it to open up shop in Hawaii.
Start a New Business in Hawaii – Initiatives
Part of that strategy includes the “Hawaii Clean Energy Initiative,” tasked with achieving 70% clean energy consumption for the state by 2030. Hawaii has some of the highest energy costs in the nation. By finding alternative energy sources, Hawaii hopes it can expand opportunities for business growth while greatly reducing the $7 billion a year in state wealth exported just to buy foreign oil.
The “Hawaii Innovation Initiative” is intended to build capacity in the state’s creative and entrepreneurial workforce to compete in the global economy. The “Global Links” effort is attempting to increase the range and value of goods and services exchanged between Hawaii and its export markets.
Industries targeted for attention fall under three primary groups: creative industries, technology, and agribusiness. Creative industries include computer and digital media, engineering research and development, and architecture/design services. The technology sector includes biotechnology, computer and engineering services, and technical consulting services.
And agribusiness, which along with tourism has generally made up the majority of Hawaiian business resources, includes agricultural packaging, warehousing, processing, and aquaculture.
Here’s how to start business in Hawaii.
Start a New Business in Hawaii – Hawaii New Business Secretary of State Requirements
Register a Business Name
In Hawaii, an entrepreneur can operate a business using a fictitious name, also known as “Doing Business As” or DBA. A DBA filing allows them to create a name for the business that is different from a personal name, but still unique to all others. A DBA does not have to include the names of any partners or the officially registered name of an LLC or corporation. Search a database of Hawaiian company names.
Business Permits and Licenses
Check out the state Professional and Vocational Licensing page.
Local Permits and Licenses
The easiest way to get local licensing and permits in Hawaii is to use their Professional Business License Service Center.
The online registration will take care of this. And in case you registered another way, you can also start tax registration when you file a BB-1 Form.
Start a New Business in Hawaii – Virtual Offices
As should be expected, Alliance Virtual Offices offers Hawaii virtual business office space in Honolulu, which is fortunately close to Oahu. However, an extensive search does not turn up virtual office space in Maui or Molokai by any of the major players. Entrepreneurs searching for virtual office space on any of the other islands would do well to talk with local business owners or maybe computer user groups to see about a referral. For Kapolei, DaVinci has Hawaii virtual office space.
Start a New Business in Hawaii – Build Business Credit
Small business credit is credit in a company’s name. It doesn’t link to a business owner’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the company.
As such, an entrepreneur’s business and consumer credit scores can be very different.
Because small business credit is separate from individual, it helps to secure a small business owner’s personal assets, in case of a lawsuit or business bankruptcy.
Also, with two distinct credit scores, a small business owner can get two different cards from the same vendor. This effectively doubles purchasing power.
Another advantage is that even startup businesses can do this. Going to a bank for a business loan can be a formula for frustration. But building small business credit, when done the right way, is a plan for success.
Individual credit scores depend upon payments but also other elements like credit usage percentages.
But for company credit, the scores really just hinge on whether a small business pays its invoices promptly.
Start a New Business in Hawaii – Business Fundability™
Building small business credit is a process, and it does not occur without effort. A small business must be Fundable to lending institutions and vendors.
That’s why, a small business will need a professional-looking web site and e-mail address. And it needs to have website hosting from a hosting company.
And, company phone numbers ought to have a listing via ListYourself.net.
Also, the company phone number should be toll-free (800 exchange or the like).
A company will also need a bank account devoted solely to it, and it has to have all of the licenses essential for operating.
Start a New Business in Hawaii – Working with the IRS
Visit the IRS website and get an EIN for the small business. They’re free of charge. Choose a business entity like corporation, LLC, etc.
A company can begin as a sole proprietor. But they should switch to a kind of corporation or an LLC.
This is in order to lessen risk. And it will optimize tax benefits.
A business entity will matter when it pertains to taxes and liability in case of litigation. A sole proprietorship means the business owner is it when it comes to liability and taxes. Nobody else is responsible.
Start a New Business in Hawaii – Starting the Business Credit Reporting Process
Begin at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s websites for the company. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.
By doing so, Experian and Equifax will have something to report on.
First you must establish trade lines that report. This is also referred to as vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can begin to get more credit.
These varieties of accounts tend to be for the things bought all the time. Like marketing materials, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are ordinarily Net 30, rather than revolving. Therefore, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.
You want 3 of these to move onto the next step.
Start a New Business in Hawaii – Monitor Your Business Credit
Know what is happening with your credit. Make sure it is being reported and fix any mistakes ASAP. Get in the habit of taking a look at credit reports. Dig into the particulars, not just the scores.
Update Your Information
Update the details if there are errors or the data is incomplete.
Start a New Business in Hawaii – Fix Your Business Credit
So, what’s all this monitoring for? It’s to challenge any problems in your records. Mistakes in your credit report(s) can be corrected. But the CRAs generally want you to dispute in a particular way. Disputing credit report errors means you specifically detail any charges you challenge.
Start a New Business in Hawaii – A Word about Building Business Credit
Always use credit smartly! Don’t borrow beyond what you can pay off. Keep an eye on balances and deadlines for repayments. Paying off promptly and fully will do more to elevate business credit scores than pretty much anything else.
Establishing company credit pays off. Excellent business credit scores help a business get loans. Your credit issuer knows the business can pay its debts. They know the business is bona fide.
The small business’s EIN connects to high scores and credit issuers won’t feel the need to ask for a personal guarantee.
Business credit is an asset which can help your small business for many years to come.
Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.
Hawaii’s Response to COVID-19
Hawaii is taking these steps in response to the novel coronavirus. Hawaii’s House Resolution No. 54 established the House Select Committee on COVID-19 Economic and Financial Preparedness. The committee will work with representatives from local and state government. They will include private industry and nonprofits to inform the House of Representatives on the State’s economic and financial preparedness.
The Select Committee is tasked with examining economic and financial issues. That includes identifying the potential economic and financial impact to the state. So it also includes developing short-term and long-term mitigation plans. In addition, they will be monitoring COVID-19 conditions and outcomes.
Due to Hawaii’s unique position in reliance on tourism, you should expect for this committee’s mandate to broaden.