If you are a licensed professional in Hawaii and looking to protect your assets while doing business, forming a professional corporation (PC) is recommended. The biggest benefit of forming a PC is its ability to limit personal liability to errors, omissions, and negligence committed by other shareholders or employees within the corporation. This guide will outline the steps to form a professional corporation in Hawaii.
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Step 1: Choose a Name for Your Professional Corporation
The first step in forming a PC is to choose a unique name that complies with the Hawaii Department of Commerce and Consumer Affairs (DCCA) naming standards. Some considerations for choosing a name can be:
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- Thinking about your field - Try choosing a name that reflects your profession (e.g. "Smith Law Corporation" or "Johnson & Associates Medical Services d.b.a Johnson Health Care")
- Make it unique - Ensure that the name isn't already taken or too similar to another business name
- Describe your work - You can also add terms such as "professional corporation" or "P.C." to your company name to reflect your status as a licensed professional
To make sure that your chosen name isn't already in use, search the Hawaii DCCA business entity name database or Hawaii Yellow Pages directory. It's also mandatory to have the words “Professional Corporation” or "PC" at the end of your business name.
Step 2: File the Articles of Incorporation with the Hawaii DCCA
Once you have chosen a name for your PC, it's time to file the articles of incorporation with the Hawaii DCCA. Articles of incorporation contain the following information:
- Your corporation's name and its principal place of business address
- The name and addresses of your corporation's directors and officers
- Your corporation's professional purpose or objective (i.e., to engage in the practice of accounting, law, medicine or dentistry in Hawaii)
- The number of shares of stock that your corporation is authorized to issue, the subclasses, Designations, and whether such shares are with par value or without par value
Submit your completed "Articles of Incorporation for Domestic Profit Organizations (Professional)" with the DCCA Business Registration Division Corp Division. The DCCA reviews the document for compliance, approves it if within the requirements, and deems it "filed." After which, your PC’s articles of incorporation will be valid within 90 days, expenses are roughly about $52.16 as of 06/17/2021.
Step 3: Obtain Necessary Professional Licenses and Permits
Obtaining necessary licenses and permits are not solely essential to PC formation in Hawaii only, but also part of the prerequisite in completing professionalism within the state, except for Attorneys because they are regulated by one of the parts of the judiciary.
Regardless of which industry area, prior to initiating operations for your corporation, it is essential obtaining the licenses withholding significance with the trade of your Corporation. Additional licenses or permits you may need include general business licensing governed by local governments, federal employment tax registration and submission within time limits.
Ensure to explore adequately about your every needed permit before initiation for your company - gaining thorough knowledge can help save time and avoid unpleasant fines.
Step 4: Draft and Adopt Bylaws and Competent Agreements
The Bylaws of your Corporation or PC portend as its rule book to establish accountability protocol which guarantees the minimum proficiency, accuracy, and honesty dedication towards governing.The bylaws of the PC outline concise guidance on corporate operation, delineation of liability, company committee election, and jobs of distinct roles within the firm alongside various formal decision-making methods.
For instance, professional corporations in Hawaii mandate detailed provisions for unappoked shareholder status, whether and how dislodgement can ensue, non-competition and medical insecurity discourse. Though Laws concerning Pro Practice Corporations may differ, it's Always recommended to always involve legal experts.
Professional agreements also portend similar Importance just as bylaws because they can systematically limit responsibility to personal vulnerabilities such as undervalued advice or inadequacy. Also, every corporate firm or any business venture within the professional service sector requires at least one practice principal that owns 25% or owns an affilated professional license known as a Qualified Ally.
Ensure to establish or appropriately update/regulate local audits by joining an administrative panel or introducing a rating system.
Step 5: Register as an S-Corporation with the IRS
For tax purposes, professional corporations may elect to receive “S-Corporation” status with the IRS if desired, this suffices as recommended since it provides advantageous tax benefits, with the organization considered as a separate legal entity, not required to pay no levy directly on company eprnigs (income) per attorneys but rather more like a partnership, and the general partner not responsible for dealing with facing corporate taxes.
To get the IRS S-Corporation Structure, you ought to file Form 8832 - the Entity Classification Election Form with at least Incursion. On approval relating to being a classified S-Corporation, the shareholders would claim the losses (and unfavourable shifts) over the tax return instead of claiming it through those reports initially altering into private investment.
Step 6: Open a Business Bank Account in Hawaii
Though not a distinct symbol of a corporation formation, opening a corporate business banking account is a sensible step. Henceforth, operating revenue and credits occur separately additionally, issuing invoices, granting pays for monthly expenditure becomes: more methodical and systematizing.
Bottom Line
While forming a Professional Corporation in Hawaii, just like any form of corporation anywhere offers asset safety and limited clinical liabilities. Make sure to have considered all the legal aspects so as to not leave any tax oaths unsettled. Be thorough and try involving legal specialists!
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