Hawaii LLC Taxes

An Hawaii LLC is taxed at three levels: federal income tax on the profits, Hawaii state rules, and payroll or sales taxes that depend on what the business does. Hawaii taxes personal income, so LLC owners report their share of profit on a Hawaii return in addition to the federal one. Hawaii also has an entity-level tax to plan for: General Excise Tax 4%.

Federal tax treatment

By default the IRS treats a single-member LLC as a disregarded entity, so profit is reported on Schedule C of the owner's personal return. A multi-member LLC is taxed as a partnership and files Form 1065, with each member receiving a Schedule K-1. Either can elect to be taxed as an S corporation (Form 2553) or a C corporation (Form 8832). See the IRS page on LLCs.

Self-employment tax

Members who work in the business generally pay self-employment tax of 15.3% on net earnings: 12.4% for Social Security up to the annual wage base set by the SSA, and 2.9% for Medicare with no cap, plus an additional 0.9% Medicare tax at higher incomes. An S corporation election can reduce this for profitable businesses, but it requires running payroll and paying yourself a reasonable salary. Our LLC vs S-Corp comparison walks through the trade-off.

Hawaii state taxes

Sales tax, payroll tax, and local business taxes sit on top of these. If you sell taxable goods or services, register with the Hawaii tax agency for a sales tax permit. If you hire, you will register for state unemployment insurance and withholding.

Estimated tax payments

LLC owners usually have no employer withholding, so they pay federal estimated tax each quarter, and Hawaii estimated tax as well. Missing estimates can trigger underpayment penalties, so many owners set aside a percentage of every payment they receive.

Hawaii specific notes

Hawaii does not have a sales tax in the traditional sense; instead, businesses pay a General Excise Tax on gross receipts (not net) which is essentially passed on to customers.

Hawaii LLC at a glance

Tax rules and thresholds change, and this page is general information. Confirm details with the Hawaii tax agency and a licensed CPA before you file.