How to Get Foreign Qualification in Hawaii

Do you own a limited liability company (LLC) created in a state other than Hawaii, but you want to expand your business to the The Aloha State? If so, you’ll need to qualify your foreign LLC in order to transact business in Hawaii.

What is a foreign qualification and how do foreign LLCs function within the state of Hawaii? In this guide, we’ll answer these questions and more.

Rocket Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.

What Is a Foreign Qualification?

A foreign qualification enables your limited liability company to do business in the state of Hawaii. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Hawaii is the same regardless of where your domestic LLC is based.

The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. However, Hawaii is one of the few states that does clearly define what it means to “do business.”

What Qualifies as ‘Doing Business’ in Hawaii

According to Hawaii’s General Excise Tax Law, “business” and “engaging in business” are defined as follows:

• "’Business’ as used in this chapter, includes all activities (personal, professional, or corporate), engaged in or caused to be engaged in with the object of gain or economic benefit either direct or indirect, but does not include casual sales;
• The term ‘engaging’ as used in this chapter with reference to engaging or continuing in business also includes the exercise of corporate or franchise powers.”

What Does NOT Qualify as ‘Doing Business’ in Hawaii

Like many states, Hawaii has adopted the Revised Model Act provisions, which outline certain activities that are exempt from the above definition. The following activities do not qualify as “doing business” in this state:

• Maintaining or defending any action or suit or any administrative or arbitration proceeding, or effecting the settlement thereof or the settlement of claims or disputes;
• Holding meetings of its directors or shareholders or carrying on other activities concerning its internal affairs;
• Maintaining bank accounts, share accounts in savings and loan associations, custodian or agency arrangements with a bank or trust company, or stock or bond brokerage accounts;
• Maintaining offices or agencies for the transfer, exchange and registration of its securities, or appointing and maintaining trustees or depositories with respect to its securities;
• Effecting sales through independent contractors;
• Soliciting or procuring orders, whether by mail or through employees or agents or otherwise, where the orders require acceptance without this State before becoming binding contracts and where the contracts do not involve any local performance other than delivery and installation;
• Making loans or creating or acquiring evidences of debt, mortgages, or liens on real or personal property, or recording same;
• Securing or collecting debts or enforcing any rights in property securing the same; “(9) Owning, without more, real or personal property;
• Conducting an isolated transaction not in the course of a number of repeated transactions of a like nature;
• Effecting transactions in interstate or foreign commerce;
• Serving as trustee, executor, administrator, or guardian, or in like fiduciary capacity, where permitted so to serve by the laws of this State;
• Owning (directly or indirectly) an interest in or controlling (directly or indirectly) another entity organized under the laws of, or transacting business within, this state;
• Serving as a manager of a limited liability company organized under the laws of, or transacting business, within this state.

How to Get Foreign Qualification in Hawaii

To obtain Foreign Qualification for your Hawaii business, you must file the “Application for Certificate of Authority for Foreign Corporation” form. You can find out more about the registration steps on the Hawaii Department of Commerce and Consumer Affairs website.

Filing Fee: $50, plus an additional $25 for expedited service and $10 for a certified copy. Checks must be made payable to “Department of Commerce and Consumer Affairs.” The forms can either be submitted online here, or printed out and delivered to the following address:

Department of Commerce and Consumer Affairs P.O. Box 40 Honolulu, HI 96810

What Is the Penalty for Not Getting Foreign Qualification in Hawaii?

The primary penalty for doing business as an unregistered foreign entity in Hawaii is the inability to bring forward lawsuits in a state court. However, your business can still defend itself against lawsuits, and all of your business contracts remain valid.

Should I Hire a Business Service Provider to File My Hawaii Foreign Qualification?

If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.

The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Hawaii.

These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.

Conclusion

Getting foreign qualification in Hawaii is easy and much cheaper than many other states. Hawaii Business Express makes the process extremely simple and efficient. However, just because it is easy does not mean that you should take the foreign qualification process lightly. The penalties for non-compliance can be severe -- especially if you need to bring a lawsuit against a third party in Hawaii.

We hope this article managed to answer your questions about obtaining a Hawaii foreign qualification, and we wish you a prosperous business future!