How to Start a Nonprofit in Hawaii

1. Name Your Organization

   Your organization’s name establishes its brand and is also important for incorporating with the state. The legal name of your nonprofit corporation may not conflict with any other organization registered in the state. Make sure the name is available and meets state requirements.

   Name Search:	Hawaii Business Registration Division (BREG) Name search
   Suffix:	Not required.  HRS §414D-61

2. Recruit Incorporators and Initial Directors

   The incorporator is the person who signs the Articles of Incorporation for your nonprofit. You will need at least one, but can have more than one. Directors make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success. You’ll want to identify three, unrelated individuals to meet IRS requirements. You will also want to be aware of any age or residency requirements.

   Hawaii director requirements:	Number: minimum 3 Qualifications: An individual. No residency requirement. No membership requirement. Term: default is 1 year, 5 year maximum Quorum: majority Committee: minimum 2 directors
   Hawaii officer requirements:	Defined in articles or bylaws. One officer prepares minutes of the directors' and members' meetings and authenticates records of the corporation. Two or more offices may be held by the same individual.

3. Appoint a Registered Agent

   A registered agent is responsible for receiving legal notices on behalf of your organization. The appointed registered agent must be physically located in the state and maintain an office that is open during regular business hours. As a nationwide registered agent, our service is designed to receive your legal documents and provide secure access to those documents through your online account. Our local Hawaii registered agent office is located in Honolulu, HI. We offer registered agent service independently or as part of our nonprofit formation packages.

4. Prepare and File Articles of Incorporation

   Your nonprofit’s articles of incorporation officially mark the creation of your organization. They document where and when the organization was formed and capture other information necessary to verify its existence. While requirements for language vary from state-to-state, there are some basic provisions that the IRS will look for when you apply for 501(c)(3) exemption. It is important to customize the articles for your organization and make sure you meet the state and IRS requirements. Meeting these requirements from the start will help avoid having to make amendments later or risk getting your 501(c)(3) application rejected. Some states will also require you to publish your articles of incorporation, so be mindful of any deadlines and publishing instructions.

   Agency:	Hawaii Business Registration Division (BREG)
   Form:	Articles of Incorporation
   Instructions:	Form DNP-1 Instructions
   Filing Method:	Mail, fax, in-person or online
   Agency Fee:	$26 + optional $25 expedite fee
   Turnaround:	~7-14 business days by mail. ~3-5 business days by fax, in-person, or online. ~1-3 business days if you file online and pay the $25 expedite fee.
   Law:	Hawaii Statutes - Chapter 414d: Hawaii Nonprofit Corporations Act
   Notes:	Filing online will NOT result in sufficient language for 501(c) exemption. You must add provisions to the paper form.

5. File Initial Report

   After filing articles of incorporation, you must file an initial report.

   Not required

   
   
   

6. Obtain an Employer Identification Number (EIN)

   This unique, nine-digit number is assigned by the IRS to identify your nonprofit. All types of nonprofits will apply for an EIN, not only those that hire employees. You will use your EIN to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.

   Agency:	Internal Revenue Service (IRS)
   Form:	IRS Form SS-4
   Filing Method:	Mail, phone, fax, or online.
   IRS fee:	$0
   Turnaround:	Immediately online or by phone. 4 business days by fax. 4-5 weeks by mail.
   Notes:	The IRS website is only available during certain hours. Print your EIN before closing your session. For additional guidance, see IRS Pub 1635: Understanding Your EIN.

7. Store Nonprofit Records

   As you launch your nonprofit, you will receive a number of official documents. Organizing these documents in one place will save you headaches down the road. You will soon have numerous items to keep in your records including your EIN letter, bylaws, meeting minutes, 501(c)(3) determination letter, and more.

   
   
   

   A great way to maintain necessary documentation is Records Manager, our software for storing records securely, tracking directors and officers, and getting notified of meetings.

8. Establish Initial Governing Documents and Policies

   Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and the law. When your Board of Directors meets for the first time, you’ll review and ratify the bylaws and they will be a roadmap for governance from there.

   At the same time, you’ll also want to create and adopt a conflict of interest policy. A conflict of interest is when someone in a key position in your nonprofit has competing interests and is making choices that could benefit themselves to the harm of the organization. Personal interests should be set aside and organizational interests prioritized. If a conflict of interest does arise, it should be disclosed immediately.

   Your application to the IRS for 501(c)(3) exemption will require that both the bylaws and the conflict of interest policy are approved and adopted. Once they’ve been adopted, safely store them in your Nonprofit Records Kit.

9. Hold Organizational Meeting of the Board of Directors

   The initial organizational meeting of your Board of Directors will be incredibly productive. At this meeting you will approve the bylaws, adopt the conflict of interest policy, elect directors, appoint officers, and approve resolutions such as opening the organization’s bank account. Important decisions are being made so be sure to record them in the meeting minutes.

10. Get Hawaii State Tax Identification Numbers/Accounts

    Hawaii offers a consolidated state tax registration application. This application simplifies the process of starting a business in Hawaii by allowing you to register for various State tax and employer licenses and permits, including general excise tax (GET), withholding (WH) tax, and unemployment insurance (UI) tax.

    Submit to:	State of Hawaii - Department of Taxation http://tax.hawaii.gov/
    Form:	Form BB-1: State of Hawaii Basic Business Application
    Filing Method:	Mail or online
    Fee:	$20

11. Apply for 501(c)

    Applying for 501(c) tax exemption can feel like the most daunting step in bringing your nonprofit dream into reality, but obtaining tax exemption comes with many benefits. You will be able to apply for grants and grow your fundraising success in addition to being exempt from IRS income tax. 501(c) is the chapter of the Internal Revenue Code that regulates nonprofit organizations. Like others, you may be most familiar with 501(c)(3) nonprofits, including charities and foundations. 501(c)(3) nonprofits apply using Form 1023 or Form 1023-EZ. Review the criteria for each application and make sure you meet the eligibility requirements set out by the IRS. Other types of nonprofits, including 501(c)(4)s and 501(c)(6)s, apply using Form 1024. After reviewing and approving your application, the IRS will return a Determination Letter officially recognizing your exemption.

    Completing the federal application for tax exemption is significantly easier with the assistance and support of a professional. Find someone with the expertise to ensure the correct application is being used and is completed accurately. A well-prepared application takes time, over 100 hours by IRS estimates, so put yourself on the path to success by finding a specialist to walk alongside you in the journey - from start to tax-exempt finish!

    Agency:	Internal Revenue Service (IRS)
    Form:	IRS Form 1023, IRS Form 1023-EZ, or IRS Form 1024
    Instructions:	IRS Instructions for Form 1023, IRS Instructions for Form 1023-EZ, or IRS Instructions for Form 1024.  Also see guidance IRS Pub 557: Tax-Exempt Status for Your Organization.
    Filing Method:	Mail
    Agency Fee:	$275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
    Turnaround:	1023-EZ average: <1 month. 1023 average: 3-6 months.

    

    Tax-Exempt in 2 Weeks!

    Download the case study of how our client, Reform It Now, obtained 501(c)(3) tax exemption in only two weeks using the new IRS Form 1023-EZ!

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    Dr. Bob A.Reform It Now, Inc.

12. Apply for State Tax Exemption(s)

    With your IRS Determination Letter in hand, make sure you familiarize yourself with your state’s requirements for recognizing your nonprofit’s tax-exempt status. This is an area where requirements vary state-by-state. Many states issue their own tax-exempt certificate that can be used for sales and use tax purposes, but it may require application and periodic renewal.

    To file to obtain exemption from state income tax:

    Not required

    
    
    

    Your IRS determination letter granting exemption from federal income taxes, also exempts your organization from Hawaii income taxes. Organizations that are not required to file an application for recognition of exemption with the IRS are exempt from Hawaii income taxes.

    More information: Hawaii Department of Taxation

    To file to obtain General Excise Tax Exemption:

    Agency:	Hawaii Department of Taxation
    Form:	G-6: Application for Exemption from General Excise Taxes
    Instructions:	http://tax.hawaii.gov/forms/a1_b2_1geuse/
    Agency Fee:	$20 unless you already have a Hawaii GET tax ID number.
    Notes:	Hawaii does not have sales tax; instead, it has general excise tax (GET).Hawaii does not have sales tax; instead, it has general excise tax (GET).

13. Register for Charitable Solicitation (Fundraising)

    This is another area where laws differ from state to state, but most states require any nonprofit soliciting donations to register to do so on an annual basis. This means registering in the state prior to soliciting any resident of that state. Registering in your home state is essential, but you may also need to register other states depending on the scope of your organization.

    Hawaii Charity Registration

    Agency:	Hawaii Tax and Charities Division
    Law:	Hawaii Revised Statutes § 467B-2.1
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	Yes

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	Charitable organizations that normally receive less than $25,000 in contributions annually and do not compensate any professional solicitor or professional fundraising counsel Any duly organized religious corporation, institution, or society that is exempt from filing Form 990 with the IRS Parent-teacher associations Any educational institution that is licensed or accredited by any of the following licensing or accrediting organizations or their successor organizations: Hawaii Association of Independent Schools, Western Association of Schools and Colleges, Middle States Association of Colleges and Schools, New England Association of Schools and Colleges, Higher Learning Commission, Northwest Commission on Colleges and Universities, Southern Association of Colleges and Schools,  The National Association for the Education of Young Children, or AdvancED Any organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code expressly authorized by, and having an established identity with, an accredited education institution provided that the organization's solicitation of contributions is primarily directed to the students, alumni, faculty, and trustees of the institutions and their respective families Any nonprofit hospital licensed by the State or any similar provision of the laws of any other state Government agencies Congressionally chartered organizations that submit financial reports to the Secretary of Defense
    Filing Method:	Online
    Agency Fee:	$0
    Original Ink:	Not required
    Notarize:	Not required
    Notes:	Exemptions do not expire as long as the organization continues to qualify under the exemption criteria.

    Initial Registration

    More Details

    Filing Method:	Online
    Agency Fee:	$0
    Turnaround:	4-6 weeks
    Before you Apply:	Domestic Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Hawaii. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. Foreign Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Hawaii. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. If you will foreign qualify in Hawaii, obtain a certificate of good standing from your home state to submit during the foreign qualification process. The certificate cannot be more than 60 days old when filing foreign qualification documents.
    How to Apply:	Domestic Applicants: File entity formation documents with the Hawaii Business Registration Division (BREG). Create a 990 online account and complete the charity registration. Foreign Applicants: Determine whether or not your charity will need to foreign qualify based on your activity in Hawaii. If not required, skip to number 3. File foreign qualification documents with the Hawaii Business Registration Division (BREG). Create a 990 online account and complete the charity registration.
    Required Attachments:	IRS form 990 Audited financials (if applicable) Articles of incorporation IRS determination letter List of officers and directors List of other states where registered to solicit

    Registration Renewal

    More Details

    Filing Method:	Online
    Agency Fee:	$10-750, depending on annual gross revenue
    Due:	Annually by the same day as your IRS Form 990; that is, 4.5 months after the close of your fiscal year. So if your fiscal year ends December 31, then your renewal is due May 15. There is no official start to the renewal period, so renewals may be submitted as soon as financials become available for the most recently completed fiscal year.
    Due Date Extension:	Hawaii honors extensions granted by the IRS to file Form 990. Organizations are not required to submit proof of an IRS extension unless requested by the Department, at which point they will have 20 days to provide the Department with a copy.
    Penalties:	The Attorney General may assess late fees of $20 per day up to a maximum fee of $1,000 against an organization for the failure to timely file its renewal.
    Required Attachments:	IRS form 990 Audited financials (if applicable)

    Contract Filing

    More Details

    Form:	Commercial Co-venturers Consent Form
    Filing Method:	Online
    Agency Fee:	$0
    Turnaround:	1-2 business days.
    Due:	File a notice of entry into contract at least 10 days prior to the commencement of the charitable sales promotion.
    Notes:	An authorized representative of the charitable organization and the commercial co-venturer must sign the written consent, and the terms of the written consent must include the following: The goods or services to be offered to the public; The geographic area where, and the starting and final date when, the offering is to be made; The manner in which the name of the charitable organization is to be used, including any representation to be made to the public as to the amount or per cent per unit of goods or services purchased or used that is to benefit the charitable organization; A provision for a final accounting on a per unit basis to be given by the commercial co-venturer to the charitable organization and the date when it is to be made, which date shall be no more than ninety days after the end of the charitable sales promotion; and The date when and the manner in which the benefit is to be conferred on the charitable organization.

    Change of Fiscal Year

    More Details

    Notes:

    Email ATG.Charities@hawaii.gov to update fiscal year. You will then need to file the short year in the efile990.org system.

    Cancellation

    More Details

    Notes:

    To close out your registration, send a written request to close your organization's registration. If the organization is six months or more into their filing period, the organization would need to file that filing periods report along with the fee.

    To fundraise nationally or online, please see our Fundraising Compliance Guide. Our services manage your initial, renewal, and exemption filings in every state.

14. Obtain Other Business Licenses & Permits

    Running your nonprofit corporation legally also means securing all applicable licenses and permits. The range of local, state, and federal requirements is wide. Access resources like the Small Business Administration Business License & Permit look-up tool and search by your business type and locality.

    Unlike many states, Hawaii does not have charitable gaming laws to provide special treatment of fundraising using bingos, raffles, and other charitable games. Instead, nonprofits conducting these activities are subject to the general Hawaii Gambling Laws. Many nonprofits work carefully to be in compliance with this law - for example, consider the Hawaii Attorney General Guidance on Charitable “Raffles”.

You’ve made it! You turned your passion into a legitimate nonprofit corporation exempt under IRS 501(c) and are benefiting your community. That solid foundation on which you built your organization requires ongoing maintenance. Investing in maintaining compliance with all of the government agencies is an ongoing responsibility and commitment needed to ensure your vision continues long into the future. Check out our compliance guide to learn more!

Once you have registered your nonprofit per the steps listed above, you will need to maintain compliance with all of the government agencies. Staying current with the IRS and state requirements is an ongoing responsibility. Continue reading our Hawaii nonprofit compliance guide to learn more!

Continue reading "Hawaii Nonprofit Compliance"

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