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Hawaii Single-Member LLC Operating Agreement

Create a Hawaii single-member LLC operating agreement with state-specific guidance on default rules, the General Excise Tax, and charging order asset protection.

Introduction

A single-member LLC operating agreement is the internal document where you, as the sole owner of a Hawaii LLC, set the rules for how your business runs, how profits are handled, and what happens if you bring on a partner or close the business later. Hawaii's LLC Act does not spell out a required form for the agreement itself, unlike some states that expressly allow oral or implied agreements, so putting your terms in writing is the clearest way to make sure your own rules, not the state's default rules, actually govern. It is also the clearest evidence, if a court or the IRS ever asks, that you are running a real business.

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Key Things to Know

  1. 1

    Hawaii's LLC Act does not spell out a required form for the operating agreement itself. Section 428-103(a) says members "may enter into an operating agreement" without specifying written, oral, or implied form, unlike some states' statutes that address the question directly.

  2. 2

    Without an operating agreement, Hawaii law splits distributions in EQUAL SHARES among members, not in proportion to capital contributions (Hawaii Revised Statutes Section 428-405(a)). This is the opposite of some other states' contribution-based default.

  3. 3

    A charging order is the exclusive statutory remedy for a member's judgment creditors against that member's LLC interest (Hawaii Revised Statutes Section 428-504(e)). Hawaii's statute explicitly allows a court to order foreclosure of that charging order, a real limit on the remedy worth knowing about.

  4. 4

    Hawaii has no flat annual franchise tax like California's $800 minimum. LLCs owe a $15 annual report fee to the Department of Commerce and Consumer Affairs, plus Hawaii's General Excise Tax on gross receipts, generally 4.5 percent for retail sales and services once the county surcharge is included.

  5. 5

    Hawaii lets an operating agreement narrow the duty of loyalty, but not eliminate it, and allows the duty of care to be reduced if not unreasonable (Hawaii Revised Statutes Section 428-103(b)). Unlike some states, Hawaii's statute does not require this modification to be in a written agreement.

  6. 6

    Hawaii law does not require an LLC operating agreement to be notarized or witnessed to be valid. No provision in the state's LLC Act imposes either formality on this internal document.

  7. 7

    The operating agreement itself is not filed with the state. You form the LLC by filing Articles of Organization (Form LLC-1, $50 fee) with the Hawaii Department of Commerce and Consumer Affairs, then file a $15 annual report every year on a schedule tied to your original filing date.

Key decisions before you file

Before you file a LLC Operating Agreement in Hawaii, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.

Open the LLC Operating Agreement guide

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Hawaii-Specific Provisions

Use this together with the complete LLC operating agreement template, which covers the standard provisions your agreement also needs: capital contributions, management structure, meetings, transfers, withdrawal, and dissolution. The sections below cover only what is specific to Hawaii law.

1. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Hawaii, including the Hawaii Uniform Limited Liability Company Act, Hawaii Revised Statutes Chapter 428.

2. Allocation of Distributions

Unless otherwise stated elsewhere in this Agreement, any distributions made by the Company before its dissolution and winding up shall be shared in equal shares among the Members, as provided by Hawaii Revised Statutes Section 428-405(a) in the absence of a contrary agreement.

3. Fiduciary Duties

The duty of loyalty a Member or Manager owes to the Company and to the other Members may not be eliminated by this Agreement, but this Agreement may identify specific types or categories of activities that do not violate that duty, if not manifestly unreasonable, and may specify the number or percentage of disinterested Members or Managers who may authorize or ratify, after full disclosure of all material facts, an act that would otherwise violate the duty of loyalty. The duty of care may not be unreasonably reduced. The obligation of good faith and fair dealing may not be eliminated, but this Agreement may set the standards by which its performance is measured, if not manifestly unreasonable, as provided by Hawaii Revised Statutes Section 428-103(b).

4. Indemnification

The Company shall reimburse a Member or Manager for payments made, and shall indemnify a Member or Manager for liabilities incurred, by that Member or Manager in the ordinary course of the Company's business or for the preservation of its business or property, as required by Hawaii Revised Statutes Section 428-403(a). A payment or advance made by a Member under this Section constitutes a loan to the Company upon which interest accrues from the date of the payment or advance.

5. Execution

This Agreement is effective as of the date signed below. Hawaii law does not require an LLC operating agreement to be notarized or witnessed to be valid. The provisions above are effective only because they are set forth in this written, signed Agreement.

[MEMBER] Signature: _____________________ Date: _____________

Printed Name: _____________________

Hawaii Requirements for LLC Operating Agreement

Operating Agreement Authority (Hawaii Revised Statutes § 428-103(a))

The Operating Agreement governs the relations among the Members, Managers, and the Company; to the extent it does not otherwise provide, Chapter 428 fills the gap (Hawaii Revised Statutes Section 428-103(a)). The Agreement may not: unreasonably restrict a member's right to information; eliminate the duty of loyalty (though it may identify activities that do not violate it); unreasonably reduce the duty of care; eliminate the obligation of good faith and fair dealing; vary certain member-expulsion or winding-up rules; or restrict the statutory rights of non-member third parties (Hawaii Revised Statutes Section 428-103(b)).

Articles of Organization (Hawaii Revised Statutes § 428-203)

The LLC is formed by filing Articles of Organization with the Hawaii Department of Commerce and Consumer Affairs, Business Registration Division (Hawaii Revised Statutes Section 428-203), for a $50 filing fee. The Articles must state whether the LLC is manager-managed or member-managed. The Operating Agreement itself is not filed with the state; it is kept as the Company's internal record.

Member-Managed vs. Manager-Managed Structure (Hawaii Revised Statutes § 428-404)

A Hawaii LLC is member-managed by default unless the Articles of Organization designate it manager-managed (Hawaii Revised Statutes Section 428-404). In a member-managed LLC, each member has equal management rights and ordinary-course matters are decided by majority vote; in a manager-managed LLC, the manager has exclusive authority over ordinary-course matters. Regardless of structure, amending the Operating Agreement, admitting a new member, and selling substantially all Company property always require the consent of all Members.

Fiduciary Duties (Hawaii Revised Statutes § 428-409)

Members and managers owe a duty of loyalty and a duty of care to the LLC and other members (Hawaii Revised Statutes Section 428-409). The duty of loyalty cannot be eliminated, but the Operating Agreement may identify specific activities that do not violate it, and may allow disinterested Members or Managers to ratify an otherwise-disloyal act after full disclosure. The duty of care cannot be unreasonably reduced. Unlike some states, Hawaii's statute does not require this modification to be in a written agreement (Hawaii Revised Statutes Section 428-103(b)).

Capital Contributions (Hawaii Revised Statutes § 428-401)

A member's contribution to a Hawaii LLC may consist of cash, property, services rendered, a promissory note, or another benefit to or obligation to contribute to the Company (Hawaii Revised Statutes Section 428-401). A member who fails to make a promised contribution remains liable for it even after dissociation, unless the other members consent to compromise the obligation (Hawaii Revised Statutes Section 428-402).

Allocation of Profits and Losses (Hawaii Revised Statutes § 428-405)

Unless the Operating Agreement provides otherwise, any distributions made by the Company before its dissolution and winding up must be shared in EQUAL SHARES among the Members, not in proportion to each member's capital contribution (Hawaii Revised Statutes Section 428-405(a)). The Operating Agreement can set a different split.

Voting Rights (Hawaii Revised Statutes § 428-404)

In a member-managed Hawaii LLC, ordinary-course business decisions are decided by a majority of the members; in a manager-managed LLC, the manager decides them instead (Hawaii Revised Statutes Section 428-404). Regardless of management structure, amending the Operating Agreement or the Articles of Organization, admitting a new member, and selling substantially all Company property always require the consent of every Member.

Transfer of Membership Interests (Hawaii Revised Statutes § 428-502)

A transfer of a Hawaii LLC member's distributional interest entitles the transferee only to the distributions the transferor would have received; it does not make the transferee a member or give the transferee management rights (Hawaii Revised Statutes Section 428-502). A member automatically ceases to be a member upon transferring all of that member's distributional interest, other than a transfer made for security purposes.

Withdrawal or Dissociation of Members (Hawaii Revised Statutes § 428-601)

A member has the power to withdraw from a Hawaii LLC at any time by express will (Hawaii Revised Statutes Section 428-602(a)). Hawaii law lists ten default dissociation-triggering events, including bankruptcy, death, and expulsion (Hawaii Revised Statutes Section 428-601). A member who wrongfully dissociates, including by withdrawing before a specified term expires, is liable to the Company and other Members for the resulting damages.

Dissolution Procedures (Hawaii Revised Statutes § 428-801)

A Hawaii LLC dissolves upon an event specified in the Operating Agreement, the consent of all Members (unless the Operating Agreement sets a different threshold), or a judicial decree finding the Company's economic purpose is frustrated or that it is no longer reasonably practicable to carry on the business (Hawaii Revised Statutes Section 428-801). The Operating Agreement should specify any additional dissolution triggers the Members want beyond these statutory defaults.

Records and Accounting (Hawaii Revised Statutes § 428-408)

Hawaii law gives a Member the right to inspect and copy the Company's records at reasonable locations during business hours, and requires the Company to furnish business information a Member reasonably needs without being asked (Hawaii Revised Statutes Section 428-408). A Member may also obtain a signed copy of the Operating Agreement from the Company at the Company's expense. The statute does not itself enumerate which specific records the Company must keep; the Operating Agreement should specify that.

Indemnification and Liability Limitations (Hawaii Revised Statutes § 428-403)

A Hawaii LLC shall reimburse a Member or Manager for payments made, and shall indemnify a Member or Manager for liabilities incurred, in the ordinary course of the Company's business or for the preservation of its business or property (Hawaii Revised Statutes Section 428-403(a)). This is a mandatory statutory obligation, not merely a power the Operating Agreement may choose to grant.

Amendment Procedures (Hawaii Revised Statutes § 428-404(c)(1))

Unless the Operating Agreement sets a different threshold, amending the Operating Agreement requires the consent of all Members (Hawaii Revised Statutes Section 428-404(c)(1)). This is a default rule, not a fixed floor -- the Operating Agreement can lower the threshold if the Members agree to do so.

Frequently Asked Questions

It's the internal document where a Hawaii LLC's sole owner sets the rules for running the business and handling profits. Hawaii's statute does not specify a required form for it, but writing your terms down is the clearest way to make your own rules apply instead of the state's defaults, and it proves the LLC is a real business.

Not by an express blanket requirement. Hawaii's LLC Act does not state a required form for the agreement (Hawaii Revised Statutes Section 428-103(a)). But without a written one, state default rules fill every gap automatically, including an equal-shares profit split rather than one you choose yourself once you add a second member.

Hawaii's default LLC rules fill the gap. Distributions get split in equal shares among members rather than however you'd choose to allocate them, which matters most once you bring on a second member and haven't defined your own split (Hawaii Revised Statutes Section 428-405(a)).

It supports that protection. Hawaii law makes a charging order the exclusive remedy for a member's judgment creditors against that member's LLC interest, but the statute also lets a court order foreclosure of that charging order (Hawaii Revised Statutes Section 428-504). Keeping business and personal finances separate still matters.

Hawaii has no flat annual franchise tax. LLCs owe a $15 annual report fee to the Department of Commerce and Consumer Affairs, plus the state's General Excise Tax on gross receipts, generally 4.5 percent for retail sales and services once the county surcharge is included.

No. You file Articles of Organization (Form LLC-1, $50 fee) with the Hawaii Department of Commerce and Consumer Affairs to form the LLC, but the operating agreement itself is an internal document you keep with your own business records. It is never submitted to the state.

Partially. The duty of loyalty cannot be eliminated, though the agreement can identify activities that do not violate it. The duty of care cannot be unreasonably reduced. Unlike some states, Hawaii's statute does not require this modification to be in writing (Hawaii Revised Statutes Section 428-103(b)).