I sell handmade jewelry and small home goods, mostly through a marketplace right now, but the fees are eating me alive. I want to build my own store and form a Hawaii LLC because a friend told me it's the cheapest and most private option. I live in Ohio though, and I need someone to tell me straight whether that's actually allowed for a one-person business shipping out of my basement. Also, what does it cost each year after the first year? I want real numbers, not a sales pitch from a formation company.
LLC Setup
I want to run a small online store through a Hawaii LLC
Having an out-of-state LLC is legal, but you may need to register as a foreign entity in Ohio once you have physical operations there. That's a separqate filing and often gets overlooked.
You're not avoiding registration pain. If you live in Ohio and work from there, Ohio is your home state for practical purposes. Forming in Hawaii isn't illegal, it just adds layers.
Hawaii annual report fee is around $15 and their general excise tax can apply, so dont assume Hawaii is always cheap. A lot of the advice online oversells the state income tax angle.
I looked into this last year. The formation cost itself was fine, but the registered agent service every year added up, and then my tax preparer charged more because therre was another state return. It was more annoying than expensive.
so if I still have to deal with Ohio, what's the actual point of the Hawaii LLC? Is it just privacy for my address? My friend swore it was cheaper than Ohio.
main reason people do it is asset protection or privacy. not ne cessarily cheaper. depends on your revenue and whether you keep business banking there.
To answer the point question, it probably isn't cheaper than a plain Ohio LLC once you include foreign qualification, registered agent, and an extra return. The privacy argument is stronger than the cost argument, especially if you don't want your home address on the state site.
Also check whether the marketplace you sell on has its own requirements. I got stuck because my payment processor wanted a business address matching the state of organization, and that set me back weeks.
That payment processor point is something I hadn't considered. Did you end up changing states or working it out?
Worked it out, but I had to submit the foreign registration and a lease addendum. Not impossible, just slower than the YouTube videos make it sound.
One thing nobody has mentioned, the registered agent has to be physically in Hawaii. If your friend used a service, confirm they're still providing it and that the address doesn't lapse, because a lapse gets your LLC administratively dissolved.
Honestly, for a one-person handmade shop, a local LLC plus a separate business bank account gives you almost all of the same protection with less paperwork. Hawaii only makes sense if you have a specific reason.