Why Using the Hawaii Department of Commerce and Consumer Affairs Business Registration Division’s Limited Liability Company Articles of Organization (Form LLC-1) May Be a Mistake

Pursuant to Hawaii Revised Statutes Section 428-203(a), the Articles of Organization of a Hawaii limited liability company shall set forth the following:

• (1) The name of the company;
• (2) The mailing address of the company’s initial principal office, the street address of its initial registered office in this State, and the name of its initial registered agent at its registered office in this State;
• (3) The name and address of each organizer;
• (4) Whether the duration of the company is for a specified term and, if so, the period specified;
• (5) Whether the company is to be manager-managed, and:
• (a) If so, the name and address of each initial manager, and the number of initial members; or
• (b) If not, the name and address of each initial member; and
• (6) Whether the members of the company are to be liable for its debts and obligations under section 428-303(c).

The State of Hawaii Department of Commerce and Consumer Affairs Business Registration Division’s Form LLC-1 regarding the Articles of Organization for a Limited Liability Company requires each applicant to answer the aforementioned requirements. However what this form does not provide for is a section that requires an applicant to limit the authority of any member of a member-managed limited liability company or any manager of a manager-managed company in the Articles of Organization.

Hawaii Revised Statutes Section 428-301(c) provides:

“(c) Unless the articles of organization limit their authority, any member of a member-managed limited liability company or any manager of a manager-managed company may sign and deliver any instrument transferring or affecting the company’s interest in real property. Such an instrument shall be conclusively in favor of a person who gives value without knowledge of the lack of the authority of the person signing and delivering the instrument.”

Therefore, if your Hawaii limited liability company’s Articles of Organization is silent with respect to the limitation of a member or manager’s authority, then any member of a member-managed limited liability company or any manager of a manager-managed company can convey your Hawaii limited liability company’s interest in real property, and a third party who relies on your Articles of Organization can do so without knowing what you Operating Agreement may say.

If you feel uncomfortable such scenario, you need to limit the authority of such members and managers in the Articles of Organization.

As you can see forming a Hawaii limited liability company may not be as simple as you may expect it to be, and doing it on your own via the internet may result in short term savings but huge problems in the future.

There are other issues that a Hawaii attorney can point out to you that may require further assistance from such Hawaii attorney in preparing the Articles of Organization for your Hawaii limited liability company.

Please contact us if you need a Hawaii attorney in your corner.