Planning to run your small business as a limited liability company (LLC) or a corporation? You’ll need to choose a registered agent before you file the formation paperwork for your new business.
It might seem like a formality, but choosing your registered agent is an important decision. There can be serious consequences — including suspension of your business’s right to operate — if your registered agent isn’t up for the job.
What is a registered agent?
A registered agent is the individual or company designated to receive the following documents on behalf of a business:
- Service of process. If someone brings a lawsuit against your business, the court issues legal documents which are then served on your registered agent. The term “service of process” refers to the delivery by hand of litigation-related court documents. The purpose is to give you notice of pending legal action.
- Government correspondence. Official government documents, such as business registration renewal forms or notices, are delivered to the registered agent.
- Tax notices. Your registered agent will receive any correspondence sent by relevant tax authorities.
Don’t be misled by the word “agent.” Your registered agent’s sole purpose is to receive delivery of official documents for your business; they don’t have the authority to act on your behalf.
Does my business need a registered agent?
While each state has its own set of rules and regulations, every state requires business entities to designate a registered agent. This is true whether you’re registering your business as an LLC or a corporation (or a limited partnership or limited liability partnership in states that offer those business structures).
Who can be a registered agent?
Every state has specific criteria that a registered agent must meet. But in general, your registered agent will fall into one of two categories:
- Individuals. If you designate an individual as your registered agent, they must be at least 18 years of age. They also need to have a physical address in the state in which your business is registered and be physically available to receive service of process during regular business hours.
- Registered agent services. You can designate a registered agent service company to be your registered agent as long as they’re authorized to do business in your state. Like individuals, a registered agent service business must have a physical office in your state that’s available to receive service of process during normal business hours.
It’s important to check your state’s registered agent laws for additional requirements your registered agent may need to meet.
What if I don’t have a registered agent?
So what happens if you don’t have a registered agent? Maybe the registered agent you initially appointed can no longer act in that capacity. Or what if the person you choose to be your registered agent fails to meet all the requirements?
The consequences can be severe:
- The state could suspend your business’s right to operate.
- If no one is available to take service of process, you risk losing a lawsuit because you didn’t know one had been filed against you.
- Failing to act in response to official notices or correspondence might result in significant fines or penalties.
Can I be my own company’s registered agent?
Most states don’t permit an entity to act as its own registered agent. However, this doesn’t apply to the entity’s owner. And designating yourself as your company’s registered agent can often look like a good choice. After all, you need a registered agent you can trust — who’s more trustworthy than yourself?
As long as you meet your state’s registered agent requirements, you can generally act as your business’s registered agent. Similarly, you can designate a family member (such as your spouse or an adult child), an employee, or a trusted advisor such as an attorney or accountant to be your registered agent, as long as they meet the criteria.
However, it isn’t always practical to designate an individual as a registered agent.
Factors to consider when choosing a registered agent
While it might seem easier (and less costly) to appoint yourself or another individual as your company’s registered agent, there are some potential drawbacks:
Privacy. A business’s registered agent is a matter of public record. This means anyone can access your registered agent’s name and address as listed in your business formation paperwork.
This might not be an issue if, for example, you appoint an employee to be your registered agent and use your company’s physical address for receiving delivery of documents.
But what if you operate your business out of your home? That’s when things can become problematic, especially from a privacy standpoint. And it’s not something you can circumvent by using a PO box or a virtual address, either: A registered agent’s address must be a physical address.
Availability. Your registered agent must be available during regular business hours to receive official correspondence delivered via mail or courier and any potential in-person service of process.
This can often be a stumbling block to appointing an individual as your registered agent. An employee might seem like a good choice, but it’s impossible to guarantee they’ll always be available at the listed address during normal business hours. Even a quick coffee run could cause problems if the process server shows up while your employee is out on a break.
Confidentiality. You also need to think about confidentiality. You’ll want to choose someone you trust to be your registered agent, as they’ll be receiving official correspondence on behalf of your business.
You may also want to consider confidentiality concerns if your registered agent is an employee located at your business. Your registered agent could be served with legal documents in front of your customers, which could be embarrassing.
What are registered agent services?
If you’re concerned appointing an individual as your registered agent, a professional service can be a good choice. These are private companies that offer registered agent services, and annual costs can range from $75 to $300. Search online for “registered agent services near me” to find companies that operate in your state.
Using a registered agent service can alleviate privacy concerns by eliminating the need to list your home or business address on the public record. A company will also be able to accept service of process on your business’s behalf, which eliminates any concern that your registered agent might be unavailable for service throughout the business day.
What if my business operates in more than one state?
If you’re planning on running your business in multiple states, you’ll need to designate a registered agent in each state where you operate. You make this designation when you register your business in each state.
For this situation, you’ll likely need to rely on a registered agent service company with a physical office in the states where you’re running your business. Many registered agent service companies operate nationwide, so you may be able to sign up with a single company for services in multiple states.
Ultimately, if you’re registering your business as an LLC or a corporation, you’ll need to appoint a registered agent. While your registered agent’s only function is to be available to receive documents, it’s an important role. Choosing well can give you peace of mind so you can focus on what matters most: running your business.
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