Starting a business as a corporation, LLC, or Limited Liability Partnership requires having a registered agent in Alabama. Learn what the registered agent is, their job duties, and the requirements to be one.
What is a registered agent?
A registered agent (also referred to as a resident agent or statutory agent in some states) is a person or company that is designated to be the official point of contact between the government and your business entity.
What are the duties of a registered agent?
The primary responsibility of a registered agent in Alabama is to accept important legal notices and tax documents and then forward them to the appropriate person in the business.
Why is a registered agent required in Alabama?
A registered agent is required by the Alabama Secretary of State when filing for a business entity such as a corporation, Limited Liability Company, and Limited Liability Partnership. This appointment is first made in the entity formation documents (Certificate of Formation or Articles of Incorporation) but can be changed at any time.
Related: How to form an LLC in Alabama
Sole proprietorships and general partnerships do not need a registered agent.
The requirements for an entity to have a registered agent are formed under Alabama Statutes Section 10-12-15 (LLC) and Section 10-2B-5.04 (corporation), which mandate registered entities will have and continuously maintain a registered agent and office within the state.
The reason for having one makes sense. If a business is owned by one individual, it’s easy to determine who should be notified in the event of an annual report renewal, lawsuit, or tax notice. However, if a business has several owners, members, or partners, it would be difficult to determine who the correct contact is. By requiring a central point of contact there is no question that time-sensitive documents are going to the right person in a timely manner.
What happens if you don’t have a registered agent?
Not only is a registered agent required when forming an LLC or corporation, but you must maintain a registered agent to keep the entity in compliance. Besides the requirement of designating a registered agent at the time of formation, there are several reasons to not be with one:
- Not Receiving Legal Notices – If the listed registered agent cannot receive legal notices, this lawsuit will still proceed. If a process server is unsuccessful in reaching the company’s registered agent, the court can proceed with the case. This could result in a judgment being placed against the business without the owners knowing.
- Administrative Dissolution – In Alabama, if the business doesn’t have a registered agent, the Secretary of State can dissolve the entity.
- Penalties and Fees – By not maintaining a current registered agent, penalties and state fees can be levied against the entity and, in some cases, the owners too. Once an entity is no longer in good standing with the state, the owners may lose their liability protection and are at risk personally.
- Entity Closure – Waiting too long to remedy the lack of a registered agent may result in the administrative closure or dissolving the entity.
Who can be a registered agent in Alabama?
A registered agent in Alabama can be any resident of the state who is 18 years or older, a registered Alabama domestic business entity, or a foreign business entity authorized to do business in the state. An entity may not be its own agent.
The registered agent needs to have a physical street address (often referred to as a registered office or principal office) in the state of Alabama. This can be your home address, the address of a family member, an accountant or attorney, the address of the business, or an Idaho registered agent service. Any physical address in the state may be used, but PO Boxes and mail drop services are not acceptable since someone has to be available to sign for documents.
The agent will also need to be available to receive Service of Process on behalf of the business during normal business hours. Service of process refers to the delivery of legal documents, often a summons, subpoena, or lawsuit filed against a business entity.
Can I be my own registered agent in Alabama?
Yes! Any individual, owner, member, officer, director, etc., of a business entity that meets the state, registered agent requirements above can be a registered agent.
Why you may not want to be your own registered agent
Provided one of the members or officers live in Alabama, it is less expensive to act as your own agent rather than hiring a service. While this is the route many businesses take, there are a few reasons to consider hiring a service.
- Privacy – The address of the registered agent becomes public record and is available for anybody to see. This can be especially concerning if someone is doing business on the side, and they don’t want their employer knowing about the business. Also, if the business is sued, the notice will be delivered to the address on file. This could mean employees, customers, or even neighbors witnessing the event. There is always the remote possibility of a vindictive litigant or upset customer showing up at your house.
- Availability – Alabama requires the registered agent to be available at the principal address during regular business hours. The biggest issue with availability, especially if a home address is used, is if the agent goes on vacation or is otherwise away for some period of time and can’t be reached.
- If the Business Expands to Additional Locations – If the business has a physical presence in multiple states (offices, warehouses, employees, etc.), a foreign entity registration will often need to be filed with those states. A registered agent will need to be appointed with a physical address in each state.
- Due Date Reminders – Registered agent services provide annual report reminders and updates on any state requirements.
How much does a registered agent service cost?
If you act as your own Registered Agent, there is no cost. Depending on the services provided, a commercial registered agent typically costs between $100-$150 per year. Northwest Registered Agent’s service is $125 per year and offers several extras such as document scanning and mail forwarding. Some entity formation companies like IncFile, include a Registered Agent at no cost for the first year when you register your corporation or LLC with them.
Can a registered agent be changed?
If the registered agent changes, the entity is required to file a change of registered agent.
A Registered Agent can be changed by submitting the Change of Registered Agent or Registered Office by Entity Form along with the filing fee to the Secretary of State.
Is a registered agent liable for the actions of the business?
The only liability a registered agent faces is from a lack of timely transmission of correspondence. If the registered agent is negligent in sending documents promptly, and the entity suffers a financial loss, the registered agent is responsible for paying those damages.
Can a registered agent sign on behalf of an LLC?
Unless the registered agent is also authorized to sign on behalf of the entity, they are not legally allowed to.
Does a sole proprietor need a registered agent?
Only entities registered with the Secretary of State, such as corporations and LLCs, need to register a registered agent. Sole proprietorships and general partnerships do not.