Starting a business as a corporation, Limited Liability Company (LLC), Limited Liability Partnership (LLP) or Limited Partnership (LP) requires having a Resident Agent in Michigan. Learn who the Resident Agent is, their job duties and the requirements to be one.
What is a resident agent?
A resident 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 resident agent?
The primary responsibility of a resident agent in Michigan is to accept important legal notices and tax documents and then forward them to the appropriate person in the business.
Why is a resident agent required in Michigan?
A Resident Agent is required by the Secretary of State when forming a Michigan LLC, corporation, LLP or LP. This appointment is first made in the entity formation documents (Articles of Organization or Articles of Incorporation), but can be changed at any time.
Related: How to form an LLC in Michigan
Sole proprietorships and general partnerships do not need a Resident Agent.
The requirements for an entity to have a Resident Agent are formed under Michigan Statutes Section 450.4207 (LLC) and Section 450.1241 (corporation) which mandate registered entities will have and continuously maintain a Resident Agent and registered office within the state. The agent must be also be available during normal business hours to forward any service of process, notice or demand pertaining to the entity to the appropriate individuals.
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 resident agent?
Not only is a resident agent required when forming an LLC or corporation, but you must maintain a resident agent to keep the entity in compliance. Besides the requirement of designating a resident agent at the time of formation, there are several reasons to not be with one:
- Not Receiving Legal Notices – If the listed resident agent cannot receive legal notices, this lawsuit will still proceed. If a process server is unsuccessful in reaching the company’s resident 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 Michigan, if the business doesn’t have a resident agent, the state can dissolve the entity.
- Penalties and Fees – By not maintaining a current resident 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 resident agent may result in the administrative closure or dissolving the entity.
Who can be a resident agent
Who can be a Resident Agent in Michigan?
A resident agent in Michigan can be a resident of the state who is 18 years or older, a registered Michigan domestic business entity or a foreign business entity authorized to do business in the state. An entity may not be its own agent.
The resident agent needs to have a physical street address (often referred to as a registered office or principal office) in the state of Michigan. This can be your home address, the address of a family member, an accountant or attorney, the address of the business, or an Idaho resident 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 resident agent in Michigan?
Yes! Any individual, owner, member, officer, director, etc., of a business entity that meets the state, resident agent requirements above can be a resident agent.
Why you may not want to be your own resident agent
Provided one of the members or officers live in Michigan, 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 resident 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 also the remote possibility of a vindictive litigant or upset customer showing up at your house.
- Availability – Michigan requires the resident 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 resident agent will need to be appointed with a physical address in each state.
- Due Date Reminders – Resident agent services provide annual report reminders and updates on any state requirements.
How much does a resident agent service cost?
If you act as your own resident agent, there is no cost. Depending on the services provided, a commercial resident agent typically costs between $100-$150 per year. Northwest Resident 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 resident agent at no cost for the first year when you register your corporation or LLC with them.
How do you change a resident agent?
If the resident agent changes, the entity is required to file a change of resident agent.
A Resident Agent can be changed by submitting the Certificate of Change of Registered Office and/or Change of Resident Agent along with the filing fee to the Secretary of State.
Is a resident agent liable for the actions of the business?
The only liability a resident agent faces is from a lack of timely transmission of correspondence. If the resident agent is negligent in sending documents promptly, and the entity suffers a financial loss, the resident agent is responsible for paying those damages.
Can a resident agent sign on behalf of an LLC?
Unless the resident agent is also authorized to sign on behalf of the entity, they are not legally allowed to sign.
Does a sole proprietor need a resident agent?
Only entities registered with the Secretary of State, such as corporations and LLCs, need to register a resident agent. Sole proprietorships