When you are starting a business and forming an LLC or corporation, a registered agent (called a resident agent or statutory agent in some states) must be designated on the formation paperwork. Let’s learn more about what the Registered Agent is and does and why they are important.
What is a Registered Agent?
A registered agent is an individual or company that is the point of contact for certain business entities which include the corporation or LLC. Sole proprietorships and general partnerships do not need one, only LLCs or corporations.
The agent must have a registered office which is a physical street address (No PO Boxes are allowed) in the state where the Limited Liability Company or corporation is formed. The registered office address can be the actual business address, home address, address of a friend or family member, attorney or commercial registered agent service. The agent must also be available during normal business hours should the business entity receive a legal notice.
What does a Registered Agent Do?
The primary purpose of a registered agent is to receive service of process (notice of lawsuits, liens, subpoenas, etc.), legal documents, annual report, or notifications from the Secretary of State (or similarly named state department) on behalf of a corporation or LLC.
When is a Registered Agent Selected?
The registered agent is initially selected when filing the entity formation documents (Articles of Organization (or Articles of Formation, Certificate of Formation, etc) for the LLC and Articles of Incorporation for the corporation. Should the registered agent need to be changed, it can be easily done with a form through your states formation office (typically the Secretary of State)
Why do I Need a Registered Agent?
A registered agent provides several benefits.
- Before the state will approve the Articles of Organization or Articles of Incorporation, an initial registered agent must be designated.
- Even after forming the business entity an active registered agent must be designated with the company. By not keeping an active registered agent, an LLC or corporation risks not being in good standing with the state. Losing the good standing status means the business owners will lose their limited liability protection. The business may also face penalties and fees for noncompliance and in extreme cases the state will force the dissolution or revocation of the entity.
- Last, having a single point of contact is also important because it allows for a reliable way to communicate with the business entity. This allows for proper legal notification should the business face legal action. If there is legal action and there is no way to communicate with the owner, the business may not get time sensitive documents and have adequate time to prepare. Also, a default judgment might be entered against the company.
Who can be a Registered Agent?
There are four common options when choosing a registered agent.
- An owner, member or employee of the business who lives in the state of formation
- A friend or family member who lives in the state of formation
- An attorney or accountant providing services to the business entity
- A commercial registered agent service
Should you be your own Registered Agent?
For most businesses an owner or member is the best person to be the registered agent. Many small businesses have a storefront and operate during normal business hours so they fulfill the requirements by the state. A few exceptions to consider whether you should be your own agent include:
The exceptions would be:
- When the business isn’t staffed during normal business hours (9-5 in most states), which many online or home-based businesses don’t.
- For privacy reasons and you don’t want your name or address associated with the company. The name of the registered agent becomes public record online. Many people like the privacy, especially if they are still employed, want to stay under the radar or don’t want the additional junk mail.
- If you are working from home and don’t want your address listed since the registered office is public record.
- When you want to make sure notifications from the state don’t fall through the cracks. This helps to avoid fees or legal trouble due to delays, missing or misplacing legal notifications that could result in a default judgment against your company. Most services will provide reminders of when annual reports, tax payments and other important deadlines are due and will also scan and save all correspondence.
- While it may never happen, the possibility of being served papers in front of customers or if working from home – neighbors, friends and family is unsettling.
- If you are planning to move and don’t want to pay and file to update the address of the agent.
- If you are forming a business entity in another state and need to fulfil the requirements of having a physical address.
How much does a Registered Agent Service Cost?
Depending on the level of registered agent services you need, a commercial Registered Agent service typically costs between $100 – $250 per year. A few of the better known companies include Northwest Registered Agent or IncFile.