What Is a Registered Agent? A Small Business Owner’s Guide
If you decide that a limited liability company or a corporation is the right structure for your new business idea, and you start preparing your incorporation documentation, you’ll soon learn that appointing a registered agent is an essential part of your business formation journey.
But what is a registered agent, and why do you need one? Keep reading to learn more about this corporate compliance responsibility.
Understanding the Concept of a Registered Agent
The term “agent” is more broadly defined as an individual who is authorized to act on behalf of another person or entity. But that’s not what a registered agent does.
Also referred to as a statutory agent or an agent for service of process, a registered agent is an individual or company that you designate to receive legal documents on behalf of your business. Regardless of the size and type of your company, your designated agent can receive documentation such as service of process notices (court papers if your company is sued), tax notices, Secretary of State’s business registration renewal notices, and any other compliance-related papers. After receiving documents, a registered agent is required to promptly forward the materials to the company.
What Is the Purpose of a Registered Agent?
Appointing registered agents is a legal requirement that derives from Due Process clauses in the US Constitution. A lawsuit against your company cannot move forward in court until you get properly notified about it, and the action of informing an individual or an entity that there’s a pending lawsuit against them is called service of process. Your statutory agent’s job is to receive service of process on behalf of your business.
In addition to accepting notices about lawsuits and forwarding them to you, one of the main purposes of a registered agent for your LLC or a corporation is to send you annual report filing reminders and notices to help your business stay up-to-date with legal requirements and corporate compliance rules. Think of a registered agent as a gatekeeper that gives you a heads up so that you’ll have enough time to take action.
Registered Agent Requirements
Before we list all business entity types that must appoint a registered agent, let’s discuss the requirements that an individual or an entity must meet to be considered statutory agent material. Also called a resident agent, this individual or entity must be based in the state where your business operates. Moreover, a registered agent’s address must be a physical address where documents can be delivered.
Here’s a list of business structures that must designate an agent that fulfills the aforementioned conditions:
- Limited liability companies (LLCs)
- Limited partnerships
- Limited liability partnerships (LLPs)
If you’re just starting a new company, you’ll need to appoint your registered agent as part of the documentation you file with your Secretary of State or an equivalent authority. For an LLC, this document is called articles of organization, while a corporation requires articles of incorporation. Note that you’ll need to designate a registered agent in each state you plan to do business in.
If you need to change your registered agent or update any information, you can do so through the same institution where you filled your incorporation documents.
Can You Be Your Registered Agent?
Appointing yourself or another member/shareholder of your company as your registered agent may seem like a no-brainer at first glance. However, before you choose that route, there are a few things you need to take into account.
First, remember that an agent for service of process must always be available to accept government correspondence, lawsuit notices, and other important documents. In other words, a registered agent, by definition, must be present at the designated physical address at all times during business hours. If the person you’ve designated to receive correspondence takes a holiday or even leaves the site to meet a client, you’ll be risking potentially severe consequences of unsuccessful delivery.
Additionally, if you decide to move your business, you’ll face the costs of filing a change of your registered agent’s address. Meanwhile, using a third-party service won’t expose you to such charges - you’ll be able to move your company as many times as you like, and it won’t affect the address of your registered agent. Of course, registered agent services come with their own fees.
Should You Hire a Registered Agent Service?
There are cases where appointing yourself, another team member, or even your spouse as your company’s registered agent makes sense. This is especially true if you run a small company. However, if you’re concerned about any of the aforementioned pitfalls, assigning a professional is a better option.
So what is a registered agent company useful for, and what are the advantages of employing its services? The answer is simple - the company is always there to take delivery of notices and other important documents and forward them to you in a timely manner. Here are some of the main reasons why business owners choose to hire professional registered agents rather than taking this task upon themselves.
Compliance with the Law
Hiring a registered agent means that you’re getting all the help you need to meet the legal requirements imposed by the state. You’ll receive regular reminders about annual report filings due dates and similar official government notifications.
A registered agent service company will also hold on to copies of your corporate documents for safekeeping. In case anything is lost or stolen, you’ll still have access to your sensitive paperwork.
Privacy is a number one priority for most business owners. Let’s say you’re running your business from your home. Not only do you risk not being present for document delivery, but your home address is listed on the public records and available for everyone to find. So, what does a registered agent do to prevent this? Hiring a professional to accept your correspondence means that the company will have their physical address public instead of yours. That way, you’ll be protected from getting unsolicited mail and receiving a summons in front of your family, employees, or even customers.
If you decide to act as your own registered agent, you’ll need to commit to being present at the designated location every day during business hours. Hiring a professional registered agent relieves you of that burden and lets you devote more time and energy to growing your company and maintaining a healthy balance between work and your personal life. The best registered agent service helps you with the following:
- Choose your business hours. As a rule, registered agents must be available from 8 a.m. until 5 p.m. every weekday. By appointing a third-party registered agent service, you’ll give yourself the freedom of flexible business hours.
- Incorporate your business in another state. Let’s say you run a limited liability and want to conduct your business in a state other than the one where your company is registered. You’ll need to form your LLC in the other state and appoint a registered agent with a physical location in that jurisdiction.
- Form a company in multiple states. Similarly, you can find a national LLC registered agent and conduct your business in as many states as you like.
A registered agent is a person or an entity designated to receive legal documents such as subpoenas, regulatory and tax notices, and other correspondence on behalf of a business. A company’s registered agent can be its owner or another entity that the owner assigns. Also referred to as a resident agent, a registered agent must have a physical address in the state where the company is operating.
A company’s registered agent must be present at the designated address at all times during business hours to receive official documents. So what is a registered agent for a business? This can be an individual or an entity that works as the first point of contact between a business and the state it’s registered in.
While you can be your own registered agent, hiring a professional comes with many advantages, such as the flexibility to set your own business hours, the opportunity to operate your business in multiple states, and knowing that you won’t miss any important deliveries and compliance-related deadlines.
While all companies provide the same basic service, some offer additional features for a higher price. So what is a registered agent going to cost you? The average price of the service ranges between $100 and $200 per year.
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