Why a Registered Agent is Needed for an LLC or Corporation

All state-registered business entities, such as LLCs and corporations, are required to have a registered agent in the state where the company is formed or doing business in. In addition, every state requires an LLC or corporation to assign a designated physical street address to the registered agent for state documents.

Requirements vary among the states, but generally registered agents must:

  • Have a physical office in the state where your business is registered.
  • Be available at the physical street address during normal business hours to receive legal documents.

There are three options when selecting your registered agent for your startup. In this article, we will help you determine the best registered agent option.

What is a Registered Agent?

A registered agent is formally known as a "registered agent for service of process" and may also be known as a resident agent, statutory agent, or agent of record. It acts as an agent to receive legal documents on behalf of the registered business.

These documents may include:

  • Tax-related documents from the IRS, the Franchise Tax Board, and other government tax entities.
  • Normal corporate filing documents, such as reminders for filing the statement of information and other information sent by the secretary of state.
  • Notice-of-litigation mail (mail that initiates lawsuits) and legal documents when others want to formally contact you or send you notice.

Failure to have a proper registered agent for your company may result in fines and possible loss of good standing with the state. Therefore, it is important to keep accurate corporate records with the state so you do not miss receiving legal documents.

Who Can Be Your Registered Agent? 

There are three options for designating a registered agent for your startup.

Option 1: You can be your company's Registered Agent.

Option 2: A friend or family member can be your company's Registered Agent.

Option 3: You can hire a Commercial Registered Agent for a fee.

Note: There are a couple states that allow your company to serve as its own Registered Agent, but this is the exception to the rule.

 

There are certain restrictions and conditions to becoming a registered agent for your business. In general, an individual or business can become your registered agent if the following requirements are met:

  • A registered agent must physically reside in the state of the business.
  • The registered agent’s address must be a physical street address. PO boxes are not allowed.
  • The registered agent must be available during normal business hours to receive important state and legal documents.
  • The name and physical address of the individual is required if the agent is a person.
  • If the agent is a business, it must be a company registered in the state and is in good standing. In this case, usually the business name or some record ID is required to identify the business as your agent when you file.

Designating Yourself or an Individual as Your Registered Agent

Acting as Your Own Registered Agent: If you choose to be your own company's registered agent, then it is important to be aware that there are a couple states that allow your company to serve as its own registered agent, so it is important to check with the state you are registering in.

The biggest advantage to being your own registered agent is that it is the most convenient. It's also the most cost effective option for startups.

While cost is an advantage, there are larger concerns to consider about being your own registered agent.

  1. Lack of Privacy - A problem many startups encounter is that the business has no physical location. Often, startup owners decide to use their home address. By using your home address as your registered agent address, your information will be listed on the Secretary of State website and will be a matter of public record. That means anyone can access your home address and personal information. If you don’t want to list your home address and personal information, hiring a registered agent service will solve this problem.
  2. Travel & Hours - If you travel frequently, set your own hours, or are not in the location of your business, you are more likely to miss a government issued delivery. It is required that the registered agent be available during normal business hours.
  3. Lack of Expertise - Compliance and legal processes need to be processed and filed accordingly, which takes a lot of time and energy. The improper handling or failure to successfully handle the Service of Process can have serious adverse consequences for the business. If this is not your level of expertise, then there is a high risk of penalties, fees, and state standing.

Assigning an Individual as Your Registered Agent: Another option for startups is designating another member of your LLC or corporation as your registered agent. This option is best if you don’t have a street address in the state of your business.

The advantage to having another person act on your behalf as your registered agent is it provides an extra layer of privacy since the registered agent's name and contact information will be made publicly available, not yours.

By using an individual as your registered agent, you should strongly evaluate the following issues.

  1. Delayed Delivery - An individual registered agent is not a professional service and the delivery times may be significantly delayed. Delayed deliveries could cause you to incorrectly rush time sensitive legal action and information. You may also miss important legal deadlines.
  2. Trust & Credibility - It is important to trust the individual that you are assigning as your registered agent. The individual you assign as a registered agent must be reliable, available at the location during normal business hours, and have expertise in compliance and legal matters.
  3. Compliance Risks - The individual that you are assigning as your registered agent should be knowledgeable in this area. If they are not experienced in compliance rules and regulations, then inaccurate handling or processing failures are a high risk for your business.
  4. Tracking - The individual you assign as your registered agent should be able to track and notify you when annual reports are due with compliance. If you hire a registered agent service, then your registered agent should have a system in place to track and notify you when annual reports are due to keep your business in compliance with the state, so you don’t have to worry about it.

While it is legally possible to serve as your own registered agent or assign an individual as your registered agent, it is advisable to designate a commercial registered agent service to perform this important role.

Commercial Registered Agent Services

A commercial registered agent is a company that specializes in receiving Service of Process on behalf of businesses nationwide. They will receive Service of Process on behalf of your company and then forward it to you by mail at any address you’d like. Most of these companies will also fax or email your documents if preferred.

By using a commercial registered agent service, you have the assurance that there will always be someone available during standard business hours at the registered address to take delivery of notices and other documents.

The registered agent service will promptly forward notices and other documents received to you in a timely manner.

For some startup owners, it is well worth the fee to not have to track the official notices and annual report due dates with the state. Also, all your important documents will be kept in one place and you don’t have to bother keeping track of notices.

By using a third party registered agent service you will receive the following benefits:

  1. Controlling Important Documents - It is not uncommon for the registered agent to receive a significant amount of "junk mail" for the business. A registered agent’s address is public record and can be viewed by anyone. Some states include the company’s legal address, while others only show the agent’s address. This means that anyone can search and find the address to contact you, including marketers. Using a registered agent service provider will reduce unsolicited mail your business receives and keep your personal information safe.
  2. Privacy of Lawsuits - Using a professional registered agent service ensures you receive any Service of Process both promptly and privately if a lawsuit is served.
  3. Avoid the Risk of Non-Compliance - A registered agent service will help you stay in compliance, avoid unnecessary state penalty fees, and maintain your company's good standing in your state of formation and/or qualification.
  4. Convenience - The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. A professional registered agent service provider will ensure someone will never miss these important communications. Some business owners who aren’t available during business hours opt for registered agent services, so they can maintain irregular work hours.
  5. Peace of Mind - By having someone else responsible for the receipt of tax and legal documents, you can have the peace of mind that someone will always be available to claim such important information without having to worry about missing any deliveries.
  6. Consolidation of Multiple Businesses - If you are doing business in multiple states, then you will need to have a registered agent with a physical location in each operated state. For this reason, many business owners choose to hire registered agent services because it is easier to use one provider who can be an agent for you in multiple states than having to deal with separate agents. Additionally, business owners find it a benefit to have registered agent services in order to comply with state regulations and to be sure all important notices to the business are kept in one place, with their registered agent.

Conclusion 

For LLCs and corporations, a registered agent service is essential to maintaining good standing and keep your business running without encountering compliance issues.

Compliance requirements can be both time and labor intensive, often requiring the completion of lengthy and sometimes confusing forms using information from various sources. By using a registered agent service for your business, you will be confident that you can avoid risk of non-compliance so you can avoid penalties and fees by the state as well as save time to run your business.

A registered agent service also provides many benefits of privacy, convenience, and staying on top of all legal and government documentation in a timely manner for your business.  

Do You Still Need Help Deciding on Your Business Structure?

Download our Business Structure Advantages and Disadvantages Chart to determine what business entity is right for you. In this chart we cover the advantages and disadvantages of a C-Corporation, S-Corporation, Limited Liability Company (LLC), General Partnership (GP), and Sole Proprietorship.

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