When forming a business as an LLC or Corporation you’ll be required to designate a registered agent. Many new business owners may be confused and unaware of who can be appointed as their registered agent and what their responsibilities are. In this guide, we’ll go over who can be a registered agent, what the responsibilites of a registered agent are, and the risks associated with serving as your own registered agent.
Who Can Be a Registered Agent?
A registered agent plays a vital role during the business formation stage. The agent’s address provides a delivery point for an LLC or corporation’s legal and other documents. To become a registered agent, you need to meet specific conditions.
Here are the prerequisites you need to meet when planning to become a registered agent.
- A physical address (not a postal box number) located within the state where the business is registered/formed
- Be 18 years of age or older
- Your address must be in the state where you intend to incorporate the company
- Must be available during business hours at the listed address
Can I Serve as my Own Registered Agent?
If you are a person who is 18 years or older, has a physical address within the state where the business is formed, and are always available at that address during normal business hours (Monday through Friday, 8 AM to 5 PM), then yes, you can serve as your own registered agent. However, it’s important to stress that you must meet all criteria, especially the availability requirement.
Should I Be My Own Registered Agent?
Even if you fit the requirements to serve as a registered agent for your LLC or Corporation you may want to fully consider the responsibilities and risks. Failing to perform the required duties triggers dire consequences for a company. For instance, when a business does not receive service of process before the deadline, it may face complications. Such an event can lead to a default judgment, meaning that the business would automatically lose the lawsuit.
Hence, the need to ensure that you can handle the responsibilities throughout the year. Many people often underestimate the importance of ensuring year-round availability at the listed address during working hours. However, any individual or business filing a lawsuit against your company may obtain substituted service if the registered agent is unavailable when the process server arrives at the address.
In such a case, your company may forfeit the right to contest the lawsuit. Full-day availability is one of the most critical reasons why you should consider hiring a professional registered agent. By doing so, you enjoy peace of mind knowing that important documents will reach your desk at all times.
Cost reduction vs. business risks
Many entrepreneurs choose to represent themselves as agents to reduce the cost of forming a business. However, the approach still presents challenges in the long run. Self-representation may still cost the business by triggering legal woes. Some businesses may cease operating due to legal problems caused by failing to receive critical documents on time.
Flexibility
On the other hand, working as a registered agent for your new company compels you to remain based in one state at the designated address. Although the ability to meet the requirements and handle the responsibilities depends on your circumstances and business activities, it is best to avoid taking risks. Thus, you should seriously consider enlisting the help of a commercial registered agent.
Entrepreneurs working from home still need to spend some time away from the designated address handling various tasks. A professional registered agent ensures full-day availability, eliminating the risk of failing to receive essential documentation.
Another critical aspect of the registered agent role is keeping paperwork well-organized. You handle essential documents, such as legal paperwork, renewal reminders, financial reports, and tax forms. Misplacing or losing these time-sensitive documents could spell disaster for your business.
Key takeaways:
- As an agent, you must be willing to receive the summons and other confidential documents publicly
- The registered agent role places an additional burden on your ability to travel or move to a new business premise
- Elevates the risk of missing crucial notices and facing default judgments
Why Use a Registered Agent Service
Opting to rely on the services of a professional registered agent is undoubtedly a prudent move that helps safeguard your business interests. You recoup the fees associated with the service by minimizing legal risks. Commercial agents provide guarantees when it comes to availability. In addition, they make it easier to handle business registration and other documentation in multiple states.
Agents can receive various documents from a court of law, tax authorities, the secretary of state, and other sources. Service of process notices are a top priority when deciding to work with an agent. Your business can ill-afford to miss legal notices, as well as federal and state correspondence. Registered agents also receive tax forms and notifications, company filings, and permit-related correspondence.
Additional reasons to hire a commercial registered agent include:
Avoid embarrassment
Legal correspondence like summons and other notices require high levels of confidentiality. By opting to represent yourself as an agent, you face the risk of receiving lawsuit notices in front of customers, employees, and other parties. Such incidents can be embarrassing and damaging to your company’s reputation. Thankfully, you can avoid the humiliation by partnering with an established agent.
Minimize spam
Registered agents’ information is available publicly. This requirement exposes your contact information to spammers who are more likely to scrape the details and flood your inbox with unwanted spam mail. It is no surprise that many startups grapple with spam immediately after formation. Furthermore, the availability of your contact details on the secretary of state’s website may also attract scammers.
Reports show a significant rise in bad actors targeting startups with notices resembling official correspondence from courts of law, the Internal Revenue Service, the federal government, and state authorities.
Ensure compliance
The secretary of state’s office delivers compliance documentation via registered agents. Thus, working with commercial agents enables you to maintain compliance by receiving notices timely. State authorities use this channel to remind you about submitting annual reports and paying the renewal fee. Failing to respond to the notices may affect your company’s ability to operate.
Operate in multiple states
Registered agents provide an invaluable service when your business operations span multiple states. This scenario is typical for Nevada and Delaware corporations. Many companies operate in more than one state without setting up local offices.