Receiving important legal documents like case filings and tax notices requires reliability and privacy. That’s where registered agents come in. Read on to see how registered agents can help your small business meet requirements as an LLC.
What is a registered agent?
A registered agent is someone you pay to be responsible for receiving documents at a physical address within the state where the LLC is registered and then forwarding the documents to the LLC itself.
When forming an LLC or corporation, you are required to name a registered agent as part of the formation process. The registered agent must have a physical address in the same state where your business is registered.
For example, if you form an LLC in California, you must designate a registered agent with an address in California. This gives your business an official presence within the state.
The role of your registered agent is to forward any legal correspondence from the state or other entities to your company's owners or officers. This ensures important documents like lawsuit notices, tax documents, and official filings reach the right people in a timely manner. Having a registered agent covers your business if correspondence is sent to an outdated address.
A registered agent serves as an important intermediary for all legal and tax-related communications for your business. Appointing one is a key compliance requirement and protects your business interests.
If you want to start an LLC, make sure you read a complete guide before taking any concrete steps.
What does a registered agent do?
A registered agent receives important documents and ensures that they are forwarded to the appropriate parties. Documents can be from the government or a private party.
Documents sent to registered agents can be correspondence (essentially letters) or attachments to letters or other kinds of documents. Typical documents that a registered agent would process include:
- Subpoenas
- Tax notices
- Lawsuit filings
- Reminders to file annual reports
- Judgments of court
A registered agent has four basic responsibilities:
- Be present
- Organize documents received
- Promptly notify a client once a document is received
- Get documents to the client, either by sending or waiting for pickup
Usually a registered agent supplies the originals, and sometimes copies too.
Why do you need a registered agent for your LLC?
All fifty states require LLCs and corporations to maintain or hire a registered agent.
Legal issues can be a major hurdle for startups.
The law aside, businesses should pay a person other than the owner to handle the job of registered agent. Learn why as you keep reading.
Registered agent requirements
In general, here are the bare minimum requirements for someone to be a registered agent:
- 18 years old
- Physically present at a real address, not a virtual address or a P.O. box
- Physically present during standard business hours, 9:00 am to 5:00 pm
- The physical address is in the same state as the business being represented
States where you need to employ a registered agent
Few states allow LLCs or corporations to appoint the business entity itself as a registered agent.
But you are typically able to appoint an employee of the entity, opting not to hire an independent person. In other words, in general across the country you are allowed to appoint yourself or someone you know.
For example, Delaware, a popular place for business entity incorporation, allows the appointment of the entity itself. But Delaware also requires active presence of an actual person to receive process and correspondence.
The decision of whether to go in-house or hire from an outside firm is a cost-benefit analysis. Let’s walk through it.
Hire a registered agent or do it yourself?
Hiring a registered agent versus doing it yourself has different pros and cons.
Pros of hiring a registered agent
What happens if you hire a registered agent instead of doing it yourself?
- You satisfy a legal requirement for your LLC or corporation and you don’t have to work hard to do it.
- You might not be available during standard business hours to be able to do the job of registered agent. In this situation, hiring someone means an important job for your business will get done.
- Your address is not listed in public records. Instead, the address of your registered agent is listed.
Cons of hiring a registered agent
- You will spend around $125 to $250 a year on a professional service. The more states you need covered, the more you’ll have to spend in total although the per-state rate may be better.
- You have to pick the right vendor, a company you can trust to notify you and forward documents and correspondence to you promptly.
- Alternatively you have to pick the right employee. Time they could’ve spent on a value-add activity will be spent on being a registered agent.
- It’s possible you may have to hire more people or pay for a more expensive service to meet new states if you expand to operate in more.
- You will have to update any changes in registered agent name and address.
Pros of doing it yourself
- You’re hyper-focused on the legal and litigation aspect of the business and do not trust a service or another employee to handle incoming legal documents and correspondence.
- You will learn to do something new, an activity that you value as a business owner.
- You can be sure the job will get done with you fully there and ready to act.
- You save $125 to $250 a year on the annual registered agent fee.
Cons of doing it yourself
- You’ll need to be available in person to receive mail and correspondence from 9:00 am to 5:00 pm in the office address that you listed in public records. You cannot use mail forwarding or a P.O. box.
- As the person whose name and address is listed in public records, you will have less privacy.
- You may have to sift through a lot of useless mail, rather than time-sensitive and valuable correspondence and documents from the government and private parties.
- An embarrassing event could take place at work if that’s the address you list, like service of a hotly contested lawsuit in front of employees and clients.
- You may have to spend a significant amount of time in your role as a registered agent, rather than leaving the work to a company who focuses completely on the role for a variety of clients.
How to get a registered agent
Finding a registered agent is straightforward. If it won’t be you, and that’s recommended, it’ll either be someone you know or someone you don’t. It is not recommended to have a family member or friend do the job, because this job requires professionalism and a serious time commitment.
A good registered agent is either a reliable employee of the business or a third-party service. Registered agent services should be done in house when you can afford to be certain that someone (other than you) will be available to receive and organize the relevant files. This person could be an in-house attorney supervising a paralegal.
But if you want to pay for a third-party service, you’re going to find a reliable partner. The market of registered agents is healthy. Every LLC and corporation in the United States has to do the “make or buy” choice for registered agents. It’s not hard to find options.
Firms offering registered agent services compete on price. At times they offer heavy discounts. I’ve seen 50%, from around $250 to $125. I’ve seen another annual fee offer of registered agent services for $125 for each state. The rate then becomes more attractive with each state added.
Search for a few options and pick an established name with a fair offer.
Or you could go for a new funded startup vying for an edge. Legacy services are subject to tech competition too. Registered agent services are no exception to the rule.
Remember, the point of getting a registered agent isn’t for someone else to be on top of things. It’s that between you and another professional, the job will definitely get done well.
You should have a list of documents and correspondence you’d expect to see. Set calendar dates to check up on these items, as a test of the registered agent services partner you choose.
What happens if you don’t have a registered agent
The consequences of a business not having a registered agent can be severe. First, if you are required to maintain or hire an active registered agent, and you drop the ball or your agent does, then you would be in trouble with the relevant state authority.
You would need to fix the issue immediately. There could potentially be:
- Fines
- Penalties
- Termination of the business entity as a valid business structure
Beyond the more formal and structural legal problem, there’s the more immediate legal problem: Who will the government or private party give documents to?
An active registered agent can physically receive important papers like lawsuit filings and reminders to file annual reports.
- What if you don’t know that your fledgling startup is being sued for intellectual property violations by a larger, better-equipped competitor? Courts at times enter default judgments against parties who don’t participate.
- What if you didn’t get that reminder to file an annual report? And you forgot to file?
- What if you don’t know that former officers of your company are being investigated by the government? You might not get a word in about what did or did not happen.
If you don’t have a registered agent, you can’t formally register a business entity anywhere in the United States. There are different types of business entities and the formation of each is different.
- If you expand operation to a new state, you either need a new agent in that state or to pay your existing provider a larger fee to include the new state if they have the footprint.
- If your agent leaves their position or closes shop, you will need a new agent.
- If your agent changes address, you have to update the address.
- If you change agents, you have to update that information on file.
Starting a business is a complicated endeavor–like getting customers and working with vendors–and you need to do as much research as possible.
Registered agent FAQ
What does a US registered agent do?
A US registered agent is responsible for receiving the mail sent by the government or a private party to a US business entity. A registered agent is available during all standard business hours, between 9:00 am and 5:00 pm, for a variety of tasks including service of process for a civil case or delivery of a legal notice from a government tax agency.
Beyond waiting at a physical office during standard business hours, receiving documents and correspondence, and organizing these files, a US registered agent has duties to notify clients of documents receiving and forwarding those documents to clients.
Can I be my own registered agent?
Yes, in virtually every state in the country you can be your own registered agent. It’s a lower-cost choice that will eventually make less sense to you the more your business grows.
Do you anticipate your business growing? Do you anticipate your business becoming involved in legal and regulatory processes and problems? Then by working as your own registered agent you will sign yourself up to receive process servers–sheriffs or contractors–who deliver unpleasant or tedious news and documents.
Will you be at the same address during all hours of the business day? Are you willing to sift through useless mail too?
Your time may be more valuable than a small annual fee.
What types of businesses require a registered agent?
In general, formal business entities are required to have registered agents. In all states, LLCs and corporations are expected to have registered agents available during standard business hours. A registered agent must be physically located in the state of the business’s operation.
A sole proprietorship or a general partnership may not strictly need a registered agent to satisfy a legal requirement of incorporation. But it would probably be wise to eventually have one as the business grows to a certain size. Registered agents eliminate the hassle of receiving and organizing important correspondence and legal documents.
Incorporation is a normal part of building a modern business. The incorporation and operation of a modern business requires the use of a registered agent. It’s time and hassle that should be allocated to a specific position or third-party service.
