Deciding to take your small business to the next level by incorporating or forming an LLC is an important step in the lifecycle of any company. If you’ve recently incorporated or formed an LLC, you’ll realize that one of the prerequisites to becoming a corporation or LLC is designating a registered agent in the state of incorporation.
If you’re not familiar with the term, a registered agent receives important legal and tax documents on behalf of a business in a given state. This includes important mail sent by the state (annual reports or statements), state tax documents, as well as any Notices of Litigation.
Individuals can act as a registered agent for a business. If you have a physical address in the state where you incorporate or foreign qualify, you could name yourself as the agent. While it may be tempting to take on this role for yourself, here are five reasons why you should think twice:
1. The registered agent must have a physical address in the state of incorporation or qualification: A registered agent is required to have a physical address in the state; post office boxes and private rented mailboxes won’t suffice. If you incorporated or formed an LLC in Delaware, but you live in California and your company is physically located in California, this means you cannot serve as a registered agent in Delaware. In this case, you’ll need to use a professional third party as your registered agent in Delaware.
2. Your company does business in multiple states: When you register your company to conduct business in other states besides where you incorporated, you’ll need a registered agent in each of those states (unless you have physical offices in each state).
3. You don’t maintain normal business hours: The registered agent needs to be available during normal business hours to accept important documents from the state. If you set your own hours or aren’t tied to an office (i.e. you’re a real estate agent or landscaper), you should consider a third party service so you never miss an important communication from the state.
4. Your address is likely to change: A registered agent’s address must always stay current in the state records. Any changes to the address require a formal state filing, which is often accompanied by a fee. By using a professional third party service as your registered agent, you never have to worry about updating the state records – no matter how many times you move over the years.
5. The registered agent’s address is of public record: Since the registered agent’s address is publicly available, anyone has access to it… including marketers, mailing lists, and spammers. Registered agents often receive unsolicited junk mail for their business. If you wish to keep your company or personal address information confidential, opt for a third party registered agent. You’ll get an extra layer of privacy and won’t have to deal with as much unsolicited mail.
While a registered agent may seem like a trivial formality, it actually plays an important role in receiving communications and keeping your corporation or LLC in good standing. The last thing you want is to miss an important filing date or fail to respond to a litigation notice because you didn’t receive the notice on time.
Reading Mail Photo via Shutterstock
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Reason #5 would be the deal killer to me. I get enough junk mail as it is and don’t need unsolicited sales visits on top of it.
Stan Hartman
How does one find a independent registered agent for your business?
Hi Stan – most online legal filing services such as my company, Corpnet.com, offer the service on all 50 states. We offer it free for the first year. Thank you for reading my post! – Nellie
Ehud
Hi Nellie,
Do you still offering the free first year for a registered agent?
Thanks,
Hi Ehud,
Our registered agent is included for free for the first year with our Deluxe and Complete corporation/LLC packages. If you’d like to move forward with this or have any additional questions, please contact Katie Hendrix in my office at 888.449.2638 x110.
allen
None of those are strong reasons to me. Pushes me toward being my own registered agent and saving whatever money it would otherwise cost.
John
I agree. Also note the author runs her own registered agent business so this is not an unbiased article
John B.
I know I’m late to this site, but as many articles describing things to an unknown audience, I think the author’s main point is to get the word out about just exactly what a registered agent service is. You don’t go into finer detail or technicality (with the average American attention span), and most SBOs don’t have time to give strangers time to explain the utility of their services (even if they’re the most honest people in the world).
But the point is: you legally HAVE to have such a service if your corporation operates in a State without physical presence or an officer to receive communications whether legal or from a Secretary of State, or other government department. (Lacking one can be serious–not to mention the subpoena of your person on account of it.)
One of the best things about a registered agent is if you want to keep moving your corporate headquarters around without updating the address, or don’t want to have an address for it! And no, I’m not a registered agent (or benefit from one in any way), I just looked it up a while back while researching what services I could offer in complement to what I already do. Funny part is I didn’t want to be stuck at one address but remain mobile–no resident agent business for me! :)~
The problem here is that if you run to the restroom or are not there to receive a service of process that you could jeopardize the status of your entity? The State could put you in a default or revoked status and it may be costly to change it back to good standing. Also, if you are being sued, the court can be notified that you did not have a registered agent available and you could lose the case. Some people are served by the Sheriffs department and don’t want that image in their office. It is a personal choice of course and some companies just don’t want to worry about it for a mere $8.25 a month (our fee) but if you are on a tight budget I completely understand! Our services are $99 per year and we also offer a compliance service for $49 a month. With compliance we will file your annual reports for you so you don’t need to worry about the either. If you order both of those services together we offer a discount – You get both services for $125. Seriously a great deal. Call us if you would like to know more! 888-366-9552 Stacy
Nari
Reason 4 needs to be weighed against cost/benefit.
How often does a company change address? vs. How much does this registered agent charge per year.
Also, what is the GUARANTEE that the registered agent is present in their office to receive legal correspondence in all business days of the year? We paid $75 a year once for an agent, and that office was not ever available to take one call or return one simple phone call. I sincerely doubted that they would actually function and receive legal correspondence and transmit it properly. If they do NOT do it, does the business get any compensation for the losses suffered? Probably not in most cases.
Registered agent is some arcane myth and it is still surviving in today’s new media world.
Nari
A better way to assess this would be… what are the costs/time involved to do these filings etc and deal with the paperwork stuff to stay compliant and decide if it is better done by someone who likes doing this and does it regularly and then outsource it to them.
However, normal Registered agent fees are too rigidly structured and turn people away in the start up phase. For that, I note that your first year free offer is great and helps people test this. And then usually it is worth keeping it on for the second year.
New Company Owner
This sounds like a boondoggle to get small businesses to spend more money. If my agent receives IMPORTANT mail from the state, how are they going to get it to me? They are going to MAIL it… Now why doesn’t the state just mail it to me in the first place?! The only thing that happens is time is wasted going through a 3rd party.
And how does an RA reduce junk mail? If mail is sent to the RA, isn’t it their obligation to accept it on my behalf? And then who makes the decision to throw some of it out? They can’t do that… so wouldn’t all the junk mail be forwarded anyway?