Selecting a Registered Agent for Your Business
If a company is going to establish itself as a formal entity, it will need a full-time registered agent who is authorized to receive legal papers on behalf of the entity.
When forming your business as a corporation or limited liability company (LLC), you will need to select a registered agent. Virtually all states require corporations and LLCs that are formed or foreign qualified (registered to transact business there) to have a registered agent in that state; however, many business owners have no idea what a registered agent is or does.
The registered agent is responsible for receiving important legal and tax documents on behalf of the business. Types of documents sent to the registered agent include service of process (sometimes called notice of litigation), which is the document that initiates a lawsuit; important mail sent by the state, such as annual reports or statements; and tax documents sent by the state's department of taxation.
The registered agent must have a physical address in the state of formation or qualification. Post Office boxes or a private mailbox rented from a company, such as The UPS Store, are not allowed. The registered agent must also be available during normal business hours.
Additionally, the registered agent's address is a matter of public record, which means that anyone has access to it. In states that do not require a company's legal address be included in the formation or qualification documents, the registered agent's address is the only address on file with the state for that company.
Individuals are allowed to act as registered agents for a business, although this is very seldom a good idea. For example, if you have a physical address in the state where you form your corporation or LLC, you could name yourself as the agent.
You could not, however, name your new company as its own registered agent. In order for a company to act as a registered agent, it must typically be approved to do so by the state in question.
There are private companies that specialize in providing registered agent services to other businesses for an annual fee. These companies provide a great deal of value to even the smallest of businesses, such as providing online access to service of process and providing tools to assist with the ongoing compliance requirements corporations and LLCs face.
When considering a registered agent for your business, below are some items to keep in mind and some situations for which using a registered agent service provider may be the best choice for your business:
- You're forming your company in a state where you don't have a physical location. You are legally required to have a registered agent with a physical address (no P.O. box) in the state of formation. Using a professional registered agent provider helps you satisfy this requirement.
- You use a post office box as your business address. You cannot act as the registered agent for your business if you have only a P.O. box or a private mailbox as your only address.
- Your company does business in several states. When you qualify your company to transact business in states other than your state of formation, you need a registered agent in each of those states. By using a registered agent service provider, one company is handling this important documentation for you in each state and allowing you to concentrate on your business.
- Your address changes frequently. It is important to keep the registered agent address updated with the state, but changing it requires a formal state filing and may also require that a fee be paid to the state. If you name yourself as agent, you will be responsible for undertaking this process to keep your address current. By using a registered agent service provider, you never have to worry about this.
- Your business is home-based. As previously mentioned, the registered agent address is a matter of public record. That means anyone, including marketers, can access it. It is not uncommon for the registered agent to receive a lot of "junk mail" for the business. Using a registered agent provider can reduce the amount of unsolicited mail your business receives.
- You prefer to keep business activities private. When a company receives a service of process, this document is often delivered by local law enforcement. Most business owners do not want the sheriff to show up in front of customers, employees or neighbors (as in the case of home-based businesses) and serve them notice that their company is being sued. Using a professional registered agent ensures you receive any service of process discreetly.
- You don't maintain normal business hours. The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. If you set your own hours, you may wish to consider using a professional provider, so that you never miss these important communications.
- You do not have a permanent work site. If your business requires you to move around frequently, for example an electrician who is making service calls all day, using a registered agent service provider ensures that important documents will still reach you and your business.
- You want one less thing to worry about. Running your company is challenging enough without personally handling the necessary minutia. A professional registered agent can often help you by providing online access to your accounts and important documents and assisting with the annual filings states impose on corporations and LLCs.
Service of process has been mentioned frequently in this article and for good reason. It is very important that this document be handled properly and promptly. As previously mentioned, a service of process initiates a lawsuit against your company.
The service of process also typically outlines the time frame in which a response from your company must be received. If a response is not received in time, a default judgment may be issued. When a default judgment is issued, the other party wins, and your company may need to pay the damages outlined.
As you form or foreign qualify your corporation or LLC, give some additional thought to who will be the registered agent for your company. While the registered agent is a legal requirement, the right registered agent can also be an asset to your business.
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