When it comes to forming any kind of business entity in America, getting a registered agent is a very important step when it comes to registering your business with the state.
In most states, you are actually required by law to designate a registered agent for your company. Having a registered agent ensures that the state has a reliable way to contact an official representative of your LLC.
The registered agent’s name and address are required in your documents of organization and incorporation to form your business and make it officially legit.
A lot of entrepreneurs think that they can be their own registered agent when they start out, thinking that they get to save money by taking the tasks on their own. But is it really a good idea for your business?
What is a registered agent?
Before we get on the specifics, let us have a refresher on the general aspects of a registered agent. A registered agent is the point of contact between the state and your business. A registered agent is also referred to sometimes as a resident agent or statutory agent.
As the point of contact, the registered agent will be receiving documents from the state government. This includes tax forms, legal documents, official government correspondence coming from the office of the Secretary of State, and summons or notice of a lawsuit.
You can be your own registered agent or hire an individual or business entity to be the registered agent for your LLC.
In What Kind of Situations Are Registered Agents Used?
As mentioned earlier, the registered agent’s purpose is to be the point of contact between the state and your company. Documents from the Secretary of State are important and you should work on them right away. The registered agent should inform the business owner right away if a document comes in so that the business owner can give an immediate response or action.
Aside from receiving mail on your behalf, a registered agent will also help maintain your good standing with the state by making sure your business is compliant with state laws. This includes sending you annual report filing reminders and tax deadlines.
What Are The Risks of Being a Registered Agent?
Although you are allowed legally to be your own registered agent, this responsibility can stem up a lot of issues regarding your privacy and time. Here is a list of the risks that you will be facing when you become your own registered agent.
A registered agent’s address is a matter of public record
The biggest risk of becoming your own registered agent is that your name and address will be documented in public records. Anyone can access that address by going to the database of the state.
This brings up a lot of privacy issues especially if you are doing a home-based LLC because you will be using your personal address.
If you do have a physical business location, the problem with having your address so widely available is that you will be receiving unwanted solicitation letters or junk mail.
When you hire a registered agent service, the address in the state’s database will be the registered agent’s address and not yours.
You have to be available during all business hours
If you are your own registered agent, you will have to be present at your business address during business hours from 9 AM to 5 PM every Monday through Friday. Since only the registered agent is allowed to receive important documents from the state, you have to be around all the time – no exceptions. That means no days-off or sick leaves, no business trips, or no running errands during business hours.
You could miss an important delivery
When you become your own registered agent, you have the risk of missing an important delivery simply because you are not around or you are too busy to receive the document yourself.
If it were lawsuit papers, the lawsuit could go on against you without your knowledge and you would be in for a surprise. Take note that some official documents have a limited time for you to respond and court summons or service of process are one of them.
Your customers or employees could see you get a service of process
We now live in a world where even the littlest mistakes and misunderstandings can lead to a lawsuit. If your business is high-risk, chances are you will be having your fair share of irate clients.
When you get sued, the state will be sending you a service of process or court summons. You should not receive service of process papers in front of your customers, employees, or family. It could stain the way they think of you and your business. You get to avoid this scenario if you outsource your registered agent instead.
You can only conduct business in your home state
Signing yourself up as your own registered agent will limit your business to your home state. This means you will not be able to expand your business to another state since you obviously cannot be in two places at one time. The same limitations affect having a family member, employee, or attorney as a registered agent.
Every company needs to have one registered agent in each state it does its business. Only a professional registered agent service with offices in all 50 states will be able to help you with business expansion.
You have to deal with extra hassle
As mentioned earlier, there are chances that your information can be accessed so you have to deal with spam mail, junk mail, and unwanted solicitations from other marketers or local groups. Plus you have to keep track of all the deadlines in order to make sure that your business will remain compliant with the laws of the state.
If you outsource the responsibilities of a registered agent, you get to have peace of mind knowing that you cannot be bothered and that you will not be missing important deadlines because you will be getting a reminder from your registered agent.
This gives you peace of mind and allows you to focus your attention, energy, and time on running your LLC.
Getting Registered Agent Services
Yes, you can be your own registered agent but why take the risk when you can use a low-cost hassle-free professional registered agent service like ZenBusiness or Northwest Registered Agent.
A registered agent service is a third-party company that will take the responsibilities of a registered agent for your business in exchange for a fee.
Registered agent services will not only receive documents for you but will also help you keep track of any due dates and deadlines. These companies will be more focused on their responsibilities as a registered agent and they usually provide additional features and services as well.
When you pay for registered agent service, you no longer have to deal with the risks and hassle of being your own registered agent.
The registered agent will be receiving all the important documents from the state government for your business. When a document comes in, they will inform you of the delivery, scan the form to create a digital backup copy of the document, and then forward it to your business location or online.
When you get registered agent service from a third-party business entity, you will also be able to have a back-up of the documents in case you lose your own copies due to natural disasters or theft. The registered agent service will always have a backup of all the documents they received on behalf of your business.
The best thing about getting registered agent services is that these companies can also help you form your LLC and they often offer 1 year of registered agent service along with their LLC forming packages.
LLC forming business entities also offer a lot of support and guidance to help your small business grow. This will take a huge load off your shoulders.
What are the requirements to be a registered agent?
Registered agent requirements will vary from one state to the next. Here are some of the general qualifications for registered agents:
- Must be 18 years old or older
- Must have a physical street address in the state where the business is registered
- Must be available every day during normal business hours
- If getting a third-party registered agent service, the business entity must be registered to operate in the state.
Can’t I use a P.O. Box for my registered agent address?
This could take care of a lot of privacy issues but unfortunately, this is not possible. Registered agents must have a street address in the same state your business is registered in. They should be available physically to receive the documents in your behalf as well.
Are registered agents liable?
Yes, a registered agent can be liable for damages in case they fail to meet their responsibilities.
One example is not informing you right away that your business is being sued, which caused you to have no response to the summons and left you unprepared for the lawsuit.
Another example is if a registered agent does not inform you of an important tax filing deadline which results in your business having to pay a hefty fine.
As you can see, the liability involved is more on the timely transmission of documents.
Can I change my registered agent?
Yes, you can. It is never too late to take off your name and get a registered agent service instead.
You just have to file some paperwork with the Secretary of State to change your registered agent service details and make sure that you have the new registered agent’s signed consent form.
You might be asked to pay a filing fee and have other requirements – this will vary from one state to the next so check your state-specific laws.
If you plan to take off your name and get a registered agent service instead, the registered agent service may even do the filing for you.
How to choose a registered agent service?
You should work with a trusted and reputable national registered agent service that has a legitimate office in every state. You should prioritize the following services and features when choosing a registered service:
- Document management – All documents should be scanned and uploaded in a timely manner and you should be given access to the digital copies on your business account with them online. Make sure you will be receiving a notification when you have a document and that you have the option to download and print the document.
- Compliance management – The registered agent service must remind you of important deadlines such as the filing for an annual report or tax forms.
- Responsive customer service – The registered agent service must have a reliable customer support team who can answer your questions and concerns immediately.
The point of being an entrepreneur is to start your business and become your own boss. You are supposed to be able to go in and out of the office whenever you want. If you sign up as your own registered agent, it is as if you are still shackled to the office because you always have to be around.
Business growth and expansion are also something you should consider early on. Being your own registered agent means you will not be able to take your business to another state.
Although being your own registered agent can save you money, in the long run, the responsibilities and risks associated with it are just not worth the hassle. Besides, getting registered agent services is not as expensive as you think.
Outsourcing your registered agent duties does not only decrease your business risks but it also reduces a chunk of responsibility and a huge load of time-consuming paperwork that you must keep track of. Hiring a professional registered agent to do the work for you gives you a more hassle-free experience as a business owner.