Newly formed businesses of any kind tend to have one challenge in common: they usually run on tight budgets.
Cutting costs is essential for many startups, and smart entrepreneurs save money wherever they can.
One cost that sometimes gets cut is the expense of hiring someone else to act as your registered agent. After all, you are allowed to serve as your own registered agent in all 50 states, which can save $100-150 or more per year. However, serving as your own agent isn’t the perfect solution, and we typically don’t recommend it to most of our readers.
What are the downsides to being your own registered agent? We put together this list of five common issues to illustrate why we prefer hiring a professional registered agent service.
1) Challenges With Your Address
If you serve as your own registered agent, then you’ll encounter a few difficulties with your address.
First, the address you list must be a physical address in the state — it can’t be a P.O. Box. This creates a challenge for businesses that only have an online presence. Of course, this challenge isn’t insurmountable, because you can list any address where you’ll be available during regular business hours.
So, if you rent office space and run your business from there, then you could list that address. Even if you don’t have an office, you can simply list your own personal address, although that does bring up some privacy concerns (which we’ll discuss shortly).
As your business grows, you might need a bigger space and a new location. In this situation, if you served as your own registered agent, you would need to change your registered agent address whenever you move. In addition, you could not expand your operations into an additional state, because you would not be able to maintain a physical presence in multiple states at the same time.
2) Registered Agent Availability Standards
Requirements for registered agents can vary a bit from state to state, but they do have one requirement in common: the registered agent must be present at the listed address during all regular business hours. If you serve as your own agent, then you have to be available during those hours.
This limits where you can go and what you can do. For example, you wouldn’t be able to meet a client for lunch. Meetings like that would have to wait until after business hours, because if someone tries to deliver an important document to your business and no one is there to receive it, you can encounter legal trouble.
You could even find that a lawsuit against your company progresses without your knowledge, because the state was unable to contact you in order to deliver the service of process.
3) Potential to Miss Important Legal Notices
Being gone from the office when an important legal notice is delivered is just one way to miss service of process, but there are other ways to miss important notices. For one thing, lots of mail comes to the address of the registered agent, including junk mail.
The registered agent has the responsibility of sorting out the important stuff from the junk. But, if you’re busy with your business (and you likely are), then it’s quite possible that you could accidentally overlook something in the shuffle.
Overlooking those notices could spell disaster for your business. You could accidentally miss the notice that your annual report is due, or in the worst-case scenario, you could even miss your own court date. Hiring a registered agent alleviates this concern, because a professional will sort through your mail for you, separating the important stuff from the worthless junk.
4) Limited to One State
If you serve as your own registered agent, then you technically limit yourself to the state where you first form your business. That’s because a registered agent must be physically located in the state where they serve in this role. Since you can only maintain a presence in one state at a time, then you can only be your registered agent in one state.
As businesses grow, they often spread out to new states. But to do so, they need to appoint an agent in each state. Even if you serve as your own agent for your home state, you’ll need to hire someone for the new states.
5) Reduced Privacy
One of the biggest downsides of serving as your own registered agent is reduced privacy. Whenever a new business forms, part of the company’s records become public record, including the registered agent’s address. As a result, you’ll get increased junk mail, and anyone will be able to access your address with a simple search.
Let’s say that you serve as your own registered agent, and you list your home address. You’re a small-scale entity, so you work from home. But this means that the public can technically know the address of your house, and a person delivering legal process could even show up at your front door.
Even if you list your business address as your registered address, there is potential for awkward situations. Someone serving legal process will show up at your business, which means that your clients or employees (or both) could see information about a lawsuit, even if you’d rather keep that information private.
If you hire a professional registered agent service instead, their address becomes part of the public record, while your personal address stays private. If someone comes along to serve process, they will do so at the agent’s office, rather than at your home or business. In this sense, hiring a third-party agent creates a middleman between you and the public, which helps you avoid uncomfortable situations with customers and colleagues.
Granted, if you never encounter legal trouble, it’s a moot point. Still, you never know what will happen during your company’s lifespan, so these are important factors to consider.
Despite these downsides, it’s perfectly legal to serve as your own registered agent, but it’s not a decision you should make lightly. As you now know, there are many significant drawbacks to serving as your company’s own registered agent.
Moreover, the only real positive is the fact that you can save a small amount of money by handling this responsibility on your own, which just isn’t worth losing your privacy, or missing an important document delivery.
There are probably some isolated situations where it makes sense to serve as your own registered agent, but for most of our readers, it’s not even worth briefly considering. If you’d like to continue your reading, we recommending checking out this resource from SCORE.