When you incorporate a business, there are plenty of requirements to keep track of.
You’ll need to come up with the perfect business name, decide which type of business entity you want to form, and acquire business licenses to operate in a compliant manner. Another of the important early steps for any corporation or nonprofit corporation is to designate a registered agent for your company.
But what is a registered agent, and why do you need one?
The role of the registered agent for an American business entity is not a terribly complex one, but it is an incredibly important role that requires careful consideration.
Let’s break down the essential elements of registered agents, and figure out whether you should serve as your own agent, or hire a registered agent service to handle this job for you.
What Is a Registered Agent?
A registered agent is someone who serves a business by acting as the point of contact between that business and the state government. Maintaining a registered agent is a legal requirement for any and all incorporated businesses.
Almost anyone can serve as a registered agent. In fact, you can serve as your own registered agent, you can hire a business to handle this role, or you can designate another individual, like a family member or friend, or perhaps a lawyer or accountant.
The only real restriction is that some states require an individual to be at least 18 years old. Regardless of who the agent is, the registered agent must be available to accept service of process during all regular business hours.
A registered agent has a physical address in the state, sometimes called the registered office. The agent’s address cannot be a P.O. Box, because the state does not always deliver documents through the mail. Since process can be served at any time, it’s very important that the agent is available from 9am to 5pm, every Monday through Friday.
That’s why many professionals recommend that you hire an agent and not serve as your own.
What Does a Registered Agent Do?
As outlined in great depth on LLC University, a registered agent accepts all formal written communications from the state government on behalf of the business.
These communications include service of process, tax documents, notifications from the Secretary of State, and more. The agent then forwards any relevant documents to the business in a timely manner.
This might not seem like that big of a deal — and it can even seem like an antiquated and unnecessary middleman role — but it is an important function. And if you hire a registered agent service, they may also help remind you of when certain forms are due, such as the annual report or business license renewals.
Why Is a Registered Agent So Important?
Simply put, a registered agent is important because it is a legal requirement. You’ll encounter significant legal trouble if you fail to designate or maintain a registered agent.
More specifically, the registered agent plays the vital role of facilitating the court system. Here’s how: the registered agent proves that legal process has been served. Law requires that, for a case to come to court, the plaintiff must be able to prove that there has been a good-faith effort to notify the other party of the suit.
In theory, without a registered agent, a business could deny that it ever received that communication, which could stall the lawsuit indefinitely. By having registered agent laws, there is proof that both parties are aware of the service of process — and if you’re not, it is entirely your own fault for skirting the rules.
What Happens if I Don’t Maintain a Registered Agent?
There are penalties if a business does not maintain registered agent like it should. For example, in some states, the state will administratively dissolve your business if you don’t have an agent.
In fact, you won’t even be allowed to incorporate your business if you don’t designate a registered agent, because the state will consider your filing to be incomplete.
Similarly, if process is served on your business and you don’t have an agent to notify you, then you’ll be completely blindsided. How awkward would it be to not show up at your own court date? Worse than awkward — it could even spell doom for your business. Maintaining an agent eliminates that possibility.
Finally, businesses without a registered agent actually lose their good standing in the state. Businesses out of compliance could, in theory, lose their corporate veil and limited personal liability, which would open up your personal assets to lawsuits.
Should I Hire a Professional Registered Agent Service?
We strongly prefer hiring a professional service to handle your registered agent role, as opposed to serving as your own.
With a professional registered agent, you’ll never have to worry about missing an important document delivery, and you won’t have to concern yourself with being available at the same address during all standard business hours.
If you want to use a professional service, we recommend checking out our guide to the top online registered agent services. In general, our favorite options are ZenBusiness, Northwest Registered Agent, and Incfile. All three of these companies provide registered agent service for $119-125 per year, and they all also provide one year of registered agent for free if you purchase incorporation service from them.
A registered agent’s job might seem insignificant, but by accepting formal communications for the business, the agent fulfills a vital task.
The registered agent ensures that the state has a means of consistently contacting an official representative of your business, which makes the legal system work much more smoothly for business matters than it otherwise would.
No matter which route you choose – whether you decide to designate yourself as your company’s registered agent, or if you choose to hire a professional registered agent service — we hope that this guide helped you understand more about registered agents. Now you’re prepared to appoint the perfect agent for your business.