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Why a Registered Agent is Needed for an LLC or Corporation

Leela Hopkins
,
VPM Staff
Last Updated
September 26, 2020

All state-registered business entities, such as LLCs and corporations, are required to have a registered agent in the state where the company is formed or doing business in. In addition, every state requires an LLC or corporation to assign a designated physical street address to the registered agent for state documents.

Requirements vary among the states, but generally registered agents must:

  • Have a physical office in the state where your business is registered.
  • Be available at the physical street address during normal business hours to receive legal documents.

There are a couple of options when selecting your registered agent for your startup. In this article, we will help you determine the best registered agent option for you.

What is a Registered Agent?

A registered agent is formally known as a "registered agent for service of process" and may also be known as a resident agent, statutory agent, or agent of record. It acts as an agent to receive legal documents on behalf of the registered business.

These documents may include primary communication, between the business and the state in the form of the following:

  • Tax-related documents from the IRS, the Franchise Tax Board, and other government tax entities.
  • Normal corporate filing documents, such as reminders for filing the statement of information and other information sent by the secretary of state.
  • Notice-of-litigation mail (mail that initiates lawsuits) and legal documents when others want to formally contact you or send you notice.

Failure to have a proper registered agent for your company may result in fines and possible loss of good standing with the state. Therefore, it is important to keep accurate corporate records with the state so you do not miss receiving legal documents. To remain in compliance with state laws, most states require the business to designate a registered agent.

What are the Requirements for a Registered Agent?

It’ll depend on your state you form your LLC and corporation, but most of the requirements for most states include the below.

Assigning a physical location: registered agents must have a physical street address. A PO box is not considered a substitute for an address. Additionally, this street address must be in the same state as the business location.

Maintaining normal business hours: registered agents must be available to accept service of process during general business hours. These are generally Monday through Friday from 8:00 AM - 5:00 PM.

Guess what?

You’ve signed up for a registered agent service, but realize that you’ll need a separate mailbox service for your business on top of using a registered agent service. Wouldn't it be great if you could manage your mail and registered agent in one place instead of having to look for two different services?

By having a virtual mailbox with your registered agent service TOGETHER for your business, you can easily manage all your personal, business, and legal mail in one place. Here are multiple reasons why having the two under one single service provider is a smart choice. Learn the 8 Reasons to Use a Virtual Mailbox With Your Registered Agent Service.

Who Can Be Your Registered Agent?

There are three options for designating a registered agent for your startup.

Option 1: You can be your company's Registered Agent. There are a couple states that allow your company to serve as its own Registered Agent, but this is the exception to the rule. We recommend you check with the state.

Option 2: A friend or family member can be your company's Registered Agent.

Option 3: You can hire a Commercial Registered Agent for a fee.

There are certain restrictions and conditions to becoming a registered agent for your business. In general, an individual or business can become your registered agent if the following requirements are met:

  • A registered agent must physically reside in the state of the business.
  • The registered agent’s address must be a physical street address. PO boxes are not allowed.
  • The registered agent must be available during normal business hours to receive important state and legal documents.
  • The name and physical address of the individual is required if the agent is a person.
  • If the agent is a business, it must be a company registered in the state and is in good standing. In this case, usually the business name or some record ID is required to identify the business as your agent when you file.

Can I Be My Own Registered Agent?

If you have a physical address in the state where you form your LLC or corporation, you could name that address as your company’s registered office and yourself. You cannot name your new company as its own registered agent, this is prohibited.

If you choose to be your own company's registered agent, then it is important to be aware that there are a couple states that allow your company to serve as its own registered agent, so it is important to check with the state you are registering in.

The biggest advantage to being your own registered agent is that it is the most convenient. It's also the most cost effective option for startups.

While cost is an advantage, there are larger concerns to consider about being your own registered agent. It is possible for a small business owner to act as a registered agent. However, much like the requirements that come with acting as an registered agent, you need to ask and answer the following questions before deciding if you are ready for the role of acting as your own registered agent.

  1. Lack of Privacy - A problem many startups encounter is that the business has no physical location. Often, startup owners decide to use their home address. By using your home address as your registered agent address, your information will be listed on the Secretary of State website and will be a matter of public record. That means anyone can access your home address and personal information. If you don’t want to list your home address and personal information, hiring a registered agent service will solve this problem. Learn How to Maintain Privacy Protection with Your Home Address for Your Business.
  2. Travel & Hours - If you travel frequently, set your own hours, meet clients away from your home, or are not in the location of your business, you are more likely to miss a government issued delivery. It is required that the registered agent be available during normal business hours. You cannot step out for a few hours and miss the possible chance of an important document's delivery. If you cannot receive documents during normal business hours acting as your own registered agent is not for you.
  3. Lack of Expertise - Compliance and legal processes need to be processed and filed accordingly, that takes time that goes into sitting down with the documents, opening them, reviewing them and organizing them. You must treat these documents in a timely manner to ensure that your business does not miss critical deadlines. The improper handling or failure to successfully handle the Service of Process can have serious adverse consequences for the business. If this is not your level of expertise, then there is a high risk of falling into bad standing with the state plus penalties and fees. If you know you don't have the bandwidth to sit down and organize documents on your own, it may not be in your best interest to act as an registered agent.

Should I Assign an Individual as a Registered Agent?

Another option for startups is designating another member of your LLC or corporation as your registered agent. This option is best if you don’t have a street address in the state of your business.

The advantage to having another person act on your behalf as your registered agent is it provides an extra layer of privacy since the registered agent's name and contact information will be made publicly available, not yours.

By using an individual as your registered agent, you should strongly evaluate the following issues.

  1. Delayed Delivery - An individual registered agent is not a professional service and the delivery times may be significantly delayed. Delayed deliveries could cause you to incorrectly rush time sensitive legal action and information. You may also miss important legal deadlines.
  2. Trust & Credibility - It is important to trust the individual that you are assigning as your registered agent. The individual you assign as a registered agent must be reliable, available at the location during normal business hours, and have expertise in compliance and legal matters.
  3. Compliance Risks - The individual that you are assigning as your registered agent should be knowledgeable in this area. If they are not experienced in compliance rules and regulations, then inaccurate handling or processing failures are a high risk for your business.
  4. Tracking - The individual you assign as your registered agent should be able to track and notify you when annual reports are due with compliance. If you hire a registered agent service, then your registered agent should have a system in place to track and notify you when annual reports are due to keep your business in compliance with the state, so you don’t have to worry about it.

While it is legally possible to serve as your own registered agent or assign an individual as your registered agent, it is advisable to designate a commercial registered agent service to perform this important role.

Should I Use a Registered Agent Service?

A commercial registered agent is a company that specializes in receiving Service of Process on behalf of businesses nationwide. They will receive Service of Process on behalf of your company and then forward it to you by mail at any address you’d like. Most of these companies will also fax or email your documents if preferred.

By using a commercial registered agent service, you have the assurance that there will always be someone available during standard business hours at the registered address to take delivery of notices and other documents.

The registered agent service will promptly forward notices and other documents received to you in a timely manner.

For some startup owners, it is well worth the fee to not have to track the official notices and annual report due dates with the state. Also, all your important documents will be kept in one place and you don’t have to bother keeping track of notices.

When considering a registered agent below are some situations for which using a registered agent service provider may be the best choice:

  1. You don't have a physical location with the business you’re forming. It is legally required to have a registered agent with a physical address in the state of formation. A PO box is not an acceptable physical address. By using a professional registered agent provider with an office in the state will satisfy this requirement.
  2. You have a PO box or a private mailbox as your only address. You cannot use that as your registered office. The registered office must have a street address.
  3. You do business in multiple states. For your company to operate business in states other than your state of formation (home state), you need a registered agent and registered office in each of those states. Through using a registered agent service, one company is handling compliance documentation for you in each state so you can concentrate on your business.
  4. Your address changes often. You are required to keep the registered agent’s address updated with the state. Changing this information requires a formal state filing and may also require that a fee be paid. There are penalties for failing to maintain your LLC or corporation address and it can result in large fees because of important documents not being received by the company. It also requires you remember to update the information. By using a registered agent service provider as your registered office, instead of your company’s business address, you never have to worry about this.
  5. Your business is home-based. The registered agent address is available on public records, which means anyone can access it. A registered agent service can reduce the amount of unsolicited mail your business gets.
  6. You want to maintain privacy. A service of process is often delivered by local law enforcement. Most businesses do not want the police to show up in front of customers, employees, or neighbors (for home-based businesses) and serve them notice that they are being sued. That is where a registered agent service ensures you receive any service of process discreetly.
  7. You don't have normal business hours. The registered agent for a business must be available during normal business hours to accept delivery of all documents. If you set your own hours or travel often for business a registered agent service will ensure you never miss any document.
  8. You don’t have a permanent work location. If your business requires you to move around frequently for clients and you act as your company’s registered agent, you can miss important documents being delivered. A registered agent service will make sure important documents will reach you wherever you are.
  9. Avoid the risk of non-compliance. A registered agent service will help you stay in compliance, avoid unnecessary state penalty fees, and maintain your company's good standing in your state of formation and/or qualification.

One of the key aspects of using a commercial registered agent is the ability to organize documents and deliver them quickly and discretely to small business owners.

Some paperwork that is delivered on behalf of the state is sensitive in nature. For example a small business is served with a lawsuit and does not have a registered agent. This paperwork would then be delivered directly to the business's location instead of the registered agent address. If you have employees or customers, it could negatively impact the way that they view the business because you’ll be served in front of an audience.

Luckily, commercial registered agent exercise caution when delivering paperwork. They will deliver the materials to the company, carefully organize it in a manner that allows the small business owner to review them privately. This gives small business owners peace of mind in knowing that there are not likely to be any moments where submitted paperwork could embarrass them publicly. Learn more about the 9 Reasons to Use a Registered Agent Service.

Choosing the Right Registered Agent Service for Your Business

These companies specialize in the business formation process and will offer registered agent services to LLCs, corporations, and other business entities that are required to have a registered agent.

They can add value to startups by providing online access to service of process and providing tools to assist with the ongoing compliance requirements LLCs and corporations face with prices ranging from approximately $40 a year to $300 or more.

Consider the following guidelines when choosing a registered agent service:

  • Always be available during business hours to ensure that they’re able to receive important, hand-delivered documents.
  • Make sure the staff are professionally trained experts who can also properly handle all service of process papers.
  • Be able to deliver crucial documents to you as needed.
  • Be located with a physical office address in the states in which you currently operate and plan to do business.
  • If you need to register your company in multiple states, then you should look at national registered agent services.
  • If you only do business in one or two states, then you should look at less expensive agent services within those states.
  • Determine how much mail you think you will receive. Expect to receive extra marketing mail in the beginning if starting a new business. Existing small businesses normally do not receive much mail unless doing something out of the ordinary.
  • Check if your annual fee includes free mail forwarding. Some agents offer unlimited First-Class Mail forwarding (and probably charge $150 or more), while others include very limited mail forwarding for free. Some agents may charge you on a per-use basis. Make sure to find out how much it costs to forward the mail.
  • Some agent services allow you to use their address as your business address, while others may not. Get more information if this is a requirement.

Conclusion

For LLCs and corporations, a registered agent service is essential to maintaining good standing and keep your business running without encountering compliance issues.

Compliance requirements can be both time and labor intensive, often requiring the completion of lengthy and sometimes confusing forms using information from various sources. By using a registered agent service for your business, you will be confident that you can avoid risk of non-compliance so you can avoid penalties and fees by the state as well as save time to run your business.

A registered agent service also provides many benefits of privacy, convenience, and staying on top of all legal and government documentation in a timely manner for your business.

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Marketing Specialist at VirtualPostMail. I am dedicated to bringing you useful information to help you run your business remotely. My ultimate goal is to help you successfully take your business fully remote.