If you are thinking about starting a business, one of the many legal aspects you will have to understand is the concept of a registered agent. It is something you must have to formalize your company, whether you are considering forming an LLC, corporation, partnership, or nonprofit organization. Below we explain exactly what a registered agent is, along with other key facts you need to know.
What is a registered agent?
In simple terms, a registered agent—also referred to as a statutory agent or agent of process—is an individual or entity who you assign to receive essential legal documents on behalf of your business. Legal correspondence your registered agent may receive includes items such as service of process, federal and state reports, and tax documents.
A registered agent:
- Must be designated to form your business as a legal entity within your state.
- Must have a physical address located in the state where you form your business.
- Must be open for business during standard business hours from Monday through Friday (except holidays).
- Can be you, or a third party that provides a registered agent service.
Why do you need a registered agent?
Legality is one important reason for needing a registered agent. For example, service of process such as subpoenas and summons compel the need for your registered agent to be physically located in your state of incorporation and open during normal business hours. This is because officers serving notice against your business must have a legally specified place to present these critical documents.
Accessibility is another consideration. If you plan on running a brick-and-mortar business, such as a restaurant or convenience store, you will have a physically accessible location to designate when registering with the state. However, if your business is online, such as with an e-commerce store or consultant service, you will likely only have a P.O. box—which federal and state notices can’t be sent to.
Why should you have a third party act as your registered agent?
While you can designate yourself as a registered agent—as long as you meet the physical address requirement—it is generally a best practice to assign a third party instead. Even the SBA notes that most business owners opt to use a registered agent service over performing this role themselves.
Here are several reasons why having a third party be your registered agent is in your best interests:
Availability
Recall the requirement of having both a physical location and also being available during business hours. Even if you have a brick-and-mortar business, you may not necessarily operate within standard business hours. For example, you may have a barbershop that’s closed on Mondays or a bar that is only open during the evening. A registered agent service would maintain legally required availability, allowing you to keep hours that make the most sense for your business.
Privacy
A registered agent’s name and address are public record and can be found easily. An officer can show up at any time during normal business hours with a service of process, which means your customers, employees, friends, or family (depending on location) could become aware of legal issues you are facing. As a more extreme example, you may have personal dealings where someone who you do not want around finds your address and shows up unexpectedly. If you value privacy, designating an appropriate entity can save you from both these headaches.
Due diligence
In the hustle and bustle of running your own business, you are bound to have a few things slip through the cracks. For example, you get piles of mail every day—most of it is junk, but there could be one important letter from the state that you accidentally throw away. This wouldn’t happen with a registered agent service since their whole role is focused on dealing with legal correspondence and alerting you accordingly.
Convenience
Your registered address must be kept up to date, so every time you move, you must go through the process of changing your address. In addition, if you plan to operate your business in multiple states, you have to worry about registering an address in each state of operation. Engaging a third party as a registered agent would mean they handle these tedious tasks.
What happens if you don’t designate a registered agent?
Without a registered agent, you can’t legally form an LLC or other business entity. Since all states have this requirement, there is no way around it. Your only choices are to designate yourself as your own agent, assign a third party as your agent, or operate your business informally. The latter option means you would forego the protections and benefits of operating under a legal entity, which is not advised.
Still, designating a registered agent does not have to be complicated or confusing. You have options available, such as our Business Maker Legal Package, which helps you quickly transform your business vision into a legal reality. In partnership with Legal inc, our Business Maker Legal Package files all the paperwork needed to form a business entity and designate a registered agent. All you have to do is fill out a questionnaire—it takes less than 15 minutes.
