If your business is a limited liability company (LLC), you may be familiar with the term “registered agent.” A registered agent is the person who serves as your business’s legal point of contact. This role comes with many responsibilities primarily related to managing compliance-related documents and legal correspondence on behalf of the company. Here’s how to know if your business needs a registered agent and how to find the right person for the task.
What does a registered agent do?
A registered agent receives legal documents and important government notices on behalf of your business. Their job is to relay that important information to the right person within your organization in a timely manner.
“The registered agent must have a physical address within that state and be available during business hours so someone suing you can easily find you. This requirement gives the court an easy way to notify you,” wrote SCORE.
Agents receive documents such as:
- Government correspondence (such as tax forms).
- Compliance-related updates.
- Documents related to any legal proceedings (lawsuits, summons, motions, etc.).
- Notice of garnishment proceedings.
You may be required to have a registered agent, depending on the type of entity your business is. “Having a registered agent is a legal requirement for LLCs and corporations, as they serve as a point of contact with the business entity filing office and ensure compliance with state regulations,” wrote LegalZoom.
General partnerships and sole proprietorships are not registered with the state and therefore don’t need registered agents.
Can you be your company’s registered agent?
In short, yes — a business owner can be the point of contact for legal issues. For small businesses with 10 employees or less, it makes sense to appoint a registered agent internally rather than hire an outsider. The only requirements are that the agent must be at least 18 years old, have a physical address in the state where the LLC is registered, and be available to receive documents during normal business hours.
However, there are some cases where it makes more sense to separate the registered agent role from that of the business owner.
For small businesses with 10 employees or less, it makes sense to appoint a registered agent internally rather than hire an outsider.
Should you use a service for a registered agent?
There are several reasons why your company might choose an outside service or contractor as your registered agent.
First, if you travel often for work, it’s absolutely necessary to appoint someone who is available when you’re not. If you work remotely or if you keep odd business hours, a registered agent is the best option to ensure you receive documents in a timely manner.
Then there’s the practicality of providing a physical address. For e-commerce and other online services, it’s not economical to set up an office or storefront in every state in which you do business. Even if you are in the same state as your business, there are privacy concerns to consider.
“If you list yourself as your business's registered agent, you’ll probably be listing your home address as the business’ point of contact,” wrote SCORE. “This puts your home address on public record and anyone who wants to officially contact your business (typically with tons of junk mail) will find your home address.”
Cost is another factor. Thomson Reuters estimates that most registered agents charge an annual fee ranging from $100 to $500 a year. Those payments add up over time.
Where to find a registered agent
If you choose to recruit outside help with the registered agent duties, you can either contract with an individual or an organization. “Entrepreneurs who opt for professional help can choose between professional registered agents — most often individuals — and registered agent services, generally small businesses that offer more services than professional agents — like scanning documents or courier services — and cost accordingly more,” wrote Thomson Reuters.
Northwest and LegalZoom are two popular professional registered agent services, but they can be more expensive than finding someone locally.
You can also ask a lawyer or law firm to serve as your registered agent, although this option can also be pricey. Consider other managers, board members, business partners, or even trusted acquaintances who can step into the role.
How to change your registered agent
Many business owners sign on to be their own registered agent. Then, as the business grows, they delegate it to someone else.
“Changing a registered agent typically involves filing a form and paying a fee with the state’s business filing agency,” wrote LegalZoom. “The fees associated with changing an appointed registered agent's name are generally quite low, ranging from $25 to $50 in most states.”
If you decide it’s time to choose a new registered agent, check your state’s business filing office or secretary of state. Some states let you complete the process online, while others require a form.
What are the penalties if you don’t have a registered agent?
Remember, certain types of business entities are required to have registered agents. Fines for not having a registered agent range from $50 to $500 and up, depending on the state. Many states provide a grace period to appoint a registered agent before imposing fines, but failure to comply can lead to progressively more severe penalties.
Beyond fines, businesses risk suspension or dissolution of the company, the inability to renew licenses, and difficulties in legal and financial operations. Suspension can mean that you aren’t able to expand into more states, cannot access financing, and could be blocked from filing lawsuits.
You could also lose your good standing, which causes even more headaches. “Once a business loses its good standing status, it risks losing the right to use its name in the state. As a result, other companies may be able to acquire the rights to its name,” said Cynthia Flynn of Hackler Flynn & Associates.
Additionally, without a registered agent, businesses risk not receiving critical legal notices. Failure to respond can result in default judgments and further legal and financial consequences.
It’s not worth the consequences to operate without a designated registered agent. Don’t neglect this administrative task as you start and grow your small business.
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