Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
In the United States, formal business entities like LLCs must have a registered agent.
A registered agent acts as the point of contact for all legal purposes.
While you may have heard that they provide an address for your LLC, you may feel confused about the exact role of the registered agent within your organization.
In this article, you’ll learn all the details you need to know about registered agents, why they’re important, state requirements, and the advantages and disadvantages of outsourcing the role or fulfilling it yourself.
Registered Agent Definition: What Does a Registered Agent Do?
A registered agent is a person or company who agrees to receive and forward any legal correspondence on behalf of a legal entity, such as an LLC.
The registered agent accepts responsibility for ensuring your business complies with all state filing requirements, such as annual reports and renewals.
Registered agents also provide a physical address for the business that’s used on legal forms and in correspondence with other companies or government agencies. They serve to notify you whenever it’s time to file any new paperwork or pay fees associated with state or federal licenses.
In addition to what’s listed above, a registered agent can also receive legal papers on behalf of the company and forward them to the appropriate people.
In essence, they’re what we call the “middleman” between your business and any lawsuits or official correspondence that may come your way.
Is a Registered Agent Required?
In most cases, the law requires that you list a registered agent. For example, suppose you’re doing business in certain states and don’t have an appointed registered agent on file with the state. In that case, you might face fines of several hundred dollars.
Every state requires businesses to name a registered agent when starting a new LLC. Here are three important reasons to use a registered agent.
- It provides an officially recognized point of contact for your company
- You’ll get a notification anytime you receive important paperwork or need to take care of renewal fees
- If legal action is taken against your company, the registered agent will get the notice
Registered Agent Requirements
Each state lists different requirements for registered agents. Generally speaking, here are a few common registered agent requirements.
- An individual must be 18 years or older to fill a role as the registered agent.
- Any individual listed as the registered agent must reside in the United States.
- Specifically, they must live in the same state where you register the business. A foreign or domestic company listed as the registered agent must obtain authorization to conduct business in your state.
- The registered agents must remain available during normal business hours. Most states define availability as the ability to sign for documents or receive mail from 9 AM to 5 PM every Monday through Friday.
- A registered agent must use a physical address in the state where you’re doing business. You can’t use a USPS post office box or even a virtual office, such as inside a Staples or other Federal Express or UPS mail drop location. You can only use a real, physical address.
What Happens if You Don’t Have a Registered Agent?
If you’re caught doing business in a state without having an appointed registered agent, you could face some pretty stiff penalties.
For example, Texas charges a $200 fine and requires businesses to complete a form stating that they were not aware of their requirement to have a registered agent. Penalties for not registering your company with the state can range from simple fines to getting shut down entirely.
In most cases, it’s simply not worth the risk to go without a registered agent. It’s one of the easiest ways to ensure compliance with state regulations and avoid costly fines down the road.
Can You Be Your Own Registered Agent?
Yes, you can become your own registered agent. All states allow you to make your own decision regarding who to choose for this important role. Each state only stipulates that your chosen registered agent can fulfill the aforementioned requirements.
If you don’t hire a third-party registered agent service, you can name yourself or any other member, manager, officer, or partner of the business as the registered agent. You can’t name your company itself as its registered agent.
There are a few pros and cons to consider when deciding whether or not to take on the role of the registered agent for your LLC.
On the plus side, you’ll have total control over what happens with your company’s legal correspondence. You’ll also know exactly what’s going on at all times and won’t have to worry about any surprises.
However, acting as your own registered agent can result in a lot of work. You’ll need to make sure you’re available during normal business hours, keep track of all state and federal paperwork requirements, and handle any legal disputes that may come up.
If you’re not comfortable handling these tasks yourself, you might consider the option of outsourcing the role to a professional registered agent service. You can decide to use either an attorney for this role or any number of companies that provide registered agent services.
Pros and Cons of Registered Agent Services
When considering what’s best for your business regarding registered agent services, it’s helpful to think about what you’re trying to achieve. Here are the pros and cons associated with using registered agent services.
Pros of Registered Agent Services
Registered agent services offer many benefits for businesses of all sizes. Some key advantages include the following:
Peace of mind: Let someone else take care of all the paperwork so you can focus on what you’re good at – your business. Some business owners attempt to take on the role of a registered agent in the beginning. Once they realize that they don’t always understand the role’s intricacies, they decide to outsource it.
For example, you may recognize that your attorney already understands the registered agent position, especially if you’re running a real estate business. If your lawyer also works in the real estate industry, consider using that person as the registered agent.
You’ll gain the peace of mind that comes with knowing you have the right person in such a vital business role.
Time savings: Delegating tasks like renewing licenses, handling legal disputes, and notifying you about important paperwork means more time to work on your business goals. Ask yourself how many hours you work on the business. More likely than not, you’re already tapped out on time each week.
Do you want to potentially miss important documents because you were too busy running the daily business operations? What happens if you go on vacation and you’re faced with worrying about anything you could miss as the mail continues to stream into the inbox?
Expertise: An excellent registered agent service will understand what needs to get filed with the state and federal agencies each year, saving you from doing that research yourself. Failing to understand each filing requirement can get your company in trouble with state and federal agencies. Avoid this problem by outsourcing the role.
Expertise is probably why many small businesses decide to hire a registered agent. They aren’t sure what goes into adequately filing paperwork with their state and federal agencies every year and don’t want to make costly mistakes.
If this is you, consider using a registered agent service that specializes in ensuring compliance with all document and fee requirements. Doing so will take the guesswork out of the process and help avoid any potential penalties from the government.
Organization: Using a registered agent service helps maintain organization when it comes to vital deadlines around filing. It’s one less responsibility to put on your plate by letting your attorney or service take care of it.
Privacy: Your personal contact information won’t get shared with the public or other businesses. You also won’t need to worry about receiving a legal document at your home or physical place of business. Additionally, you won’t start receiving the inevitable mountain of junk mail after your personal or business address gets entered into the state’s system.
Inexpensive: You can use services like Rocket Lawyer or LegalZoom for only $100 to $200 per year to act as your registered agent. Some services will perform the role for even less money. These services will safely receive all important paperwork for your company and forward these documents to you when you need to act on them.
If you need other services, such as business entity setup, many registered agent services perform that for you, too.
Let’s sum up the most important advantages of hiring a registered agent.
- They’re your go-to contact for any legal disputes that may arise
- They can help you navigate state and federal compliance regulations
- You’ll obtain a physical address in every state where you do business
Cons of Registered Agent Services
While there are many pros to using registered agent services, there are also a few potential disadvantages to consider.
Cost: Most registered agent services charge an annual fee, ranging from around $100 to several hundred dollars.
Although we mentioned above that it’s a nominal amount, you might operate as a one-man-band. If you’re looking to cut costs at all corners, consider becoming your own registered agent to see if you can handle the role.
Lack of control: As the business owner, you’ll give up some measure of control over what happens with your company’s legal correspondence. You may be uncomfortable giving up any control to others and would instead take on this responsibility for the company.
If you do become your own registered agent, remember that you can always change your mind later. Hire a registered agent service the following year if you discover that you can’t fulfill the position with the highest quality.
Cost of Getting a Registered Agent
The cost of getting a registered agent is usually pretty minimal and can range from $100 to $300 per year. However, some services do charge more depending on the size and complexity of your business.
When choosing a service, make sure you ask what’s included in the annual fee. Some companies will only provide mail forwarding services, while others offer a wider range of offerings like document retrieval and legal advice.
How to Change Your Registered Agent
Changing your registered agent is a pretty simple process, whether you had a registered agent resign or you need to transfer duties. You can either do it yourself or hire someone to take care of the task for you. To change your registered agent, follow these steps.
Download and complete the correct form(s) from your state’s secretary of state website (you’ll need to search what forms it requires based on what type of business entity you have). Not all states require these kinds of forms. Make sure to verify this detail with your state beforehand.
Send in the necessary paperwork and fees by mail or fax using instructions provided on the state website. You should receive confirmation after filing that shows the new registered agent on your company documents, along with the official listing of that new contact’s information.
If you choose not to use a registered agent service, you’ll need to list an officer or manager of your company as the registered agent. Remember, this person must accept responsibility for receiving and handling any legal correspondence on behalf of your business.
The manager or officer must stay consistent with keeping up-to-date records about all communication related to your company’s legal proceedings. If you’re not sure who should fill this role in your business, consult with an attorney or use a registered agent service that can help you make the decision.
The Last Word
It’s important to weigh all the pros and cons before deciding whether or not to use a registered agent service for your business. By considering your overall goals, you can find the right company to help take some of the burdens off your shoulders. Doing so might help you focus on important day-to-day business activities.
Filed under: Advice Columns
