If you are setting up your business as anything other than a sole proprietorship, you may be required by law to designate a registered agent. The cost of having a registered agent can vary considerably, but it is not a major expense.
Registered Agent Requirements
The requirements for a registered agent are determined by the law of the state where your business is organized or registered. One factor in determining whether you need a registered agent is how your business is structured. Generally, if you are operating as a sole proprietorship, you do not need a registered agent. All states require a registered agent if you organize your business as a corporation or a limited liability company (LLC). Depending on the state, you may need a registered agent for a general partnership, limited partnership (LP), limited liability partnership (LLP), or limited liability limited partnership (LLLP).
A business entity is known as a domestic entity in the state where it is formed, or organized. A business that is formed in one state and engages in business activities in another state is known as a foreign entity in the other state. For example, if a business is organized in Nevada and conducts business in California, it is a domestic entity in Nevada and a foreign entity in California. The business must file formation documents in Nevada and then file documents in California to register as a foreign entity. It must also have registered agents in both states.
If a company has a business office in the state where it is formed or registered, it may designate an owner or employee of the business as the registered agent. However, the agent and office must meet the state requirements for a registered agent, such as being properly staffed during regular business hours. If there is no company office that meets the requirements, the company must hire an outside registered agent.
Standard Registered Agent Fees
If your business meets the legal requirements to designate an owner or employee as the registered agent, doing so costs the business nothing. In a few states, a business is required to designate a state agency as its registered agent, although nothing prohibits the use of another agent. For example, New York requires a business to designate the New York Secretary of State as the registered agent in the original registration document. You can later switch to another registered agent, although there is a $30 fee for the change. If permitted, using a state agency as your company's registered agent does not cost anything, but the only service the agency provides is forwarding any legal papers to your business at a mailing address you provide.
An online search for registered agent fees in any state typically results in ads for companies that serve as a registered agent for numerous businesses. These professional registered agent companies typically offer their services for between about $50 and $500 per year. Fees and services vary from one company to another.
Registered Agent Services
The basic, essential registered agent service is to receive legal documents on behalf of the business. A registered agent is required by law so that the public and the government have an official place to serve lawsuits and other legal documents on the business entity. To fulfill this purpose, there are generally two requirements for a registered agent:
- To have a street address in the state
- To have a responsible adult at that street address during regular business hours
If legal documents are received, the obligations of the registered agent are to promptly notify the business owner and forward the documents to the owner.
Registered agent companies typically also offer additional services, including:
- Preparing and filing registration documents
- Sending reminders when annual reports or license renewals are due
- Storing documents, such as registration papers and annual reports
Such supplemental services may be included in the registered agent's basic fee, or they may be offered for an additional charge.
Registered Agent Fees and Tax Deductions
The fees paid to a registered agent are tax deductible expenses of the business. This includes the fees paid for the basic services of the registered agent as well as any additional fees for supplemental services. Even if your company is not legally required to have an outside registered agent but chooses to have one, the fees are still tax deductible.