If you’re forming a corporation or a limited liability company, you’ll need to select a registered agent for your business and provide the agent’s name and address on the formation documents you file with the state.
Here’s what you need to know before you choose an agent.
What Is a Registered Agent?
When someone sues a business, they must notify the business of the lawsuit.
In some states, a copy of the lawsuit must be delivered in person to a representative of the business. In other states, it must be mailed.
To make it easier to determine who should receive a lawsuit against a corporation or LLC, all states require business entities to keep the name and address of a registered agent on file.
The registered agent is a person or entity that has agreed to be available during business hours to accept lawsuits and other documents on behalf of a business.
Depending on the state you’re in, the registered agent may also be called a “statutory agent.” The agent’s business address may be called a “registered office,” and the legal documents the agent accepts may be referred to as “process.”
In addition to lawsuits, registered agents may receive subpoenas, tax notices and other official correspondence. They are responsible for passing these documents along to the appropriate person at the corporation or LLC.
Corporations and LLCs must have a registered agent in each state where they are registered to do business.
Who Can Act as Registered Agent?
Registered agent requirements vary slightly from state to state, but there are a few general rules:
- The agent must have a physical street address within the state – a P.O. box won’t do.
- The agent must be available at that address during normal business hours.
- In most states, the agent can be an individual who is at least 18 years old, or it can be a company that provides registered agent services.
- A corporation or LLC cannot act as its own agent, but in most states, one of its employees or owners can be the agent.
Should You Be Your Company’s Registered Agent?
Naming an employee or owner to act as registered agent for your business can save money on registered agent fees and can give you the comfort of knowing that legal documents will go directly to you.
However, acting as your own agent has numerous downsides, including:
- You can be personally served with a lawsuit at your place of business, in front of employees and customers.
- Your name and address will be part of your business’s public records on file with the state. This can be a particular concern if you have a home-based business or want to keep your information private.
- Registered agents commonly receive other documents, notices, solicitations and junk mail addressed to the business. If you don’t want to sift through this mail on an ongoing basis, you might prefer an outside agent.
- If your business changes locations or if your agent leaves the company, you will need to update your registered agent information with the state. In the midst of a move or reorganization, small business owners seldom remember to do this.
- If you travel frequently or spend a significant amount of time outside the office during the workday, you’re won't be available during normal business hours.
- You can only act as agent in the state where you’re physically located. Many businesses with a multi-state presence find it easier to hire a company that can provide registered agent services nationwide.
Tips for Selecting an Outside Registered Agent
Your registered agent’s responsibilities don’t end with accepting lawsuits and other documents on your behalf.
The agent is also responsible for getting the documents into your hands promptly. If your agent neglects to do this, you can lose a lawsuit through default or you can be subject to court sanctions for ignoring a subpoena.
For this reason, it’s important to choose an agent that is reputable and has a track record for providing registered agent services.
Don’t name your second cousin just because he’s agreed to do it for free. Many states’ business filing departments maintain a list of companies that provide registered agent services in that state.
If you are registering to do business in multiple states, consider hiring an agent that will be able to act as your agent in all those states.
Your registered agent plays an important role: ensuring that lawsuits, court documents and notices are brought to your attention promptly, so you can act on them and avoid default judgments, fines and penalties.