Small business owners running their businesses through a corporation or a limited liability company (LLC) are required to designate a registered agent for their businesses. While specific registered agent requirements vary state by state, the primary function of a registered agent remains the same—to receive important government- and litigation-related mailings on behalf of your company.
While it might seem more cost-effective to be your own registered agent, or to designate an employee or perhaps even your spouse as your registered agent, there are a number of reasons to consider using a third-party registered agent service. For example, your registered agent's address is on public record, so you need to consider privacy issues if you're designating yourself or your spouse as your registered agent.
Read on to find out how to choose the right registered agent for your business.
What Are the Benefits of Using a Registered Agent Service?
Seattle business attorney Mark Tyson notes that the basic services offered by commercial registered agents are fairly uniform. These services include a physical address for receiving your company's government compliance and litigation-related mailings and personnel who will receive and forward such mailings to you. This means that, as a bare minimum, the registered agent you choose should offer these services.
- Mail sorting. Kreitzer notes that your registered agent acts as a central hub for all of your business's important mailings. "It can be easy to be overwhelmed by the amount of mail you receive as a business," he points out. By using a commercial registered agent service, you ensure that essential mailings will come to your attention.
- Privacy. Having a third-party registered agent reduces the risk of employees seeing sensitive information that you may not wish to share with them. Kreitzer gives the example of a business owner receiving sensitive mail from the Equal Employment Opportunity Commission regarding certain employees who may be causing problems. "If you do not have a registered agent," he says, "your employees may accidentally open sensitive materials, which can lead to employee retention problems or issues in your workplace."
- Flexible hours. Kreitzer also notes that many registered agents can provide more flexible hours. For example, they may offer large drop boxes where communications can be dropped off after hours. Additionally, some services may have staff working outside of the normal hours of business so that your company's important mail can be reviewed during off-hours.
Tyson notes that some registered agents might offer additional services, such as providing assistance with the business formation process by preparing and filing required formation documents with the state. While these services are usually provided for a higher or additional fee, they may be an option if you find you have the need for such services.
How Much Does a Registered Agent Service Cost?
While there are clear benefits to using a commercial registered agent service, you might be worried that the costs might very well outweigh the benefits. It turns out, however, that registered agent fees are usually quite reasonable.
"Businesses that hire a commercial registered agent should expect to pay in the range of $150-$300 annually," says Tyson, "with some variation beneath and above this range, assuming you do not elect to pay for additional services, like business formation."
Kreitzer adds that most registered agents will charge a flat fee of some kind. "This is usually an annual fee," he notes. "Fees can vary depending on what kind of registered agent you choose. Different states have different rules for who can qualify as a registered agent. I would recommend avoiding registered agents that do not offer flat-fee models and that try to add additional fees. Make sure to read your contract to see what kind of fees they are charging and if there are any last-minute add-ons."
How To Choose a Registered Agent Service?
You've done your research, and you've put together a list of registered agent services whose fees fit within your company's budget. How can you be sure that the registered agent you choose will provide you with good value?
Tyson notes that a registered agent should provide the following basic tasks or services:
- a physical address in-state
- personnel present at that address to receive service of process and other legal notifications on behalf of the business owner
- timely forwarding of all service of process and other legal notifications to the business owner
Assuming these tasks are all performed competently, his advice to clients is usually to find the lowest rate that they can, as this typically represents the best value for the client.
Kreitzer has some additional tips for finding the right registered agent for your company. "It would be worth talking to other people in the industry," he suggests. "One great way of identifying a registered agent is to attend trade shows and talk to other businesses about which registered agents they are using. It's not uncommon for some registered agents to be more dedicated to specific types of industries. Different industries have different demands and require different skill sets. For example, the registered agent you choose will be different if you are in the medical supply industry than if you are selling copy paper."
He also suggests either scheduling a call with whoever runs the registered agent service to ask for references, or read their reviews online. "A good registered agent should be both easy to find and responsive to your requests," he notes. "It's a registered agent's job to be responsive, and if they aren't responsive to your initial questions, then you should have concerns about their ability to be responsive to your important mail."
It may appear daunting at first sight to use an outside party to act as your business's registered agent. Still, generally speaking, the benefits of designating a commercial registered agent service as your business's registered agent can far outweigh the costs.