Small business owners running their businesses as a corporation or an LLC must 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 several reasons to consider using a third-party registered agent service. For example, your registered agent's address is on public record, so you must consider privacy issues if you designate yourself or your spouse as your registered agent.
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.
There are also other benefits to using a third-party registered agent service. According to Matthew L. Kreitzer, a Virginia-based business attorney, these benefits include:
- Mail sorting. Kreitzer notes that your registered agent is 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. Using a commercial registered agent service ensures 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. 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 normal business hours, so your company's important mail can be reviewed during off-hours.
Tyson notes that some registered agents might offer additional services, such as assisting 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 require 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. "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 researched and put together a list of registered agent services whose fees fit your company's budget. How can you be sure that the registered agent you choose will provide you with good value?
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, you should choose the service that provides the best value for your budget.
It is also worth talking to other people in the industry. Another 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 industries. Different industries have different demands and require different skill sets.
You can also call the registered agent service to ask for references or read their reviews online.
Using an outside party to act as your business's registered agent may appear daunting at first sight. Still, generally speaking, the benefits of designating a commercial registered agent service as your business's registered agent can far outweigh the costs.
What happens if you have more than one business or have a business in more than one state needing registered agent?
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