If you’re a small business owner who’s recently decided an LLC, or limited liability company, is the right business structure for your business, and you’ve started preparing your formation papers, or Articles of Organization, you probably know by now that you’ll need a registered agent.
But what is a registered agent? And how do you make the decision regarding who to designate as your LLC’s registered agent?
What is a Registered Agent for an LLC?
An LLC registered agent is an individual or entity which has been designated by the LLC to receive service of process notices, government correspondence and compliance-related documents on behalf of the LLC.
While generally the term “agent” means someone who’s authorized to represent an individual or an entity, or enter into transactions for an individual or an entity, registered agents don’t have a similar mandate.
The registered agent for an LLC has one primary function: to be an agent for service of process, as well as receiving other important correspondence on behalf of the LLC. Additionally, a registered agent must also forward such materials to the LLC in a timely manner.
Registered Agent Requirements
The requirements that must be met to be eligible to be a registered agent are quite simple. A registered agent must be a resident of the state in which you registered your LLC.
A registered agent must also have a physical address to which documents can be delivered. This means a P.O. mailbox can’t be used.
While these requirements are simple, it’s important to look more closely at who you should designate as your registered agent.
Designating Yourself or Another Member of Your LLC
At first glance, designating yourself or another member of your LLC as your registered agent may seem to be good idea. But there are a number of things you should keep in mind.
First, a registered agent must always be available to receive service of process notices, government correspondence and other important documents. This means the registered agent must always be present at the physical address you registered during normal business hours.
If the registered agent can’t be found—for example, if the person you designated takes holidays, or even occasionally goes off-site to attend a meeting with a client—delivery can’t be made and the consequences can be quite severe.
Other considerations? Generally, if you designate a member of your LLC as the LLC’s registered agent, the physical address you use for service will be your place of business, as that’s where your registered agent is likely to be during regular hours of business. It can therefore be quite embarrassing if someone sues your LLC and serves notice of the lawsuit in front of your customers or clients.
And if you move your business, you’ll have to file a change of address for your registered agent. With a third party registered agent, you can move your business as often as you want without it affecting the address of your registered agent.
Third Party Registered Agent Services
In many cases, it makes sense to use a registered agent service as your LLC’s registered agent to receive documents on your behalf and forward them in a timely manner.
Because these third party firms are professional registered agents, you have the assurance there will always be someone available during standard business hours to take delivery of notices and other documents on your LLC’s behalf. You can also rely on them to promptly forward notices and other documents to you.
What Happens if You Don’t Have a Registered Agent?
Generally speaking, you’ll be required to designate a registered agent at the time you register your LLC. If your registered agent changes, you’ll need to file a form indicating this change.
It might be tempting not to maintain a registered agent after you’ve initially designated one when you registered your LLC. However, if you do not have a registered agent you face serious consequences.
Your LLC may no longer be considered in good standing with the state in which you registered, and in addition to subjecting your company to potential penalties and fines, your LLC could, among other things, lose its ability to enter into contracts or bring a lawsuit.
There’s also the risk of not receiving service of process or other important correspondence which requires a response.
For example, if you do not receive service of process regarding a lawsuit, you won’t be aware that you’re being sued. And if you’re not aware you’re being sued, you won’t respond in a timely manner, nor are you likely to show up at the court proceedings, and a default judgment could be issued against you.
In the case of compliance-related government correspondence, failure to respond could result in penalties such as fines and other sanctions.
While a registered agent with a LLC provides a basic and simple function, it’s also an extremely important function. Selecting a registered agent that can adequately perform this function is an important process for both your LLC and your own peace of mind.