What Is the Penalty for Not Having a Registered Agent?

The penalty for not having a registered agent can include fines, loss of good standing status, and potential administrative dissolution of the business by the state. A registered agent is a legal requirement that ensures that your business gets any important legal, tax, or business documents on time.

When you're business is just starting, it may be tempting to view having a registered agent as an unnecessary expense. While you may want to save some money by naming yourself as your registered agent or even skipping having an agent altogether, you do so at your peril. Here are some penalties your business may face for not having a registered agent.

What is the penalty for not having a registered agent?

If your business fails to designate a registered agent, the first problem you will face is that you won't even be able to register your business with the state to get it started. Naming a registered agent is a requirement on the form you must file, and the state won't accept it without a named registered agent.

If you do name a registered agent, but that person no longer fills the role, such as an employee who leaves the company or a registered agent company that has gone out of business or no longer represents you, you face financial consequences.

Cynthia Flynn of Hackler Flynn & Associates, APC in Pasadena, California, warns, "States impose fines and penalties on companies that don't comply with the LLC requirements."

The legal implications of operating without a registered agent

Because the registered agent accepts important notifications on behalf of your business, if you don't have a registered agent or one who is available, this means that your business misses out on legal notices about things you need to know, such as notifications from the IRS or your state tax department.

There are even bigger concerns to consider, though. Flynn says, "If you do not have a registered agent to receive litigation documents, including a complaint, a process server (who delivers court documents and notices of lawsuits) may try to serve your business through the Secretary of State. If this continues to be unsuccessful, the court case can proceed without your knowledge. Often, the case will lead to a default judgment against the business."

If this happens, you wouldn't have a chance to defend yourself in a lawsuit because you didn't even know about it.

Going without a registered agent could end your business

Failing to maintain a registered agent can ultimately shut your business down completely. The state can suspend your permission to conduct business and remove it from good standing. This may mean your business:

• Can't expand into more states
• Is blocked from filing lawsuits
• Won't get the financing you need to expand

Flynn warns, "Once a business loses its good standing status, it risks losing the right to use its name in the state. As a result, other companies may be able to acquire the rights to its name." So even if you take corrective measures and refile, your business name may be gone.

Once your LLC has been dissolved, if you continue doing business, you become personally at risk. Rajeh A. Saadeh of The Law Office of Rajeh A. Saadeh, L.L.C. in Somerville, New Jersey, explains, "If the business is conducted notwithstanding, then personal liability can follow to the members as there is no valid LLC shield."

Ensuring you name a registered agent who is available and will do their job will protect your business from difficulties.

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