What Is the Penalty for Not Having a Registered Agent?

What Is the Penalty for Not Having a Registered Agent?

by Brette Sember, J.D., May 2020

A registered agent is an essential component of your limited liability company (LLC). In fact, one of the requirements for setting up an LLC is designating a registered agent, and not doing so can bring serious consequences.

What Is the Penalty for Not Having a Registered Agent

A registered agent is a person or company who can accept mail and important legal notifications from the government, as well as from anyone who tries to sue your LLC. The registered agent must be someone physically in the state with a physical address—not a post office box—who can receive mail and personal service.

Learn about the penalties involved if you skip the important step of designating a registered agent.

What Is The Penalty for Not Having a Registered Agent?

If your LLC fails to designate a registered agent, the first problem you will face is that you won't even be able to register your LLC 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the role, such as an employee who leaves the company or a registered agent company that has gone out of business or no longer represents you, you face financial consequences.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."

John R. O'Brien PC in Washington, D.C., points out that to avoid this kind of situation, "It is essential to notify the Secretary of State when the registered agent leaves the company if they're an employee, and designate someone else to take his/her place."

The Legal Implications of Operating Without a Registered Agent?

Because the registered agent accepts important notifications on behalf of your LLC, if you don't have a registered agent, or one who is available, this means that your LLC 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 (the person who delivers court documents and notices of lawsuits) may try to serve your LLC 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 LLC."

If this happens, you wouldn't have a chance to defend yourself at all 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 lead to your business being completely shut down. 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 file lawsuits
  • won't get the financing you need to expand

Flynn warns that, additionally, "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 do take corrective measures and refile, your business name may be gone.

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

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