You’re confidently filling out the paperwork for your limited liability company (LLC) or corporation until you’re asked to name a registered agent. Perplexed? You’re not alone.
Many small business owners may not realize they need a registered agent to comply with the legal requirements of their business entity. However, every U.S. state requires you to have this designated representative to receive your business’s legal communications.
You may be wondering why a middleman is needed to handle your legal documents. While the law permits you to be your own agent, there are some considerations to ponder before taking on this responsibility. But first, let’s clarify the role of a registered agent, why your business may need one, and who is qualified to act in this capacity.
What is a registered agent?
The registered agent is essentially the middleman between your business and the legal system. They receive legal correspondence from government agencies on your behalf and forward the documents to you.
But why is the agent’s presence necessary to receive your legal paperwork? The registered agent position was established so that businesses can’t hide behind their employees when they are served with legal documents.
For example, let’s say the state attorney’s office mailed a legal document to your business, but you weren’t there when it arrived. However, the employee who retrieved the mail that day didn’t bring the document to your attention. The next thing you know, the attorney’s office is calling, wondering why you never responded to their letter.
Had the document been sent to your registered agent’s address, they would’ve notified you immediately of the delivery and then forwarded it to you, saving you from missed deadlines and potential penalties. The agent can even scan the document to deliver it electronically, through email, or via a private website portal.
Who needs a registered agent?
Not every business is required to use a registered agent. Only those that file as an LLC, corporation, or other formal entity must name this representative when they apply for their business structure. If your business operates as a sole proprietorship or partnership, you do not need to designate a registered agent.
What do registered agents do?
The registered agent’s job is pretty straightforward. That is, to receive all legal documents on your behalf. These could include the following types of correspondence:
- Federal and state correspondence
- IRS and local tax notices
- Lawsuit documents
- Court summons
- Wage garnishment notices
- Service of process notifications where there is notification of a pending lawsuit against the business
Upon receipt, the agent passes these documents along to you or your designated representative.
Benefits of using a registered agent
Though the law requires LLCs, corporations, and other formal entities to use a registered agent, there are actually several benefits to using their services.
A secure address. Registered agents can be particularly useful if your business doesn’t have a separate office address or if your correspondence is sent to your home address or a P.O. Box. Federal and state documents can’t legally be mailed to P.O. Boxes.
Privacy. You likely don’t want to be served legal documents in front of employees and customers.
Peace of mind. You’ll know that important legal paperwork won’t be lost, resulting in missed deadlines that may cost you in financial penalties.
Reliability. You may not be available at the business’s physical location during normal business hours to receive legal documents, but documents can go straight to your registered agent without requiring your presence.
Nationwide coverage. If you do business in multiple states, you’re required to use a registered agent in each state.
What are the registered agent requirements?
While the requirements for a registered agent can vary from state to state, they must be at least 18 years old and have a physical address (also known as a “registered office”) where the entity is formed. The address cannot be a P.O. Box.
The prospective agent must also be available to receive official mail and sign official documents during business hours, typically Monday to Friday from 9 a.m. to 5 p.m.
There are states that carry additional requirements to be a registered agent. And keep in mind that other states use different terms instead of registered agent. For example, in Massachusetts, the term “resident agent” is interchangeably used, while the agents in Maine are referred to as “commercial clerks.”
Can you be your own registered agent?
You can appoint yourself or an employee as a registered agent. While this may sound like an easy way to get around the requirement, there are drawbacks to taking this on yourself.
You must have a physical address in the state in which you’re doing business.
If you do business in more than one state, you’ll need to appoint third parties to be your registered agents in the other locations where you do business since you obviously can’t be in more than one place at one time.
You are tied to being available during regular business hours to receive legal documents. This restricts you from having your own flexible hours.
If you move, you must complete a formal state filing, which includes a fee.
Since a registered agent’s address is part of the public record, your personal or business address will also become a public record. This can result in a loss of privacy.
Your legal documents can get lost in the shuffle with your regular mail since they are delivered together to the same address.
Others who can serve as a registered agent
If appointing yourself a registered agent is out of the question, you can consider any of the following persons for this capacity:
- A trusted friend or family member who can fulfill the agent requirements
- Your business partner or other trusted member on your team
- A business lawyer or representative from the law office
- A dedicated registered agent service
Reasons to consider using a registered agent service
While you can recruit any individual that meets the criteria to be your registered agent, there is also an option to use a registered agent service. These service companies are set up for the sole purpose of providing registered agent services. Here are some of the benefits of using a registered agent service.
1. Reduced risk
Registered agent services are experts in compliance with legal document handling. They are always available when required and ensure your business doesn’t miss any deadlines.
2. Greater availability
If you use an individual as your registered agent, you run the risk of that person not being available when legal documents are served. On the other hand, using a service ensures someone will always be available to receive your important documents, legal notices, and paperwork during business hours.
3. Efficient technology
Services have greater access to technology to scan your documents and immediately send them to an online account. The service can text or email you when new documents are received. You often have 24/7 access to all of your scanned documents through an online portal.
4. Higher level of security
Registered agent services have the resources for maintaining all applications and data on secure servers, networks, and data storage systems. Many have periodic security assessments to ensure they remain protected.
5. Access to additional services
Registered agent services may also offer other benefits such as pre-filled forms, annual report reminders, and free mail forwarding.
6. Representation in other states
Many registered agent services have local offices in different states. This allows you to use their services where your business operates without having to recruit a separate agent in each state.
What to look for in a registered agent service
Don’t choose a registered agent service without doing your research first.
Legitimate agencies will offer services such as document scanning, compliance management, and enhanced security. Prices may vary depending on the scope of their services. Many offer packages with a variety of add-on options.
Obtaining recommendations from other small business owners can also help you select a reputable and experienced service that provides excellent customer support.
Changing a registered agent
You have many choices when selecting a registered agent. But what happens if you need to replace yours? Fortunately, you have the option to change your registered agent at any point if you’re unhappy with them.
Changing your registered agent is easily accomplished by submitting an update form through your state’s business website. You will also need a consent form for your newly designated special agent to sign. Both forms can be filed online or mailed to the state’s business department. A nominal filing fee is required when submitting the change.
How Bench can help
If you’re getting ready to start an LLC or corporation and select a registered agent, your tax structure will change as well. This requires time-consuming paperwork and attention to detail to ensure you’re in compliance with IRS guidelines. Your bookkeeping requirements will also change to reflect your new business status.
With Bench, you get a team of experts to complete your monthly bookkeeping to IRS standards. Learn more about our bookkeeping for small business.
Subscribers to our tax services receive unlimited tax advisory calls with our in-house tax professionals. They can help you answer all your tax questions, like which filing type optimizes your business’s tax bill the most. Learn more about our tax advisory and filing services.
If you need help choosing the entity type that’s right for you, download our free business entity guide for a breakdown of the pros and cons of each structure.
Ready to find a registered agent for your business?
A designated registered agent or service gives you peace of mind that you will receive your legal documents on time.
A registered agent is required for businesses operating as LLCs and other corporate structures, but the flexibility, security, and privacy benefits they offer can benefit any small business owner, regardless of business structure. Registered agent services can further assist business owners by furnishing services such as increased availability, enhanced security, and the ability to provide services in all 50 states.