There’s a lot one has to do when starting a business. From coming up with a name void of any restrictions and building a website, to filing for the correct permits and licenses — the list is ongoing. One of the crucial steps towards forming an entity is appointing a Registered Agent.
Wait, back up! What’s a Registered Agent? Do all LLCs need a Registered Agent?
We know you have a ton of questions and, luckily, we have the answers. Let's go over what a Registered Agent does and the penalties you’ll face if you operate without one.
Is a Registered Agent Mandatory?
A Registered Agent, also known as a Resident Agent or Statutory Agent, is a person who is designated to receive all federal and state correspondence, legal documents, service of process (summons or subpoena) and tax forms on behalf of your business.
Every American business, big or small, including legal entities like LLCs and corporations, is required to have a Registered Agent and a lot could go wrong if you operate without one.
Risky Business: The Penalty for Not Having a Registered Agent
There’s a lot at stake in the short and long run if you don’t have a Registered Agent. In fact, you stand to potentially lose your business. Let’s look at what can happen if you operate without one:
1. Not Able to Register a Legal Business Entity
U.S. statutes require you to declare a Registered Agent when you file for an LLC, S Corp, partnership or corporation. This applies even if you’re strictly running an online business or want to expand your business to another state. Simply put, if you fail to designate a Registered Agent, you can’t start your business.
2. Compromised Standing
Every state has a Certificate of Good Standing that authorizes you to conduct business. This certificate declares that you have done everything right — followed protocol, filed taxes on time and are not indebted to the state for any payments. This certificate builds credibility and trust, which we know are crucial pillars of your business. Missing summons or failing to file the appropriate forms can be detrimental to this standing as all of this is marked and can subsequently lead to losing your certificate.
Loss of the Certificate of Good Standing has dire repercussions — for instance, you could lose your naming rights to another business, face trouble securing additional finances or be unable to renew your business license.
3. Lose Right to Fair Process
One of the most important tasks of a Registered Agent is to receive service of process, which informs you of impending court proceedings. If you miss this correspondence because you weren’t available and don’t have a Registered Agent that the state can contact, you’d be sued and face a default judgment (which may include a heavy financial burden) without ever getting a chance to defend yourself.
4. Inability to Expand Business
If you operate without a Registered Agent, then you're hampering your business's growth potential. The state can suspend your ability to operate, which impacts your ability to expand into new states (yes, they check records) and secure additional funding.
Can an LLC Be Its Own Registered Agent?
No, you can’t list your business entity as a Registered Agent.
And, while some states do allow you as an individual to serve as your business entity’s Registered Agent, we generally don’t advise this because of the risks involved.
If you prefer to list not your personal information in public records, you can explore hiring a Registered Agent service.
What Is a Registered Agent Service?
A Registered Agent service is a third party that will manage your legal and tax documents on your behalf. You can find Registered Agent service providers on your Secretary of State website or via a Google search. Keep these things in mind while you’re evaluating different Registered Agent services.
If you decide to work with a service, expect to pay anywhere between $100 to $200 annually. Some Registered Agent services, like Incfile, can also help you with business entity filing, insurance coverages, bookkeeping and tax services.
Advantages of Using a Registered Agent Service
Imagine how embarrassing it would be if you received a summons in front of clients or your employee. With a Registered Agent service, you are spared from such mishaps and can focus on what you do best — run your business. Below are more advantages of hiring a Registered Agent service.
Less Paperwork to Track
A designated Registered Agent will help you organize all this paperwork, create digital backups and notify you of any upcoming deadlines or issues that need your attention. Also, if you served as your business's agent and moved, you would have to file a change of address with the state. Having a separate Registered Agent saves you the hassle of filing paperwork, as the Registered Agent’s address remains the same.
For a home-based or exclusively online business, you have to list your personal address in public records (which are permanent) if you list yourself as the Registered Agent. Therefore, anyone who wishes to contact you can easily find their way to your home.
There’s also the risk of your personal address being “sold” off to various companies as part of data. Your information can be all over the web without your consent. Appointing a Registered Agent service keeps your home address off public records.
Increased Flexibility and Work Hours
If you opt to list yourself as the Registered Agent, you have to make sure you are available during regular business hours (Monday to Friday, 8 a.m. to 5 p.m.). If work hour flexibility or the chance to be a digital nomad spurred you into entrepreneurship, then this stipulation could prove restrictive.
You may wonder, "Why can’t I designate an employee to serve as my Registered Agent?" While this idea might sound enticing, we strongly caution against it. Why? For one, the employee might not have the legal expertise required to handle compliance documents and Service of Process. Having these documents fall into unqualified hands can lead to penalties and fines with the state or IRS. Secondly, if the employee leaves the company, you could be personally subjected to any liabilities.
Expanding to Other States
If you wish to expand to other states, then you would be required to designate a Registered Agent in the new state of business. In such instances, working with a Registered Agent service would prove beneficial as most major Registered Agent services are licensed to operate across 50 states. This gives you an open gateway to easily grow your business.
Registered Agent: A Necessary Gatekeeper for Your Business
Think of a Registered Agent as a necessary gatekeeper for your business who keeps your business on track and in good standing. A designated Registered Agent provides you with the freedom to alter your working hours, travel and even expand your business across multiple states without worrying about legal implications or penalties.
Incfile offers comprehensive Registered Agent services through all 50 states at a reasonable rate (the service is free for the first year if you choose to incorporate your business with us). Our Registered Agent service includes automatic mail forwarding and a digital dashboard.
Incfile has helped over 500,000 entrepreneurs by offloading all the stress and hassle related to incorporating, filing and maintaining compliance for their business.
Swara Ahluwalia is a freelance content writer with experience in the technical, B2B and SaaS domain. She also has curated content for various lifestyle brands. In her downtime, you will most likely find Swara training for her next marathon or spending time with her two daughters.