21 December 2018
Given the ongoing development of e-commerce ventures and virtual workplaces, it may seem old-fashioned to think that a business needs an actual person, a flesh-and-blood human, who can serve as a contact. Doesn’t the promise of global interconnectivity mean we can host our businesses entirely in the cloud?
State laws mandate that businesses supply the name of a registered agent, a person who maintains a physical address and is available for contact during regular business hours. Not just a P.O. box, not just an email address.
At its core, the registered agent requirement stems from our constitutional right to due process. Due process promises defendants the right to be notified if a lawsuit is brought against them. Lawsuits cannot proceed through the courts without proof of this notification. Absent this stipulation, a business owner could avoid lawsuits simply by claiming that she never received notice; conversely, without this law, a plaintiff could advance a case through the courts without the business owner ever knowing she was being sued.
So the registered agent serves as an official point of contact between your business and the state, facilitating the reception and communication of process, legal and state documents. Every corporation must have an in-state registered agent in its formation state and in every other state in which it does business.
What Does a Registered Agent Do?
As described above, the primary function of a registered agent is to be present during normal business hours in order to accept official notices and service of process and to notify responsible parties of the arrival of legal documents. Other documents that a registered agent may handle include:
- Notice of garnishment proceedings against an employee
- Compliance notifications or documents
- Litigation requests, such as motions to produce documents
- Government correspondence, such as notices of annual report deadlines and tax notifications
In addition, many registered agent offices offer a host of other services. These may include:
- Notification of impending deadlines for time-sensitive documents, such as annual reports
- Assistance in navigating complicated business filings
- Mail sorting and package delivery notification
Benefits of Using a Third-Party Registered Agent
Peace of Mind. Enlisting the services of a third-party registered agent lets business owners rest assured that any legal documents or notices will be received and forwarded to them promptly and reliably. This allows owners time to focus on the operations of their business, rather than on the minutia of state documents or compliance forms.
Privacy. No business owner wants to risk the embarrassment of being served a summons in his place of business. Registered agent services allow the legal proceedings to operate at a remove from your customers, clients or home, while assuring you that the service process will be handled discreetly.
Compliance Assistance. Compliance obligations can be overwhelming and time-consuming. Many registered agent offices provide assistance with reviewing, understanding and filing common compliance documentation.
Flexibility. A third-party registered agent allows business owners the freedom to operate their business as they see fit. With the help of a registered agent, business owners need not be locked into standard business hours, and they can feel free to travel as their business demands. Since the registered agent office provides the state with a permanent address, the business can move within the state, if necessary, without having to re-file with state offices. Furthermore, if the business needs to expand into other states, registered agents within the new territory can take care of the owner’s business needs without the owner having to establish residency there.
Can I Act As My Own Registered Agent?
Individuals can serve as their own registered agents, but, in many instances, this is ill-advised. Serving as your own registered agent means that you must maintain regular business hours throughout the calendar year, limiting your opportunities for business travel or personal vacations.
If you operate your business out of your home, you may end up having to use your home address, which may raise privacy concerns. Law enforcement officials or an angry litigant could show up at your home to serve you with a summons.
Lastly, you will not be able to expand your business into any other state. Since each state requires an in-state agent, you can only perform that duty in a state in which you are a resident.
What If I Choose Not to Designate a Registered Agent?
Refusing to designate a registered agent is a risky choice. You could be held liable for fines and other legal action. By doing so, you are putting your company at risk in a number of ways:
- Your company may not receive valuable legal documents in time to take action on them. For example, if your company is sued, but there is no registered agent to accept the summons, it is possible that the suit could proceed without your knowledge. This places you and your company at a significant disadvantage and may make you subject to an avoidable lawsuit.
- Operating without a registered agent may jeopardize your company’s good standing with the state. Maintaining such good standing is crucial for a company’s operations; without it, your company may be prevented from bringing a lawsuit in the state, expanding its operation to other states or obtaining financing from financial institutions.
- Failure to designate a registered agent could prompt the state to administratively dissolve your company. If this happens, not only would you have to re-file formation documents to have your company re-registered, you would lose the limited liability protections granted by corporation or LLC status in the interim. This means that you would be personally responsible for any debts or lawsuits brought against the company at this time.
Registered Agents Provide Privacy and Flexibility
The role of a registered agent is often underestimated among inexperienced entrepreneurs. Far from being just a glorified mailroom, the registered agent’s office serves as your official point of contact between your company and state officials. In addition, registered agents can provide your company with the peace of mind, privacy and flexibility you need to make your business a success.