What is a registered agent, and what do entrepreneurs need to know about acting as the point of contact between the state and their business?
Amid COVID-19, many individuals are pursuing entrepreneurship and starting small businesses. If you decide to incorporate or form an LLC, then you'll need to designate a registered agent on behalf of your business.
What is a registered agent? Before you designate a registered agent (often abbreviated as RA) for your small business, it's important to understand the following key concepts:
- What is a registered agent?
- Are there requirements to becoming a registered agent?
- Why is it beneficial to work with a registered agent?
- Can a small business owner act as their own registered agent?
- Are there other options available to finding, and working with, registered agents?
What is a registered agent?
Let's say your small business is formed on the state level and incorporated as an LLC or corporation. It is then given a right to due process. To remain in compliance with state laws, most states require the business to designate a registered agent.
A registered agent – often abbreviated as RA – may be an individual. A third-party service, like a company that is designated to receive service of process, may also be a registered agent. The RA acts as the point of contact, and primary communication, between the business and the state.
An RA may accept legal and official documents on behalf of your business. Some of these documents may include but aren't limited to franchise tax forms, annual report notices, and any filing fee deadlines. The RA will then organize the materials and pass along this paperwork to the owner of the company in a timely and modest manner.
Are there any requirements for becoming a registered agent?
In order for an individual or third-party service to qualify as an RA, they must fulfill the following requirements:
Physical location: Registered agents must have a physical street address. A P.O. box is not considered a substitute for an address. Additionally, this street address must be in the same state as the business location.
Business hours: Registered agents must be available to accept service of process during general business hours. These are generally Monday through Friday from 8 a.m. until 5 p.m., similar to that of a typical workday.
- Paperwork: There is a lot of paperwork that gets passed along to a registered agent! It's critical that an RA is incredibly organized, making sure paperwork is delivered on time and no documents get lost along the way.
Why is it beneficial to work with a registered agent?
As mentioned above, one of the key aspects of working alongside a registered agent is their ability to organize documents and deliver them quickly and discretely to small business owners.
Some paperwork that is delivered on behalf of the state is sensitive in nature. Let's say a business is served with a lawsuit and does not have a registered agent. This paperwork would then be delivered directly to the business's location instead of the RA's address. If anyone else is present at the store, like employees or customers, it could negatively impact the way that they view the business.
Luckily, registered agents exercise caution when delivering paperwork. They will deliver the materials to the company, carefully organized in a manner that allows the owner to review them privately. This gives small business owners peace of mind in knowing that there are not likely to be any moments where submitted paperwork could embarrass them publicly.
Can small business owners take on registered agent duties?
It is possible for a small business owner to act as a registered agent. However, much like the requirements that come with acting as an RA, business owners need to ask and answer the following questions before deciding if they ready for the role:
Do you have physical availability? As mentioned above, an RA must be available between general business hours. They cannot step out for a few hours and miss the possible chance of an important document's delivery. Many entrepreneurs, in the early stages of business especially, are working around the clock in and out of their home. Those who are at home between these hours may be a fit to become a registered agent because they know they will be present to accept service of process. However, entrepreneurs that routinely hit the road to travel or are out and about for meetings with potential clients during the workweek may reconsider their availability.
Are you organized? Organization plays a critical role in the role of being a registered agent. Being organized goes beyond staying on top of your calendar and meeting deadlines. There is a bit of time that goes into sitting down with the documents, opening them, reviewing them and organizing them. These materials must be treated in a timely fashion to ensure that your business does not accidentally forget about critical deadlines. If this happens, and if it happens on multiple occasions, it is possible that the business may fall into bad standing with the state. If you know you don't have the bandwidth to sit down and organize documents on your own, it may not be in your best interest to act as an RA.
- Is it OK if you receive sensitive paperwork in public? This final question may make or break a business owner's RA status. Some entrepreneurs may not mind receiving important documents from the state at their business – even if some of the materials are quite sensitive. However, others may wish to retain a bit of privacy. The answer to this question is contingent on the entrepreneur's comfort level.
Are there other options available to working with third-party registered agents?
In the event that an individual is not quite ready to act as a registered agent, there are other options available.
Many entrepreneurs work with a third-party registered agent service. This service fulfills the role of the RA and acts as the point of contact for a small business. Generally, third-party RAs have a physical address in all 50 states, which makes it easy for the state to reach them. They are also quite experienced in the field, thoroughly understanding the important role that they play in working alongside your business and keeping it in compliance.
As mentioned above, a third-party RA must be physically available, organized and discrete with paperwork in order to be designated to work alongside an LLC or corporation. A third-party RA is also a key contact to get in, and stay in, touch with the business. You may reach out to the business directly, or reach out to their RA.
Remember that once a third-party RA has been designated for your business, they must receive a nominal fee for their services. Paying this fee is essential for ensuring that an RA properly maintains the records of the business, in turn ensuring privacy and security, and helping the company stay in good standing with the state.