Why Do Small Businesses Need a Registered Agent?

What is a registered agent?

A registered agent acts as a state’s means of communicating with a corporation or limited liability company (LLC). Your registered agent accepts legal and official documents on behalf of your business, including franchise tax forms, annual reports, renewal reminders, and legal notices ranging from court summons to lawsuit paperwork.

Who needs a registered agent?

Any business that’s registered with the state needs a registered agent. Those businesses include corporations, LLCs, limited partnerships, and limited liability partnerships. Sole proprietorships and general partnerships aren’t required to have a registered agent because they are considered “common law” entity types. 

What makes a registered agent so valuable?

A registered agent is a valuable business resource. Here are some of the benefits a registered agent provides:

• Registered agents accept service of process. One of the most significant immediate benefits of working with an RA is gaining an extra layer of privacy. For example, if someone sues your company, you could be served legal documents. Instead of this happening in front of customers and employees, potentially damaging your business reputation, a registered agent would step in to receive service-of-process documents on behalf of your business during any legal action. They take the legal documents, organize them and privately pass them to you. This ensures your business maintains distance from the legal action while staying on track with paperwork.
• Registered agents are a point of contact. Registered agents serve as helpful points of contact. An RA will forward legal documents and official notices to the business and report whether the legal entity is in good standing with the state.

Who can be a registered agent?

Typically, registered agents are either individuals (usually corporate officers, directors, lawyers, or certified public accountants) or third-party organizations. 

A registered agent must: 

• Have a physical street address within the state (a P.O. box is not accepted) 
• Be available during general business hours
• Be a resident of the state
• Be 18 years or older (if an individual)

Some business owners opt to become their own registered agents in an effort to save money. However, when you serve as your own RA, uncertainties can arise, including the following: 

• Being unsure of what physical address to designate
• Not knowing if you’ll be available during general business hours to receive documents
• Worrying about unexpected visitors dropping by your place of residence or business location

Experts advise that entrepreneurs work alongside a third-party business RA. A third-party RA is reliable, understands what they’re doing, and helps keep track of legislative changes and requirements in the state. Note that different states have various regulations on who can be a registered agent. Check with your state’s filing agency to ensure you’re meeting all requirements. 

What happens if my business doesn’t have a registered agent?

If your business has registered as an LLC or a corporation, it must have a designated RA to remain compliant with state law. Failing to maintain a registered agent can lead to a domino effect of trouble for your company, including penalties and revocation of your business’s legal status.

Instead of risking it all, be sure to add “designating a registered agent” to your entrepreneurial checklist early on. The peace of mind, extra privacy and added security will take you and your small business a long way.

Kimberlee Leonard contributed to the reporting and writing in this article.